‘No, YOU’RE The A-Hole Who’s Gonna Torpedo The Economy!’

Icahn vs Fink.
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Not going the way Larry expected.

For more than a year now, BlackRock’s Larry Fink has been telling anyone who will listen that a certain septuagenarian veteran of the Queens schoolyards and his ilk are the single greatest threat to all of our financial well-being. And, for more than a year now, that septuagenarian has had no recourse save for angry phone calls and the occasional “am not!” to the press. Clearly, things could not just go on like this, and, luckily, CNBC realized. So they put Carl Icahn on stage with Larry Fink. It wasn’t quite like when they put him on the phone with Bill Ackman back when the two men openly hated each other, but it was glorious all the same.

“BlackRock is an extremely dangerous company,” Mr. Icahn proclaimed at CNBC’s Delivering Alpha conference in New York….

Mr. Icahn blamed the increasing prices for such relatively risky debt partly on Mr. Fink’s sprawling, $4 trillion asset manager and its exchange-traded funds, which Mr. Icahn said were causing a liquidity problem because they have snapped up so many assets, even as Wall Street firms move to trade fewer bonds as part of their businesses.

Well played, Uncle Carl. Well played, indeed. But is he right? Is mild-mannered Larry Fink really the first horseman of financial apocalypse? Bill Gross and some other people think he might be.

One leading high-yield ETF, BlackRock Inc.’s iShares iBoxx High Yield Corporate Bond ETF, traded more than 20,000 times on average each day, according to the firm. But each of its top 10 bonds only traded 13 times a day on average….

“The reality is that the ETFs are really only as liquid as their underlying assets,” said Deborah Fuhr, founder of London-based exchange-traded product consultancy ETFGI LLP.

“You can trade small amounts on a secondary basis, but the real liquidity, when it comes to sizable trades, is the liquidity of the underlying” bonds she added….

“The growing size of the asset-management industry may have increased the risk of liquidity illusion: Market liquidity seems to be ample in normal times, but vanishes quickly during market stress,” the BIS wrote.

Carl Icahn Fuels Criticism of Bond ETFs [WSJ]
Carl Icahn Flips Script on BlackRock’s Fink, a Longtime Critic [WSJ]

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