Icahn, Investors Bearish On Everything

Volatility is the buzzword of the year.

It seems like every other day, the markets are moving at swings that are normally seen as indicators of the beginnings of months-long selloffs.

This buzzword has percolated into every facet of the market. Credit traders are watching more closely as rates fluctuate wildly, equities are managing spreads thinner than the edges of a penny and it seems that everyone is now relying on the largest economy by population and its government to dictate its actions halfway around the world.

Governments and their central banks, in fact, are pointing increasingly toward signs of flat-out losing control.

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Possibly exemplifying this is the collapse of the Chinese markets as a result of the devaluation of the yuan. Tragically, it came at a time when the economy was already slowing down amid a period of over-generous overweight forecasts of consumer growth.

There are now two approaches to the market and what to make of the August correction: Sell and watch from afar, or buy and reap in the phantom profits.

Icahn's Forecast

Carl Icahn spoke in his dystopian video "Danger Ahead" quite a bit about false growth and faux potential. Among his biggest concerns? The lack of real, tangible growth. "This market keeps going up and up with zero interest rates," he said, referring to the house of cards that has become of equities. "[A systemic collapse is] not a ‘will it happen,' but a ‘when it will happen.'"

Icahn's words come at a time when multiple institutions and investors seem to be preparing for a systemic collapse.

Emerging Markets' Parallels To 2008

One of the most striking comparisons seen to the sub-prime-induced bubble popping back in 2008 has been the amount of money virtually flooding out of emerging markets at an alarming rate, according to the Institute of International Finance.

With a massive amount of borrowing supplemented by a disproportionately growing market cap, the near future looks to be extremely bleak. This was exemplified in Tuesday's Wall Street Journal.

"The Institute of International Finance on Tuesday estimated global investors have sold roughly $40 billion worth of emerging-market assets in the third quarter of the year, which would make it the worst quarter of net-capital outflows since late 2008. The IIF represents around 500 of the world's largest banks, hedge funds and other financial firms," the article touted.

Brazil, for instance, is in a far worse recession than originally anticipated, and the risks of propping up these markets with precious liquidity is all but a risk that investors are willing to forgo.

It's never a good time for capital outflow, but yet all of this troubling risk comes amid a healthy U.S. economy and a eurozone that is showing signs of remaining under control.

For now.

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