Billionaire investor Carl Icahn is no stranger to controversy, but it’s usually because he’s embroiled in corporate takeovers, not from being in hot water with the top securities regulator.

Icahn and his investment firm, Icahn Enterprises (IEP), paid $2 million to settle a Securities and Exchange Commission probe into billions Icahn borrowed—with his own firm as collateral.

Icahn failed to disclose that he used his firm’s securities as collateral for about $5 billion in personal loans, according to the SEC. This is a huge no-no—investors have to disclose this kind of borrowing if they mix personal finances with their business.

The SEC said that Icahn pledged “approximately 51% to 82% of IEP’s outstanding securities as collateral to secure personal margin loans.” Icahn started taking out these loans in 2018, and didn’t disclose this borrowing in the company’s financial statements until February 2022—and he didn’t file the necessary Schedule 13D form, which discloses how the controlling shareholder is using their influence in a company, all the way until July 2023.

Icahn will personally shell out $500,000 in fines, while his firm will pay the other $1.5 million.

IEP shares dropped after the news broke, and ended the day down 4.71%. The SEC probe follows an already tough year for IEP, during which shares have plummeted about 22% over the past 12 months.

Icahn’s reputation as an iconic activist investor precedes him, with his bold and sometimes controversial business dealings leading some critics to label him a “corporate raider.” But despite IEP’s tough run in the public market, Icahn’s investing moves still pack a lot of punch: Shares of JetBlue soared nearly 20% in February of this year after Icahn disclosed a stake in the beleaguered airline.

Short seller vigilante justice

The SEC began investigating IEP after Hindenburg Research, a short-selling investment firm, published a report in May 2023 calling Icahn’s firm “ponzi-like”—a claim that Icahn’s firm vehemently denies. Hindenburg highlighted the margin borrowing in the report, among other claims against Icahn’s firm.

“We think Icahn, a legend of Wall Street, has made a classic mistake of taking on too much leverage in the face of sustained losses: a combination that rarely ends well,” Hindenburg wrote last May.

So next time you mess something up at work, as long as your mistake is under $2 million you can say you caused less damage to your company than Carl Icahn.—LB

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It may not feel like the economy is getting better, but if you ask the bigwigs of corporate America, hope is running higher than it once was.

According to DataTrek, “Only 6% of S&P 500 companies mentioned “recession” on their Q2 2024 earnings calls.” That’s a far cry from the nearly 30% of companies that mentioned the R-word back in late 2022 and early 2023, according to Goldman Sachs—in fact, mentions of “recession” have now fallen back to their pre-pandemic levels.

FactSet dove even deeper into the data and discovered something interesting. Before the August 2 jobs report that sank markets due to fears of an impending downturn, only 5% of management teams mentioned the word “recession.” But after the jobs report, mentions of “recession” spiked to 10.1%.

🟢 What’s up

• AMD rose 4.52% on the news that it will acquire server manufacturer ZT Systems for $4.9 billion. While this escalates the AI arms race, competitor Nvidia rose 4.35% regardless.
• FuboTV soared yet another 17.65% after a judge temporarily blocked the launch of a sports streaming service created by Disney, Warner Bros. Discovery, and Fox last week.
• McDonald’s climbed 3.25% after Evercore ISI analysts raised their price target for the stock to $320 per share.
• Zim Integrated Shipping Services rocketed 16.74% higher after the marine shipping company posted impressive earnings and raised its full-year guidance.

What’s down

• Trump Media & Technology Group fell 3.56% as the Democratic National Convention kicks off in Chicago today, with investors fretful that the stock could be more volatile than usual during the event.
• HP sank 3.65% after Morgan Stanley analysts downgraded the stock from Equal Weight to Overweight, though they kept their price target the same.
• Sweetgreen dropped 6.82% thanks to Piper Sandler analysts downgrading the stock from Overweight to Neutral after the company’s big pop last week made shares too pricey.

Unless you happened to be present at the Florida beach where Hurricane Debby washed up over $1 million worth of cocaine, you probably don’t often think about the impact tropical storms have on your finances.

But as extreme weather grows in severity and frequency, it can be helpful to understand the effect hurricanes have on the economy—and your portfolio.

Like many natural disasters, hurricanes are only getting worse over time due to the effects of climate change. This year is poised to be an especially severe season for Atlantic storms, given a combination of increased heat from the El Niño weather pattern along with the high probability of a La Niña event, which inversely cools ocean surface temperatures. We’ve already seen the earliest Category 5 hurricane this summer (Hurricane Beryl), an ominous bellwether for the rest of the year.

How do superstorms strike your portfolio? Deutsche Bank research analyst Cassidy Ainsworth-Grace recently explained what sectors and commodities are affected by these weather events.

• Hurricanes put upward pressure on oil prices, due to the damage they cause to refineries around the US Gulf Coast. “A temporary loss of monthly offshore crude production of 1.5 million barrels per day, and an equivalent loss of refinery capacity, could increase monthly average US retail gasoline prices by an estimated between 25 cents per gallon and 30 cents per gallon,” wrote Ainsworth-Grace.
• Higher oil prices tend to make agricultural stocks more expensive, too. The price of fertilizers coincides with oil and natural gas prices, meaning that when oil and natural gas face upward pressure, agricultural investments tend to follow. “General disruption to agricultural production in the US, Europe, China, India, and South America due to La Niña weather patterns and the resulting above-normal storm activity would also add to upside price pressures for crops,” wrote Ainsworth-Grace.
• The effects of supply chain disruptions span continents. A disruption in US natural gas would have a direct effect on European access to fuel, given that European nations have been reliant on American oil since Russia’s invasion of Ukraine. In addition, severe weather events directly impact South American commodity production for soybeans, corn, and more.

The takeaway? Natural disasters tend to have a domino effect on the economy. Staying well diversified across commodities and stocks can be a useful way to stay invested through the highs and lows.—LB

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• Circle K has approached 7-11 with a potential takeover bid, threatening the worldwide Slurpee supply.
• The leading economic indicators index, which measures key lagging economic data, fell for the 5th straight month in July—but that doesn’t signal a recession just yet.
• Markets are so back, and investors with FOMO have poured billions of dollars back into stocks over the last week, according to the Financial Times.
• Remember ESG investing? Companies haven’t forgotten their promises to improve sustainability, they’re just talking about it a lot less.
• Regional banks have consolidated at an alarming pace this year in order to shore up their balance sheets. In fact, two-thirds of the companies in the KBW Regional Banking Index have “a greater than 50% chance of being acquired over the next 12 months,” according to Reuters.
• The Great Rotation may have stalled, but investors are still bailing on growth stocks for small caps, value picks, and dividend investments—and these 10 diversified stock funds enjoyed big returns as a result.

The second half of this week is loaded with key reports, FOMC minutes, and a speech from Jerome Powell at Jackson Hole. But for now, enjoy a reprieve from the economic data deluge and turn your attention to the final days of earnings season.

Before the open

• Lowe’s (LOW), like its rival Home Depot, lives at the intersection of consumer spending and the housing market—neither of which is doing particularly well at the moment. When Home Depot warned of slowing consumer spending on home renovations during its earnings report the other week, Lowes’ shares sank in sympathy. Management maintained its fiscal year forecast last quarter, but investors should be wary of a selloff if that changes this quarter. Consensus: $4.00 EPS, $23.96 billion in revenue.
• Medtronic plc (MED) shares have meandered this year, but shareholders have high hopes for the medical device maker. The company beat analyst estimates on the top and bottom line last quarter, and shareholders are hopeful that a strong pipeline will help offset stiff competition in the industry. And don’t forget that management has increased the company’s dividend every year for the last 47 years, giving investors good reason to endure slower growth. Consensus: $1.24 EPS, $8 billion in revenue.

After the close

• Toll Brothers (TOL) is one of the largest homebuilders in the country, but with the housing market slowing to a crawl thanks to high mortgage rates, you’d think the stock would be struggling. In fact, shares are up nearly 30% year to date thanks to the company’s buy-to-order business model—meaning it doesn’t build a house until someone has put money down for it, making it uniquely well-suited to today’s market. Consensus: $3.31 EPS, $2.71 billion in revenue.