Most feared man on wall street.
At present, Carl Ichan is one of the richest and the most powerful trader cum American investor. In a span of 3 days, Ichan Holdings lost 66% in value, leaving Mr. Ichan with a notional loss of $10 billion. The present situation of the war is unknown, but Mr. Ichan's life is full of interesting stories. How did Carl Ichan gain the title of most feared man on the wall street? Let's find out.
Growing up in a middle-class family, Mr. Ichan always lusted after money. From a very early age, he understood the importance of money. He once said that money is a cushion, freedom, the root of all evil, and the sum of same everywhere. May it be a developing country like India or a hypocritic country like America. Even Carl's parents wanted him to pursue either engineering or medicine. He settled for a doctor, and after spending two years of his life in a medical school, frustrated Carl gave up medicine and joined the American armed forces. While in the army, Carl learned one of the most important skills required to become a skilled trader: discipline. He also learned how to play poker, which taught him the analogy of taking calculated risks. After completing his graduation from a public school, Carl got himself into Princeton University. His parents paid the tuition fees but refused to pay for his living expenses. That's when his poker skills became a blessing. He used to play poker at night, and with that money, he successfully completed his degree and landed a job at a broking firm called Gruntle. Those who have read my blog on Steve Cohen know what Gruntle Broking was famous for.
Every person goes through their fair share of ups and downs. Carl was a brilliant student, and since his early years, he hadn't faced any sort of failure until 1962. Carl had grown his Rs 10-15000 to Rs 10 lakh, only to blow them up in the crash of 1962. He was fully invested and leveraged. It was the first time that Carl had witnessed an index fall of 5.8%. Desperate to reassemble his lost capital, Carl started searching for ways to restart. One thing that differentiates the 1% from the rest is that during their down periods, they never lost hope, and that's what landed them in the elite club.
After a few days of researching, Carl came across a concept that has gained a lot of traction in India recently: options trading. Options back then had very little liquidity and were infamous as a gambler's tool. In order to establish his name in the industry, he started his own newsletter, giving investment-grade advice. His persistence had created magic. By the late 1960s, when Americans were facing recession, this man was minting Rs 300,000 per month. By the end of 1970, he was what I aspired to become: a self-made millionaire.
Carl Ichan is a person who is known for having his own set of mental models. Hence, even after becoming a millionaire, he kept on working. This time, his aspirations were even bigger. He entered the world of arbitrage trading, and by the end of 1972, he had found his new cash cow: Hostile takeovers. Hostile takeover is when an outsider becomes a majority shareholder in the company and interferes in the day-to-day operations of the business. His first target was a white-goods producer company called TAPAM. The company was trading below its book value, and hence, he started accumulating a majority stake in the company. Slowly and steadily, he became the majority shareholder in the company. He passed a resolution in order to take out the existing management.
A few years later, Carl Ichan exited the company with a sufficient amount of profits, leaving the company cash strapped. Like this, throughout the 1980's, Carl actively traded corporations and made millions. He used to find a cheap company. Then he used to buy a majority stake in the company. Post-acquisition, he would fire the existing management in exchange for those who would take decisions in his favor. After a few months or years, Carl would exit the company with millions of dollars. One thing was common among the companies Carl invested in. They would sooner or later file for bankruptcy. That's the reason why businesses on Wall Street were afraid of Carl. He was basically a bullish Manu Manik of the US.
Till date, no company has ever entered into a one-on-one battle with Carl because of his power, until he came across another legendary investor, Bill Ackman. Bill Ackman, the man who made the most money out of COVID, Bill and Carl went into a one-on-one match when Bill shorted a MLM company called Herbalife. Even before they went on a royal rumble match over Herbalife, they shared a past in which Bill had smacked Carl. This time, it was Carl's turn to get his revenge. Herbalife was a fraud, and Bill knew that they were frauds. He hence shorted their stock. Upon finding this, Carl started buying the company, breaking Bill's short and chocking him with his millions. After eight years of court cases, Carl won the battle. The most interesting fight to have ever been streamed on TV would be a conversation between Carl and Bill over Herbalife.
Wall Street and Dalal Street are filled with all sorts of investors and traders. The only way to survive in the market is to follow an ideology that matches your personality and behavior. Trying to enact a person you admire won't be profitable. Obviously, coping with a few thinking processes can give you a head start, but building your own models is the only way to achieve long-term success in the market. Carl's way of making money in the markets was by doing hostile takeovers. Bill Ackman is really good at predicting downsides and beating heavily when he finds an opportunity. Warren Buffett is good at long-term investing. Learn from everyone but do what you are comfortable doing. When it comes to investing, nothing will pay off more than educating yourself..
Happy Investing.
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