Icahn.

Sometimes, sheer absurdity can be a beautiful thing to watch. Like Karl Rove on Fox News on election night. Or Will Arnett in pretty much any role he’s ever played. Or the behavior of Netflix stock over the past few weeks. After a year in which NFLX has Ping-Ponged between $53 and $133, it was suddenly—and absurdly—a safe haven in the midst of a post-Obama-re-election market meltdown. Apple may be taking over the world, but Netflix stock rose 2.5 percent to $78 last week while that of the Cupertino juggernaut fell by more than 5 percent. In hopes of getting by email spam filters and pesky copy editors, I will pose the resultant question as simply and cleanly as I can: WTF?

It’s been quite a month for shareholders of the DVD rental and online video streaming service. In late October, Netflix reported an 88 percent decline in third-quarter net income along with hefty international expansion costs. The shares nose-dived as a result, falling 16 percent to $57.35 on the day of the news. That fall completed a one-year round-trip from the $50s to the $130s and back to the $50s again. A year ago, you may recall, Netflix was pilloried for thinking that investors might cough up a mere $6 more a month for unlimited video rentals online. (Yes, the selection could be improved. But you can still watch all of Arrested Development, which includes Will Arnett at his most appealingly preposterous. What else do you need?)

I wrote about the subscriber/shareholder revolt at the time, saying that subscribers were being babies and shareholders shortsighted. People pay $150 a month for their cellphones and another $150 for cable and internet. And $16 a month for free video streaming (plus DVD rentals) was a bill too far? I suggested people get a grip. I say so again today.

When the stock rebounded to more than $130 a few months later, I felt like a genius. (This is not an unusual occurrence, but it seemed particularly acute in this instance.) But 2012 has been a tough year for the company, with disappointing subscriber growth, worries about the rising cost of content, and the renewed focus of a deep-pocketed competition—I’m talking about Apple and Amazon here—all against a backdrop of general market malaise. So the stock didn’t stay up for long, and has been all over the place through the summer and fall. Which brings us to the present. How the hell does Netflix become one of the only stocks to hold its value with the terrible—unthinkable!—news that Obama was re-elected and will soon put into motion his plans to destroy capitalism, job creation and bottle service in Manhattan? Answer: Carl Icahn, with a Hurricane Sandy chaser.

Let’s deal with the Sandy part first. Remember before the power went off, when everyone was stuck inside for two days, waiting for and then riding out the hurricane? Well, it turns out that a lot more people than me got sick of watching CNN’s Ali Velshi standing in that intersection in Atlantic City and decided to watch a thing or two on Netflix. When word of this got out, the stock popped a little. Let’s set aside the fact that the reaction was backward—all other things being equal, if current Netflix subscribers watch more online video, the company’s costs rise with no increase in revenues—and stipulate instead that upon hearing said news, maybe a few folks who had been living under a rock actually discovered Netflix and decided that when the next hurricane comes, they, too, would like to be able to watch streaming video as the wind howls outside. Maybe. But banking on that is like projecting CNN’s own prospects based on the network’s viewership during a hurricane. It might make for a nice-looking chart, but not one to bet on.

On to the more salient news, then: the arrival of the old dog himself, Carl Icahn, who revealed in an October Securities & Exchange Commission filing that he had quietly amassed a position equal to nearly 10 percent of Netflix, at an average cost of $58 a share. When is this guy going to retire? I guess never. And why would he? Call him an “activist investor” or a corporate raider or just a pain in the ass, I don’t care. But legalized extortion—and let’s not quibble, that’s precisely what he does—must be pretty fun, if you think about it. Wake up, go into the office, find some new company (deserving or not) to pick on, make your play, and then sit back and wait for the financial press (including yours truly) to come along with pens out, ready to amplify your latest impassioned argument on behalf of the little guy, yourself. It’s worked again, if you consider a 35 percent gain in just a few weeks a nice payday. As I said, Mr. Icahn picked up his Netflix shares for an average of $58. Today, it’s pushing $80.

Although, truth be told, even Mr. Icahn seems like he’s getting a little bored of his own game. When CNBC brought him on last Thursday to let him talk up his position after Netflix responded to his takeover bid by instituting a shareholder rights plan—the so-called poison pill—he told them that the move was “a travesty of corporate governance” and “really reprehensible.” And legal, Carl. And totally predictable. Why so surprised? Oh, right, you’re not. The man was going through motions he’s gone through so many times that he’s worn a groove beneath his wingtips.

And he dutifully kept at it when asked about the possibility of a hostile takeover. “The thought has certainly crossed my mind,” he said, in a statement of the obvious so painful one wonders why he felt the need to say it at all. “It certainly is one alternative, but I have to say we haven’t made that decision yet.” Again, obvious: it’s quite clear he hasn’t made the decision, as there’s no hostile bid in play. But Mr. Icahn, ever the crafty old coot, says it’s “an alternative.” So is everything else, Carl. The gist of it all: won’t someone come buy it from him and his fellow shareholders?

It’s doubtful. I once put Netflix on a list of companies that I’m glad the market has funded—but that I personally wouldn’t touch with a 10-foot portfolio. I didn’t actually stay true to that claim—I did buy it last fall, and rode it all the way up to $130, before selling half of it (again, I’m a genius), but even though I’m a gigantic fan of Netflix the service, I don’t think anyone is buying it at these levels. Plus, those who might buy Netflix certainly didn’t need Carl Icahn’s help to make them aware of the idea, and they certainly aren’t going to cash him out at a 35 percent gain for the non-favor of alerting them to the opportunity. (On that note, if Mr. Icahn had bought when I told him to last year, he would have doubled his money. Just saying.)

Amazon, for one, is going to employ its usual modus operandi, aiming to steamroll Netflix with lower pricing and more choice. The online retailer just made a change in its Amazon Prime pricing last week, offering subscribers a $7.99-a-month deal—the same as a streaming subscription on Netflix—for free streaming of its video library, with the added bonus of free two-day shipping on all Amazon orders. Amazon is taking dead aim at Netflix. But it’s not looking to buy it; it’s looking to kill it. (Of course, Amazon did buy Zappos.com after being thoroughly outflanked by the quirky online shoe retailer. So stranger things have happened.)

Apple? It’s got other fish to fry. And even if Netflix could make for a great fit with iTunes, the people holding the purse strings at Apple aren’t dumb enough to buy at Icahn-inflated levels. Facebook? Netflix CEO Reed Hastings sits on the board of the social network, as well as that of Microsoft. Won’t either of those two step in and save the day? Again, doubtful. Netflix, a true trailblazer in online video, is nevertheless the kind of company that you cripple before you buy it. And Icahn knows that. You want my opinion? He’s probably  already selling his shares as we speak.

Duff McDonald is the author of Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase. Follow him at @duffmcdonald.

The market maker, which had been running on backup generators since Sandy landed on Monday evening, is said to have lost power around 11:45 a.m. yesterday. According to a memo obtained by The Times, the firm told clients that "all computer interfaces with Knight will be shutdown with no new orders, both by phone or electronic, being accepted at this time."

It's been a hard year for Knight. The firm was one of the market makers to lose millions to technical difficulties at Nasdaq during Facebook's initial public offering, then required rescue from outside investors after losing $440 million due to a technical glitch in its own trading program.

Citadel Group and Goldman Sachs were among the firms to take increased trading volumes during Knight's outage, according to Bloomberg.

Other new from around Wall Street:

Morgan Stanley's office building at 1 New York Plaza, and AIG's headquarters at 180 Maiden Lane, will be closed for weeks as building managers deal with flooding after the storm, according to Bloomberg.

Activist investor Carl Icahn disclosed a 10 percent stake in Netflix in a filing with the Securities and Exchange Commission yesterday. “The reporting persons believe Netflix may hold significant strategic value for a variety of significantly larger companies that are engaging in more direct competition with one another due to the evolution of the Internet, mobile, and traditional industry,” Mr. Icahn said in the filing, according to The Times.

A British man charged with involvement in an insider trading scheme that stretched from New York to Central Asia told an informant he got privileged information from a former director of the New York Stock Exchange, reports Bloomberg.

The Federal Energy Regulatory Commission said it was seeking $435 million in civil penalties from Barclays for alleged energy market manipulation in the Western U.S. between 2006 and 2008. Barclays, which agreed to a $450 million settlement this summer over Libor-rigging charges, is also facing a Justice Department anti-corruption investigation over the firm's efforts to raise money in the Middle East in the early days of the financial crisis, The Journal reports.

JPMorgan is suing Javier Martin-Artajo, the trading manager who supervised the gamble on credit derivatives that led to the bank's $6 billion London Whale loss, in London Court.

Tadahiro Matsushita, the Japanese official leading a recent crackdown on insider trading, died yesterday in what police concluded was a suicide. Mr. Matsushita's investigation, which Bloomberg reports was not yet complete, led to the resignations of Nomura Holding's chief executive officer.

With the government reducing its stake in AIG, Andrew Ross Sorkin and Neil Barofsky had a telephone conversation about how taxpayers have fared in the bailout.

A German court will rule tomorrow on the legality of the European Central Bank's new bond-buying program.

With the ECB set to start buying sovereign debt, investors' bets on European bonds are looking pretty smart.

Deutsche Bank will cut costs by $5.8 billion in order to meet new regulatory capital requirements, the bank said.

Carl Icahn called the board of directors at Navistar International, the truck and diesel engine maker, a “poster child for abysmal business decisions and poor corporate governance.” Navistar answered that despite Mr. Icahn's “unproductive tactics of threats, attacks and disruption,” the board knows what it's doing.

Court bailiffs in Hong Kong evicted Occupy protestors from HSBC headquarters.

Treasury Secretary Tim Geithner finished ninth in the 50 to 54 age group at a recent triathlon.

There's a 4 percent chance Ron Paul is the next chairman of the Federal Reserve, according to Morgan Stanley (via Business Insider).

Canadian banks! Hiring amid cutbacks at financial firms elsewhere.

Most recently, the proxy battle has found the more appropriate ground of the qualifications of the four board directors that Mr. Icahn has nominated, with Forest arguing in a letter to investors that Eric Ende, Andrew Fromkin, Pierre Legault and Daniel Ninivaggi have "significant and obvious conflicts and entanglements that compromise their independence and ability to represent all Forest shareholders."

Mr. Icahn answered back today, and we'd like to tip our cap. Note the stacked questions, the shifts in modulation even before he hits the moment emphasis, which is his own:

Is Howard Solomon conflicted when you grossly over-compensate him in options and restricted stock with accelerated vesting while he oversees a massive destruction in shareholder value over the past 10 years? Is it a conflict when Howard Solomon was selling stock while the company was repurchasing stock? Is it a conflict when Howard Solomon was part of a board meeting where his potential exclusion by the US government was being considered? I don't believe this Board has the slightest grasp over what constitutes a conflict. In addition, as I am sure you know, just because Mr. Ende was not elected to the Board last year does not mean that stockholders feel the same this year. Under your watch, Forest has underperformed your self-chosen peer companies by 21% since last year's meeting. Given that underperformance, it wouldn't surprise me if many shareholders vote differently this time around. YOU SHOULD NOT USE LAST YEAR'S VOTE AS AN EXCUSE FOR COMPLACENCY.

Well done.

Whale mis-marks: When JPMorgan announced second-quarter earnings on Friday, the firm said it would restate the previous period's results to include an additional $459 million in losses after executives discovered that traders in the firm's chief investment office may have intentionally overvalued positions. That explanation doesn't make sense to some former employees of the firm, but it's sure to interest government investigators.

Suing Goldman: A married couple that hired Goldman Sachs to sell its voice recognition software company is suing the firm for more than $1 billion.

Age of activism: Bill Ackman's $2 billion bet on Proctor & Gamble signals a new era in activist investing, says The Wall Street Journal. Evolving corporate governance standards and impatient investors seeking better corporate results have allowed activists such as Mr. Ackman, Carl Icahn, Ralph Whitworth and Nelson Peltz to take aim at bigger companies.

Nearing settlement: Negotiations to settle a Department of Justice investigation into HSBC's anti-money laundering efforts are picking up pace, The Journal reports. Bank executives will appear before the Senate tomorrow to testify on related issues, including how terrorist organizations and drug cartels may have taken advantage of lax compliance policies.

Bush on economy: "We can all agree that excessive risk-taking by financial institutions, irresponsible decisions by lenders and borrowers, and market-distorting government policies all played a role” in the financial crisis of 2008, former President George W. Bush writes in the forward to The 4% Solution: Unleashing the Economic Growth America Needs.

Stamp of approval: Climate certifications are coming to corporate bonds.

Teach-in: Occupy Wall Street, the summer camp.

Muted response:

Falling star? Morgan Stanley's star investment banker Michael Grimes believes he did an excellent job with Facebook IPO, according to the Wall Street Journal. Fault for Facebook's languishing stock price—$31.91 at Friday's close—lies with the technical glitches in Nasdaq's trading operation, Morgan Stanley officials are whispering. That won't stop rivals from dropping the FB-bomb when competing with Morgan Stanley for clients.

Hedging Europe: It's unlikely that the European crisis will give way to an investing legend like George Soros, who made $1 billion petting against the British pound in 1992, according to Reuters. Hedge fund managers are plying varied strategies—from currency trades to bets on bank stocks or sovereign debt or even a more bullish attitude towards gold in anticipation of future fallout in Europe.

New polls showed that Greece's pro-bailout parties are gaining, easing fears of a eurozone exit. The news out of Spain was less good, as the government grapples to support ailing lender Bankia SA.

Activist gas: Carl Icahn bought a 7.56 percent stake in Chesapeake Energy, the natural gas giant reeling from a series of disclosures CEO Aubrey McCLendon's potential conflicts of interest. Mr. Icahn has called for the election of a new slate of directors before the board votes on a successor to Mr. McClendon as chairman. “Having the current board select a new chairman without shareholder approval and without allowing for shareholder representation is akin to asking the fox, who has plundered the hen house, to choose another fox to assist it in standing guard over the remaining hens,” Mr. Icahn wrote in a letter to the board.

Pay dirt: Comp at European banks was down.

A Bloomberg columnist sides with Jamie Dimon in wondering about executive pay at media companies.

Bean rush: Hydrofrackers depend on guar gum; farmers in northern India's desert states reap bounty.

New directions: JPMorgan is thinking about putting directors with actual risk management experience on its boards risk committee.

Re-primed: Lou Lebedin, JPMorgan's global head of prime brokerage, is being replaced.

Meet the Newest Ultra-Rich Givers. >>

Check out The Biggest Wall Street Stars of the Year.>>

Mr. Icahn's efforts to take over Lion's Gate, the company that makes "Mad Men," have basically failed (for now; Mr. Icahn is very tenatious). But what he lacks in showbusiness-buyout skills, he apparently makes up in his ability to woo the boards of energy companies. Dynegy has agreed to accept Mr. Icahn's offer of $5.50 a share. Carl has succeeded where others were turned away; Steve Schwarzman's Blackstone Group had launched a $5-per-share bid in November but was rebuffed.

mtaylor [at] observer.com | @mbrookstaylor

Dow Jones Newswires reports on the suit, which was filed yesterday:

[Lions Gate], which produces the hit television series "Mad Men," claims Mr. Icahn was playing a "double game"--publicly saying he would oppose the merger, while secretly amassing a large stake in MGM's debt.

"Icahn opposed a merger with MGM not because it was bad for Lions Gate shareholders, but because it was good--so good, in fact, that he wanted to postpone it until he could buy as much of both companies as he could and thus extract for himself as much of the value stemming from the merger as possible."

The new lawsuit was filed just a day ahead of a vote by MGM creditors on whether to partner with another stuido, Spyglass, in a preordained bankruptcy. (Icahn VEHEMENTLY OPPOSES that deal.) Icahn is trying to take over Lions Gate and has been amassing MGM debt, of which he already owns some $480 million.

Meanwhile, the New York Post reports that Lions Gate is still looking to go ahead with the MGM merger, while debt holders in MGM are looking to do the Spyglass because in one sources appraisal, Carl is simply trying to steal this company." Looks like Icahn's rollercoaster ride in the entertainment business is far from over.

mtaylor [at] observer.com | @mbrookstaylor

Icahn said he's willing to pony up the $963 million in principal, maybe more, in exchange for a disruption of the proposed marriage. As prospective MGM spouses go, Icahn vastly prefers Lions Gate Entertainment, in which he is a dominant shareholder.

The activist shareholder did not mince words in voicing his disapproval of the mooted joinup between MGM and Spyglass. From the press release announcing the offer:

Mr. Icahn noted that "the plan is being backed by certain members of the MGM creditors committee, and is being ramrodded through with the typical fear tactic that the "sky will fall" if the plan is not approved." Mr. Icahn stated that he believes that "it is more likely for the sky to fall if the Spyglass Plan was approved."

In case investors didn't catch his drift the first time, Icahn repeated himself. We've taken the liberty of removing every part of his statement that's not in all-caps: "I URGE ALL SENIOR LENDERS TO VOTE AGAINST THE SPYGLASS PLAN [...] WE SHOULD NOT ALLOW OURSELVES TO BE RAILROADED INTO THE SPYGLASS PLAN." (Emphasis in the original.)

OKAY, CARL, WE GET IT!

mtaylor@observer.com | @mbrookstaylor