Sam Zell of Equity Group Investments on how to weather the economic storm, whether he’ll be making purchases any time soon, and the financial conditions across the US.
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Let’s start with the Fed and Jay Powell. He sort of set a message we may have to keep the rates higher, longer. What did you make it? Whereas the Fed headed. Do you think where should it be headed, given what we’re seeing in inflation right now?
To be honest with you, I don’t know. And it’s very obvious needs you today. Yeah, we’re in this mess because the Fed didn’t do their job over the last three years. I mean, you know, we think about we added 7 trillion to our debt in three years.
This is this is you know, this is the Weimar Republic. And if the United States is careful, they’re going to find themselves in the limelight in public. Well, what about that point specific? Because the bite administration, their budget came out and nobody believes that budget is actually going to get implemented.
But it’s least directional where they think you’re going. They were going up to something. One hundred and ten percent of GDP in debt higher than what we had in World War 2. They’re ending like 17 trillion dollars, the debt over time. At what point does this become not a problem, but a crisis?
I said when people don’t want to buy our debt, when we’re faced with the prospect of losing the U.S. dollar as a currency, as an international currency, and if we lose, the U.S. dollar is reserve currency. We’re look at the 20 to 25 percent
Reduction in our standard of living. If that was included in the definition of the US debt, maybe you’d get some attention. But the reality is that the Bush administration and Powell have gotten away with not doing anything other than continuing to inflate the bubble.
And I think it’s very, very dangerous. Whatever else you think, it looks like we’re coming close to the end of free money and we’re revisited pushing money into the system across the board. Certain Jay Powell is tightening the screws. You complained about free money. You thought it was a bad thing for investors.
Terrible thing. If it’s ending, what do you get to do? What does that allow Sam Zell to do? It might do before. First of all, your assumption that it’s ending is a little naive. I mean, we look at the real estate arena where municipalities are, you know, deferring
The ability to foreclose or get people out of our house or get people out of an apartment. And every time that the strategy leads to a decision, there’s a deferral and we’ll wait another three months or wait another six months. And so we’re we’re talking about ending
Free money, but we’re not ending free money and or we’re ending it at a much slower pace than it ought to be to be called for. So I’m not that I’m not sure that the assumption that free money is over. And I think we’ve got some serious problems.
I mean, not the classic problems that we’ve always had, which is if you keep feeding on free money, they get you shit. And then they say, well, where’s my free money? And, you know, look what’s happening in the housing market. In a matter of 60 days, the monthly payment is doubled.
These are extraordinary times, and I’m not sure we have the leadership either in power or Biden to basically deal with that. And as he gets tougher and tougher, for example, to borrow against real estate, you see a lot of pressure not just in the housing market, but commercial real
Estate as well. And we saw some big news this week with Brookfield and PIMCO and Blackstone essentially walking away. It looked to me that the big mortgages. What does that tell us? I mean, that’s that’s pretty that’s pretty remarkable. Why? You know, it’s it’s been both pretty remarkable. It’s pretty dangerous.
You know, the rule of law is based on everybody, quote, unquote, being responsible for their obligations. If the biggest lender in the country, Blackstone, can walk away from their obligations. Who else can and not, you know, I know I’m a little
Guy and I have to start. And the question is, what do I do? And I pick up the newspaper when I see Blackstone, Brookfield and PIMCO are walking away. Why should I feel bad about walking away? So let’s come back to equity group
Investments for a second. Given where we are right now, I know you only do something like three or four deals a year, something like that, right? Yeah, depending on the year. Yeah. OK. Is this you’re going to be different? I mean, given what you’re seeing is that creating opportunities for equity group investments,
It will eventually. Not yet. The buyers and sellers haven’t agreed yet as to what the prices, the salaries are still looking for, the number that was on the table, you know, six months ago when interest rates were zero. Now, interest rates are. 3 to 5.
And he hasn’t adjusted his price. The buyer, on the other hand, is looking at his cost of capital doubling, his availability of capital diminishing, and he’s saying, wow, under these set of circumstances, I to get a much better deal than I previously got. So if I can put it that way.
That’s a form of correction. There’s a correction in the marketplace market. Last, a buyer and the seller are indications given to a lower. It’s a form of no correction. Well, that was my question. Is it in the process of correcting how long will it take? Well, I think that I think correction is
The right word, but I think the correction is going to take a lot longer than everybody expects. I mean, it is certainly now mental state in America. OK, we’ve finished this version. Now let’s step start the next version. And there’s never, ever an adjustment
For what it takes to make that transition to cross that bridge. Sam, you’ve been an investor in energy and oil in the past. Where are you in that sector now? And specifically, given what we’re seeing out of the federal government and others really changing the investment
Equation when it comes to renewables? Is that more attractive now, given the government’s participation in things like the inflation reduction at. I’d like to think you’re right and I’d like to think that that’s exactly what’s happening. I don’t think that’s right.
I don’t think that’s what’s happening. I don’t I’m I’m wondering when two thousand thirty five comes and you can’t build any more carbon cars in California. What are they going to do? I don’t know, but I know for sure we’re not going to complete the transition
From carbon to non carbon or to renewables. It just can’t be done within this period of time. And I think that the question becomes, you know, how much can society sustain it? How much change can we actually pay for? How how far can we go and say, OK, we’re going to move to
Renewables? Well, clearly, I’m in favor of mom and apple pie and not renewables and all those wonderful things. But the reality is, first and foremost, I have this right. What’s feasible? And I think that, you know, 90 percent of what’s being done is infeasible. So, Sam, let’s put you in charge of the
Economy. You can have the White House and the Fed all put together. What would you do to address the debt problem? The deficit problem? The growth problem? What is the thing you would do that we’re not doing now? Accepting reality.
Accepting the fact that, you know, we’ve got a major transition, it’s going to have to happen. We we can’t sustain a carbon controlled economy for obvious reasons. So we have to we have to say, OK, how do we get from here to there? And the way to get there is not spending
Money or or following Obama’s ideas of dropping piles of money on things that don’t make sense. So I think we’re going to slow down the process. We’ve got to face up to the reality. We got to say this is take.
Twenty five, thirty years we can have the best of intentions, and I really believe we can have the best of intentions, but it still requires time, effort and commitment. And that and, you know, like everything else, we’re always looking for quick, simple answers.
CO2 is good and what plants breathe. We need more of it, we need less environazis
Americans consume a much larger % of the world's resources than we deserve. Our standard of living should decline by at least 25%. Four % of the world's population should not be entitled to 25% of the world's resources.
It's off to the cabaret for me.😇👑🌏🌍🌎💚@undwallace
Gold, Silver, Bullets, and Arable land. Nothing else is worth anything.
All just inflation, debasement, fake IOUs as money. Measure in gold, nothing happened in decades. GDP down 78% in past 20 years in honest gold money. All a fraud, a sham, based on debasement paying workers ZERO, an IOU. Utopians have FREE MONEY, IOUs, and they are buying fantasy, subsidizing fantasy, without honest real measures. Sam is right. We need a "reality reset". GDP is down 78% from 2,000 to 2020 measured in honest gold money, but up in fake fantasy land IOUs. We need to stop Utopians from killing the economy with IOUs.
Wonder if he knows the cares a t was the biggest treasury ripoff ever. Rich like him got most of it. Amerika has no rule of law…oligarchs always make out…i have lots of experience.
Guys like this created the economy that we have then blame the government, that they own, for the problems when the workers are getting too much money. Fucking amazing!
I didn't hear ANY solutions from Zell — just a bunch of whining about how difficult the transition to a greener economy and manageable national debt will be from this billionaire. Part of the solution to the US debt is higher income taxes on the super-wealthy; means-testing for Social Security; and likely even a wealth tax.
Why is everyone blaming the Biden-administration for this? Who was the president in mid-2020, when the FED money-press was running on overtime and printing money like never before in history????
0:25 The Fed didn't add $7 trillion to the debt over the last 3 years. That was the government's, the politicians' fiscal abuse,.. mostly to buy demcorat votes.
Senile ole joe has done nothing but try to steal from tax payers and deficit spend like a drunken sailor creatin more inflation counter productive to the Fed's efforts to fight inflation.
How come all of these supposed experts always beat around the bush when placing blame for the current financialshithole the US is in?
I suspect we'd have far less fiscal abuse if these experts would quit using the Fed as the fall guy and calling out the the real culprits, the real cause of inflation and destruction of the dollar every time these politicians pass another vote buying deficit spending scheme.
It says it all get democrats out in 2024 they are evil and still think there out to help to poor well that’s the furthest from the truth bunch of scums and pellosi is tight on top of scum and I dispose republicans!!😂
I'm sorry but why is Zell only focusing in on the last 3 years like the debt was zero before?? The current debt sits at $31.6Trillion but it was only $20 Trillion when Trump took office. When Biden took over it was $28.5 Trillion which means the debt increased by over $8Trillion under Trump in only 4 years! Why does Zell conveniently not mention that??
Ahh, Sammy, didn't see you making the rounds after the 2017 Tax Cuts. Where did you think the budget shortfall resulting from those cuts was going to go? Money heaven?
Cut the military budget from $800 Bil to $600 billion and you can easily pay for the renewable transition befored 2035. Shrink the govt. Too many politicians and lawyers. Waste. High cost low return.
When companies spin off their money losers and walk away we all lose. Blackstone will cause a lot of damage in the next couple decades.
Where was this energy when Trump was in office?
When the U.S. runs out of financial power, all they have left is military power. Think they'll be peace?
This is very depressing, have a gin and tonic instead.
old guy offered nothing but negative name dropping of Democratic presidents. WHAT ACTUALLY SHOULD BE DONE OLD MAN?????? Slow down??? That's all you got??? Need to quit listening to old white men
Why are all these people one trick ponies……..they are constantly talking about…….oh lort we have gone to far and apple pie…….this guy belongs to a consortium of investors who is selling their agenda…….their agenda is to tell everyone what not to do to become exactly what they became……. Very wealthy from plundering and doing all the wrong things……..ITS A LIE……….they created a money printing machine that is used whenever they need it or promote their private corporate welfare scheme……..
200 years to hit 1 trillion in debt; and 43 years to grow it to 31 trillion plus 186 trillion off the books debt.
thats a LOT of inflation, debt, and monopoly digits
It's called the baby boomer republic!
Boomerism is in full bloom coast to coast!
"Nothing changes for the good until those born before 1960 are removed from power."
Lol, Bloomberg couldn't stop this message so look at this using CC and you see they put in Bush…
It's "return to normal in '24".
Nope. Sam's too harsh. It is arguable whether the Fed and Congress were wrong to use stimulation and accomodations for a little longer than needed. They wanted to end the depressive effect of COVID.
The Fed waited perhaps 6 mos too long to begin tightening and Congress added 2.T extra in government stimulus.
But the Fed is acting strongly now and the extra stimulus packages ended. The extra government interest payments due to interest decreases government spending.
As in 1974-1976 these kinds of strong measures to 24-30 months to damp out the wage price spiral.
If the same timeline applies, absent other exogenous shocks like Russian use of Nukes, China invading Taiwan, we can expect easing of financial restrictions in 24 – 30 months from July 2022. This is the last half of 2024.
At that point the real US GDP growth should be the increase in productivity plus the increase in population. This will be one or two percent. The CPI diplater will be about 2%. So we will have a nominal GDP growth rate of 2.5 to 3.0% through normal this recyclables for about 5 to 7 years.
But this familiar trajectory is likely to be interrupted by new, unexpected exogenous shocks over such a long period. It may also be reduced by the depressive effects of repaying such large accumulated debt service.
So it's "return to normal in 24".
"Obama dropping piles of money that don't make sense" = Tesla
I have my wheelbarrow full of cash to pay for breakfast.
Such a bad question “if only you were in charge”. When will we learn no one person can decide.
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