Sam Zell is his name, and real estate is his game. Zell has founded or invested in multiple public and private real estate firms from his home base in Chicago over the years, and is now worth an estimated $4.8 billion.
As a guest host on CNBC today, he offered nothing but cold water and harsh reality for the starry-eyed optimists. Specifically, he said “holding a lot of cash right now doesn’t seem like a terrible opportunity” … added that we’re in the “ninth inning” of the economic cycle … and warned that recession was right around the corner.
Plus, he added:
“We live in a cyclical world. I think the cycle is changing. Things all over the world are telling us were near the end of that cycle.”
Why do I keep harping on this? Because …
First, it was Carl Icahn, estimated net worth of around $20 billion.
Next, it was Stanley Druckenmiller, estimated net worth of more than $4 billion.
Then, it was George Soros, estimated net worth of $25 billion.
The fact they have built up so much wealth over the years on Wall Street makes their opinions worth listening to. That wealth also allows each of them to speak his mind freely. They don’t have an ax to grind, or corporate masters to answer to, like your traditional happy-talk-spewing brokerage analysts.
|Sam Zell – a new warning.|
They also clearly don’t offer up the kind of overly reserved, “on the one hand, on the other” kind of claptrap you get from central bankers and politicians.
No, that doesn’t guarantee they’re correct, as I’ve said before. But with so many billionaires piling on here, maybe there’s something to this their warnings? Maybe, just maybe, we should all be paying attention and taking steps to prepare for rougher times ahead? I know I am, and I encourage you to do so, too.
So now it’s your turn to grab the mic from Zell, Soros, Druckenmiller and Icahn. Tell me what you think about their warnings, and whether they’re on target or not. Where do you believe we are in the economic and credit cycle, and what does that mean for stocks?
You know the drill: The comment section below is where to weigh in.
As for the topic of yesterday’s column – rising corporate debt – several of you shared your thoughts on it overnight.
Reader Thomas warned that high debt loads are indeed a major threat for the market, saying: “‘The borrower is the servant of the lender,’ we read in the good Book. Let us look deeper and identify who the lenders are to see who are the new masters of the money game.
“It is no surprise then to see that it is the same people as was the case during the last recession. We can soon expect the same outcome then as well. Buckle up — it is going to be a bumpy ride again!”
Reader Henry A. said higher debt alone isn’t a problem. It’s how companies use the money they borrow that makes or breaks the markets. His take: “It would be helpful, and actually useful, if the S&P report broke down total debt between productive debt and non-productive debt. Productive debt is not a great problem for an economy because it generates enough additional revenue to eventually retire the debt.
“What will eventually collapse an economy is excessive, non-productive debt from floating bonds to fund stock buybacks or to buy out your competition with cheap money to avoid R&D costs, or wasteful use of capital. With this knowledge, we could better determine the best strategy for future investing.”
Reader Vinman also picked up on that thread, saying: “A disturbing trend is that much of that corporate debt is going to buybacks, which make earnings look better than they are. And even worse, some people at the top are getting their shares bought back at higher prices while they saddle their companies with debt.
“The real reason the markets recovered much of the gains that they lost in January may be the increased amount of company share buybacks that occurred in the first quarter of this year. I wonder how much longer this can last.”
Finally, Reader Dana offered this warning on the markets overall: “In relation to corporate debt being studied by the S&P, they should be concerned as the skull and bones of the 50-day moving average crossed over the 100-day MA. There were only two other times that this happened – in 2008 and 2001, just before the market collapsed.
“I’m sure if I look back further, it has happened in previous recessions. It is only a matter of time now for this Ponzi scheme to come to its end.”
Thanks for weighing in. While markets continue to fluctuate in a relatively narrow range, I believe pressures are rapidly building up behind the scenes.
Frankly, I don’t see how you unwind or pop this massive “Everything Bubble” without a significant amount of market carnage. So my advice remains the same: Stay cautious, prepared, and ready to take advantage of a potentially significant downside break in stocks.
Also, if you’re interested, I just held a special webinar with members of my All Weather Trader service. So they’re locked, loaded and ready for what I see coming down the pike. If you want to get your hands on the intelligence I shared in that presentation, as well as my specific recommendations, click here.
Heads are starting to roll at the Transportation Security Administration (TSA) over huge airport lines, hidden bonus concerns, and more. TSA Administrator Peter Neffenger reassigned Kelly Hoggan, TSA assistant administrator for security operations. Neffenger also assigned new administrators in Chicago, where lengthy security lines got a huge amount of publicity in the past few weeks.
The bond trading business just isn’t what it used to be, what with massive central bank interference and manipulation, tighter government regulations, and more. Top Wall Street banks and brokers are responding by firing thousands of bond market employees and support staff. One research firm estimates a third of fixed-income, commodity, and currency traders and salespeople have lost their jobs in the last half-decade, per Bloomberg.
Looking for bargains on sporting goods equipment and clothing? Then head to your local Sports Authority – because liquidation sales are set to start this weekend. Once inventory and other assets are shed, the bankrupt firm will close for good by August, according to court documents.
So what do you think about the re-shuffling at the TSA? Will it help? How about the ongoing layoffs on Wall Street? Just desserts or another sign of problems in the job market? Will you be taking advantage of the bargains at Sports Authority, and do you think other retailers will follow its lead into liquidation? Hit up the comment section and let me know your views.
Until next time,