Tags: sam zell | distressed energy | buy | sell

Sam Zell: Investors Should Buy Distressed Energy, but Sell All Else

Image: Sam Zell: Investors Should Buy Distressed Energy, but Sell All Else

By    |   Tuesday, 24 May 2016 01:34 PM


Sam Zell, the billionaire investor who correctly predicted a top in the last commercial real-estate cycle, said his private investment firm is buying distressed energy assets even as it invests less in the broader market.

"We've been investing in the oil patch and buying natural gas and some other energy-related assets. Why? Because we think they're very cheap, and in many respects, they're purchasable at huge discounts to any kind of replacement costs or future competition," the chairman of Equity Group Investments told CNBC.

Crude prices are down about 55 percent from their 2014 high. The price plunge, sparked by a global oil glut, has pushed nearly 80 North American companies into bankruptcy, CNBC reported.

Equity Group Investments is investing less today because it sees fewer opportunities and selling more because it doesn't understand buyers' optimism, Zell said.

Zell suggested equity valuations are reflecting a better world than the one that actually exists. “The value of goods that crossed borders in 2015 dropped nearly 14 percent from the previous year, according to the World Trade Monitor from the Netherlands Bureau for Economic Policy Analysis,” CNBC reported.

"Well, the fact that a whole bunch of idiots have priced it on the market has very little impact on what I'm going to decide to do," he said.


In a wide-ranging interview, Zell covered a variety of topics.
  • World trade numbers sounds alarm: Zell fears a market correction could be on the horizon as evidence reveals a reduction in world trade amid political turmoil in the U.S. “I think the private sector has been on the receiving end of an extraordinary difficult seven years,” says Zell
  • Don't underestimate Donald Trump. Zell said he turned down Trump's offer to enter into a partnership because the two simply have contrary approaches to doing business.
  • "I did my best for many, many years to stay as best under a rock as I possibly could. That was the way I approached doing business. Donald's approach is obviously very different," he said. "You don't see my name on any buildings, do you? That's just not who I am. Far be it for me to criticize anybody else for whatever they want to do," he said.
  • Government should fund the rebuilding of America's crumbling infrastructure with a gasoline tax.
  • If Zell were president, he’d cut regulations by 50% to start.
Meanwhile, the Group of Seven countries will promote investing in energy projects through the oil price crash to ensure a steady stream of supply, ministers from the member countries said.

The nations will also encourage financial institutions to invest in energy projects and infrastructure, according to a statement provided by the Japanese government. Investments in oil and gas production are forecast to fall 18% this year after dropping 24% in 2015, Fatih Birol, executive director of the International Energy Agency, said in a presentation during the ministers’ meeting that started Sunday in Kitakyushu, Japan.

“We have an obligation to look at the longer term,” James Carr, Canada’s natural resources minister, told Bloomberg. “We all are feeling pressures at the moment because of low commodity prices. But so are we preparing for 15, 20 and 50 years from now. And there is a consensus among my colleagues that that is a very important focus.’’

(Newsmax wire services contributed to this report).

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Sam Zell, the billionaire investor who correctly predicted a top in the last commercial real-estate cycle, said his private investment firm is buying distressed energy assets even as it invests less in the broader market.
sam zell, distressed energy, buy, sell
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2016-34-24
Tuesday, 24 May 2016 01:34 PM
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