Tags: Sternlicht | people | nervous | markets

Sternlicht: 'People Are Nervous'

By    |   Thursday, 30 Jul 2015 01:36 PM

With so many financial markets standing at elevated levels, plenty of investment experts are worried there's a bubble brewing that will burst violently. Barry Sternlicht, the renowned CEO of Starwood Capital Group is one of them.

"People [investors] are nervous, sitting at their machines ready to hit the sell button," he told CNBC.

Many experts see a bubble in the venture-capital market, where 103 start-up companies are valued at more than $1 billion, according to The Wall Street Journal.

Stock-market valuations are an issue too. Robert Shiller's cyclically-adjusted price-earnings ratio, which accounts for 10 years of earnings, stands at 26.7 for the S&P 500 index. For months the gauge has hovered at its highest level except for the pre-crash periods of 1929, 2000 and 2007.

Meanwhile, "there's no liquidity in markets across the board," Sternlicht said. And the markets will face a day of reckoning.

"There will be something, whether it's Iran, ISIS," he said. "Something will freak people out."

Meanwhile, Jeremy Grantham, chief investment strategist at money manager GMO, is concerned about the economy.

He sees GDP growth of 1.5 percent going forward, compared to an average rate of 3.2 percent since 1948. The economy expanded 2.3 percent in the second quarter.

Grantham, writing in GMO's quarterly commentary, cites several problems facing the economy.
  • "The age of plentiful, cheap resources is gone forever." Oil is a particular problem, he says.
  • "Climate Problems." He means that dreaded global warning.
  • "Income inequality." The middle class and poor are getting poorer.
  • "Deficiencies in the Fed: a counter-productive job description, badly executed." The Fed's job description, of course, is to boost employment and control inflation.
  • "Investment bubbles in a world that is, this time, interestingly different." The differences: "profit margins in the U.S. seem to have stopped mean reverting in the old, normal way, and some real estate markets have bubbled up and then stayed there."
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With so many financial markets standing at elevated levels, plenty of investment experts are worried there's a bubble brewing that will burst violently. Barry Sternlicht, the renowned CEO of Starwood Capital Group is one of them.
Sternlicht, people, nervous, markets
336
2015-36-30
Thursday, 30 Jul 2015 01:36 PM
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