Tags: Sternlicht | asset | bubbles | real estate

Starwood Capital's Sternlicht: 'Asset Bubbles Developing'

By    |   Wednesday, 09 July 2014 09:43 AM

Record run-ups in markets ranging from stocks to junk bonds have many experts concerned about bubbles. Ace investor Barry Sternlicht, CEO of Starwood Capital Group, is one of them.

"Certainly asset bubbles [are] developing. Investors should be wary. They should watch out for tail risk," he tells CNBC.

"Since there's no yield . . . in corporates or governments [bonds], everything, whether it's farmland, timber, everything is yield proxies," Sternlicht notes, adding that money is going to real estate too.

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Treasury yields stand well below historical averages, and the spread of corporate-bond yields relative to Treasury yields is at seven-year lows.

The 10-year Treasury note yielded 2.55 percent Thursday, while the Barclays U.S. Corporate High Yield index yielded 4.92 percent Monday.

"Many sovereign wealth funds invest with us, and they're anxious to put that cash to work in something, anything," he maintains. "Real estate is a beneficiary of that, as is the stock market. They are taking money out of the debt markets."

However, it will be harder to find assets to invest in, Sternlicht states.

"I think everyone is complacent. I think everyone is levered long to a rising economy. I don't think [interest] rates are going anywhere globally. The world's economies are not strong enough."

Others are concerned about valuations too.

"We're in a world where there are very few unambiguously cheap assets," Russ Koesterich, chief investment strategist at BlackRock, tells The New York Times. "If you ask me to give you the one big bargain out there, I'm not sure there is one."

Bill Gross, chief investment officer at Pimco, is concerned about the bank loan market, as banks loosen their lending standards. "There are bubbly aspects in the terms and conditions of bank loans," he tells CNBC.

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

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Record run-ups in markets ranging from stocks to junk bonds have many experts concerned about bubbles. Ace investor Barry Sternlicht, CEO of Starwood Capital Group, is one of them.
Sternlicht, asset, bubbles, real estate
314
2014-43-09
Wednesday, 09 July 2014 09:43 AM
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