Tags: Zell | stock | market | economy

Sam Zell: Stock Market Gains Not Matched By Economic Growth

By    |   Tuesday, 08 April 2014 01:01 PM

The stock market's strong rally of the past year, though it has stalled in 2014, represents a disconnect from the economy's moderate growth path, says star real estate investor Sam Zell, chairman of Equity Group Investments.

"I have been pretty consistent that I didn't think the market was reflective of the economy," he tells CNBC. "And that is still very much the case." He noted that the S&P 500 gained 29.6 percent last year. The economy grew 1.9 percent in 2013.

"Where is it [the economy]? I'm looking at operations every day," Zell explains.


"Things are not terrible. I'm not suggesting that. But we're missing an awful lot of bounce. The stock market would have suggested everything was kumbaya [in the economy]. There's been a real discrepancy between the two, and I think it's just coming back to normal."

Some analysts think GDP can expand 3 percent this year, but Zell is skeptical. "Maybe it will be 2.5 percent, maybe 2.7 percent. I don't know," he notes.

"So far I don't see the buoyancy in activity levels. But it's early. If you think of the last three years, the first three months of the year have had a lot of enthusiasm that has waned. That's a result of the fact that as enthusiasm increased, you had to make capital expenditures, and I think companies were reluctant to do that."

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Zell doesn't see many good implications from the long-term decline of the unemployment rate to 6.7 percent, because the drop largely stems from workers exiting the labor force. "I don't think that's a positive economic signal," he argues.

The economy also faces headwinds from Obamacare and political turmoil overseas, Zell maintains.

He believes it's possible for the Federal Reserve to exit its easing program and that it should do so. "I think they can exit. Whether they have the wherewithal or the guts to exit remains to be seen. I think it's late in the game to consider anything other than an exit."

President Obama has set a goal of income redistribution that makes economic growth "extraordinarily difficult to achieve," Zell asserts.

"The two conflict with each other. The result is we have spent an awful lot of the last few years trying to redistribute, because that's the president's policy. And I think growth is the victim of that policy." So Zell expects subpar growth.

Meanwhile, he sees unprecedented liquidity in the real estate market — "more liquidity than at any point I can remember," Zell insists. But, "so far I don't think we have seen crazy pricing, the kind of stuff we're talking about, [like Facebook's purchase of] Instagram and WhatsApp."

In the stock market, the 2.1 percent decline by the S&P 500 since Thursday has some market participants concerned. But Art Hogan, chief market strategist at Wunderlich Securities, is taking it in stride.

He tells The Wall Street Journal that selling has been orderly. "There's no real panic. There is still a cohort of investors who are waiting for a further pullback to put money to work."

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InvestingAnalysis
The stock market's strong rally of the past year, though it has stalled in 2014, represents a disconnect from the economy's moderate growth path, says star real estate investor Sam Zell, chairman of Equity Group Investments.
Zell,stock,market,economy
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2014-01-08
Tuesday, 08 April 2014 01:01 PM
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