Tags: sam zell | economic | growth | irrational | exuberance

Billionaire Sam Zell: 'Irrational Exuberance' Threatens Economic Growth

(Sergey Rasulov/Dreamstime)

By    |   Tuesday, 16 January 2018 10:46 AM

Economic guru Sam Zell warns savvy investors that he senses some “irrational exuberance” in the current market threatens America’s economic growth potential.

“I think that the opportunity for the country to grow at 3% is real,” he told CNBC.

“I think the current situation seems like irrational exuberance, but we've had eight years of substantially below trend growth,” he said.

“And I think one of the arguments, and I don't know the answer, but I think one of the arguments is that if you have deferred maybe 1% of growth over the last eight years through over regulation, et cetera, you start uncapping the bottles growth may, in fact, dispute the cycle and, you know, whereas right now nine years cycle is a very long cycle maybe if eight of it is at 2% growth, the cycle is longer than we're used to because we don't have any experience,” he said.

“We've never had eight years of 2% growth,” he explained.

"We've, in effect, had a period of time where growth has been impeded by regulation, by over involvement of government in business, by an anti-business White House, and that's all changed," Zell explained.

Zell's comments parrot the same "irrational exuberance" phrase used by the then-Federal Reserve Board chairman, Alan Greenspan, in a speech given at the American Enterprise Institute during the dot-com bubble of the 1990s. The phrase was interpreted as a warning that the market might be overvalued.

As for where Zell is putting his own money, he said he is "rimarily keeping it in cash."

He said all assets, including stocks and property values, are too expensive.

"I think that if you look at the growth that we've had in the stock market in the last year and you eliminate the FANG stocks, the growth is terrific the average company is not doing that great," Zell said, referring to the acronym for four high performing technology stocks in the market as of 2017 – Facebook, Amazon, Netflix, and Google (now Alphabet, Inc.).

With a lack of investment opportunities, he argued, the burden of holding cash is not as great as it would be otherwise, CNBC.com explained.

"I mean, it's very frustrating as someone who's spent his whole life taking risks, making investments, betting on judgments. All of a sudden there's relatively few to bet on, and so the question is, what do you do in a very low inflationary environment like this? The burden of carrying cash is nothing like this when rates were 8 or 10%," he said.

Meanwhile, the U.S. economy is on track to expand at a 3.3 percent annualized rate in the fourth quarter of 2017 following December data on domestic retail sales and consumer prices, the Atlanta Federal Reserve’s GDPNow forecast model showed on Friday.

The latest figure matched the level set on Dec. 20 in the wake of an industry report that showed home resales in November reached a 5.81 million annualized rate, a near 11-year peak, Reuters explained.

Atlanta Fed’s latest estimate for fourth-quarter gross domestic product growth was stronger than the 2.8 percent it calculated on Wednesday.

The latest store sales and consumer inflation data, the regional central bank said, raised its estimate on consumer spending growth to 3.8 percent from 3.0 percent.

Earlier Friday, the government said the core rate on the Consumer Price Index, which is seen as a proxy on underlying inflation trend, grew 0.3 percent in December, which was its steepest monthly increase in 11 months. This brought its year-over-year gain to 1.8 percent.

Federal Reserve policymakers would like to see core inflation to strengthen to 2 percent.

At the same time, the government reported retail sales rose by 0.4 percent last month, marking an annual increase of 5.4 percent.

(Newsmax wire services contributed to this report).

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Economic guru Sam Zell warns savvy investors that he senses some “irrational exuberance” in the current market threatens America’s economic growth potential.
sam zell, economic, growth, irrational, exuberance
Tuesday, 16 January 2018 10:46 AM
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