Billionaire investor warns Sam Zell that the “single greatest risk” facing in investors could rattle the markets with the next decade.
“The single greatest risk that we are dealing with today is the loss of the U.S. dollar as the reserve currency,” Sam Zell, the founder and chairman of Equity Group Investments said in recent RealVision interview.
“If we keep doing what we are doing right now, I think it is 10 or 15 years away,” he was quoted by MarketWatch as saying.
“A 25% reduction in our standard of living” could take place if the dollar loses its reserve status, which he says is a very real possibility, he said.
“Unlimited debt and irresponsible activity don’t lead to positive outcomes,” the billionaire real-estate mogul added. “That’s a disastrous kind of scenario.”
As for Zell, he also shared his thoughts on two head-turning market-movers: bitcoin and Tesla’s stock price.
“We can look at some parts of the stock market today and say, ‘Everybody is crazy,'” he said, “I look at valuations and see extraordinary numbers that I can’t support. I can’t even begin to give you an intelligent assessment of Tesla,” he said.
“I am very skeptical, frankly, of bitcoin.” he said. “Ultimately, it may be the answer or one of the answers. But right now, it’s a world that’s extraordinarily populated by chameleons and other fast-talking characters. I don’t believe everybody involved in it are the kind of people I’d like to follow. ”
Zell isn't alone in his warnings about the dollar.
Ray Dalio, founder of hedge fund giant Bridgewater Associates, recently said the dollar’s decades-long position as the global reserve currency is in jeopardy because of steps the U.S. has taken to support its economy during the COVID-19 pandemic.
While equities and gold benefited from the trillions of dollars in fiscal spending and monetary injections, those efforts are debasing the currency and have raised the possibility that the U.S. will go too far in testing the limits of government stimulus, Dalio said in an interview with Bloomberg Television.
“There is so much debt production and debt monetization,” Dalio said.
To be sure, top money managers say the dollar’s decade-long bull run is at an end, as they are positioning for a stronger-growth, weaker-dollar world.
This bearish take on the dollar was the near unanimous verdict of investors attending the recent annual Reuters Investment Outlook summit, who predicted that non-U.S. assets, from commodities to emerging markets to European stocks will perform well while U.S. interest rates remain stapled to the floor.
Having strengthened more than 40% since the depths of the 2008 crisis, the dollar is on track for its first annual loss in three years versus a six-currency basket. And there is likely to be more to come -- forwards price the dollar to weaken roughly 1.2% against the euro in the coming year.
“The markets are right, I think the dollar will cheapen from here,” Rick Rieder, BlackRock’s chief investment officer for fixed income, told the Reuters summit earlier this month.
He said, however, there would always be an “organic bid” for dollars as the world’s premier reserve currency, but that should not prevent it weakening at least moderately while the euro and emerging market currencies strengthen, he said.
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