Tags: Zell | stocks | economy | housing

Sam Zell: 'Current Euphoria in Stock Market Will Be Adjusted'

Tuesday, 14 May 2013 07:58 AM

By Michael Kling

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Top real estate investor Sam Zell is predicting stocks will soon tumble.

"Right now you are buying at an all-time high," Zell said at a hedge fund conference in Las Vegas, according to Fortune magazine. "And there are times when stocks hit a high, and then go higher, but that's when you have a good economy."

Stocks are up 15 percent so far this year and the Dow Jones Industrial Average has passed 15,000 for the first time. But while stock prices are booming, underlying fundamentals remain weak, said Zell, chairman of Equity Group Investments, noting his own companies are still struggling to increase revenues.

Editor's Note:
Billionaires Dump Stocks. Prepare for the Unthinkable.

"The current euphoria in the stock market will be adjusted," Zell stated, Fortune reported. "And I hope that's all that happens."

Besides the weak U.S. economy, other causes for concern are the turmoil in the Middle East and the Bank of Japan's push to re-energize its economy by increasing inflation.

"That's not QE [quantitative easing]," he said of Japan's policy. "I don't know what you call it."

Zell believes the housing market might also be in a bubble, as large investors are buying houses in large quantities, pushing up prices. They might end up losing money, warned Zell, who noted that managing houses is more difficult that owning apartment buildings.

Zell told CNBC in April that the stock market is now similar to the housing bubble just before it popped.

"This feels like the housing market of 2006," he said. "Everybody feels they can't afford to miss it."

While Zell wouldn’t predict how low stocks would fall if a crash like that in the housing market occurs in the stock market, “I just think that we’re suffering through another irrational exuberance,” he noted.

He also criticized the Federal Reserve, saying its QE will eventually cause inflation.

"The Federal Reserve is manipulating the system," he told CNBC. "The question is how long can they get away with it.

"We're seeing a tsunami of liquidity. But I don't know that necessarily means things are better."

Dawn Bennett, CEO and founder of Bennett Group Financial Services, also foresees a stock market correction. "There are no positive fundamentals driving the U.S. stock market," Bennett wrote in an article for WealthManagement.com.

She cited a shortage of stock buyers, poor corporate earnings, weak consumer spending and low job creation. Although the official unemployment has fallen to 7.6 percent, nearly 500,000 Americans have dropped out of the labor force and the work force participation rate is down.

"We can't have a jobless recovery — it's just not possible," Bennett wrote. "I don't think any of us have witnessed such a deliberate blatant attempt by the Federal Reserve and government reporting agencies to distort economic data and at the same time relentlessly pushing unsuspecting Americans into the stock market."

Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.

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