Sternlicht On The QE Melt-Up: "Enjoy It As An Investor, Not As An American"

Tyler Durden's picture

"In some stocks," Starwood Capital's Barry Sternlicht warns, "we are seeing irrational exuberance with silly valuations." The outspoken asset manager warns that the signs are coming from the credit markets of "silly debt deals" with no covenants - which is helping equities melt-up but is a sign of a bubble. Perhaps his answer to what the Fed will do and when is the most succinct (and likely accurate) summation of the current idiocy, "very little and never," as the anchor grinningly suggests how great higher stock prices are for 'investors' before Sternlicht exclaims that may be true for the minority who hold stocks, "enjoy it is an investor," he suggests, "but don't love it as an American." Sternlicht goes on to address the dysfunctional political class and the Fed's enabling of that to continue as well as where the real estate bubbles are in the US.



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Babaloo's picture

Sounds like BS missed out on the rally.

Chris Jusset's picture

Now we're seeing on a daily basis commentators declaring that bubbles are running rampant ... whether it's a stock market bubble, a fiat money bubble, a housing bubble, a bond bubble, a "covenant-lite" bubble, or a host of other bubbles.  IOW, notice that EVERY DAY a new commentator or scholar joins the bubble bandwagon.


Of course, we at ZH have known about these rampant bubbles for the past several years.   Our bubble economy is now so obvious that people are coming out the woodwork on a daily basis to declare the existence of bubbles.

TruthInSunshine's picture

This Sternlicker fellow is very disingenuous, for he knows that if he were telling the entire truth, rather than shadow boxing, he'd have said "enjoy it as a TRADER," and NOT "enjoy it as an INVESTOR."

Buy & hold get cremated when, in his very own words, "silly" valuations go POP!

IOW, hold on if you're in & up for as long as you're really brave and not very much hedged.

29.5 hours's picture



Amazing (or not!) how all these Wall St. types characterize their activity as "investing" when really all they do is some variant of rent-scraping middle-man operation.

Then there are the authoritative economists who confuse piles of cash (infinite) with true capital.(scarce).



The Big Ching-aso's picture

I bet this guy's real popular with the ladies.

saints51's picture

The wheels on the bus go round and round, round and PLOP!!!!

Rainman's picture

Oblameo loves the 1% so much he built thousands more of them, lifting them from the obscurity of being mere millionaires.....and protecting them from harm.


moneybots's picture

"enjoy it is an investor," he suggests, "but don't love it as an American."


Balance sheet.

pound the vix's picture

When the shit hits the fan these guys will be the first to no longer be americans as they run for cover

Running On Bingo Fuel's picture

lol, but in the meantime why not bitch and complain, your non-performing REIT needs a fucking bailout bitchez! And the Ziff's and Burden's are getting thirsty for their blood meal.


JustObserving's picture

We had the Greenspan put for a decade and then the Bernanke put since 2006 and yet Sternlicht won't say stocks are in a bubble.  Without all the QE and PPT market support, stocks would be 50% lower at least.  And without Fed attacking gold and silver, they would be at least 50% higher.  We have the most corrupt, manipulated markets on earth.

TruthInSunshine's picture

But Fed Head "puts" always endure, thus protecting "investors" & make the BTFATH decision easy!


delivered's picture

You hit the nail on the head as every bit of logic dictates that equities, credit, and real estate are overvalued as a result of CB intervention. So the logical conclusion would be to start to take aggressive positions to capture the coming correction (shorts, buying puts, etc.). But the one thing that always comes back round and round is the Fed and the fact they just can't afford another stock market meltdown as three in a little over a decade (tech led bust in 2001/2002 and real estate led bust 2008/2009) combined with blow-ups in credit and real estate would certainly be the end of it. 

So if I had tried to battle the Fed over the last three years, I would be wiped out as the Fed's desire, resources, arrogance, and ego are just too much to battle in the short-run in terms of making investment decisions based on sound fundamentals. So if you can't beat them you might as well join them but not from the perspective of buying into the hype of over valued equities (anyone really think Snapchat is worth $4 billion). Rather, playing along with the theme that gold/silver are in bear markets while MSM promotes that all is well and everything is fixed. Puts and shorts expire and can get squeezed but at least owning physical PM offers some level of insurance and hedge against the current state of the financial markets.

While I may have to suffer and endure another 12 to 36 months of PMs performing poorly as TPTB continue their spin, for investors, the window into PMs is always open the widest when the skies are just beginning to darken (before an outright downpour starts). No worries, the storm will pass but just tell that to the countless saps that were wiped out from the crash in 2001 and real estate crash in 2008. So if we are on a 7 year cycle, 2015 willl be the crash but the cracks will start to form and become visible in 2014 (or maybe earlier). Here are just a couple warning signs and cracks I'm seeing:

- Consumer debt now above pre Great Recession levels (led by student and auto debt).

- Consumer real income levels continuing to fall (driven by the poor quality of jobs and not the quantity of jobs).

- Soverign debt levels continuing their upward march (especially focused on what's "off the balance sheet" for unfunded obligations at all levels).

- China's financing and debt problems mounting quickly (i.e., the left side of the balance sheet is not performing so the right side is starting to suffer and create stress).

- Reduced underwriting standards for consumer and business credit now re-appearing with low down home loans, cov-lite business loans, expanding shawdow banking system, etc.

Cdad's picture an investor...or an American.  Hmmmm?  Is that it?  Is that what this particular syndicate member is saying?

Peter Pan's picture

What he is saying is that the investor is a small class of people who are profiting from the larger class of people called Americans.

HobbyFarmer's picture

I was a programmer at his company years ago.  he is brilliant.  I respected the man then and agree with what he is saying now: Americans are not benefiting from this fake market.  those "investors" in the market are profiting (for the moment), but it won't end well for this country.


Its Only Rock N Roll's picture

I guess Barry didn't get the following podcast from Carlyle that was posted today waxing on poetically about the virtues of CLO's.  

We have reached the center of the asylum....




fonzannoon's picture

the only thing I heard here is Christmas will be better and he wants you to go to the mall.


asteroids's picture

Don't blame the FED. DO blame your politicians who are immoral, corrupt, and inept. They could stop alll of this in a heartbeat.

Anusocracy's picture

The vacuous group behind this mess is the American voter.

That's the cause of Idiocracy.

0b1knob's picture

Actually getting out of both the market AND America might be the best plan.   Enjoy your expat life.

Rainman's picture

yes....come to Idaho ! < numerous exceptions to the invitation may apply >

fonzannoon's picture

Isn't it kind of the opposite of what Sternlight says? I would think it should be "enjoy QE as an american, not so much if you are the emerging world getting our inflation blowtorched up your ass".


uncle.bigs's picture

I can't wait to see the throngs of American Morons stampeding into the stores on Black Friday.  Stuffed full of Turkey and Bourbon, these idiots will wait for hours in the cold for a $98 TV at Wal Mart or some other discounted trinket at another store.  Then we'll hear all about record sales, record profits, all-time highs.....LOL.


We're in the equity melt-up phase all the way until January at minimum.  If you're short, you're screwed.

ebworthen's picture

"This is a great party and we're havin' fun and makin' money!  Yeah, it's all complete bullshit and is screwing most Americans and future generations - but wow - what a ride!  Har-har, chuckle, guffaw."


Fucking DOW at 16,000 - meanwhile SNAP cut 5% for 48 Million, WalMart and cheap retailers down/high end retailers up, McD's giving advice on how to save money to their grossly underpaid employees, un-affordable healthcare, etc., etc., etc.

But hey, BTFATH!

Fuck me.

toros's picture

The market is just climbing a wall of worry.

Clowns on Acid's picture

No the Fed is pushing investors up the Wall of Worry.

RaceToTheBottom's picture

WS'ers getting scared about the upcoming violence and are trying to be men of the people. 

Expect some more bro pump hugs among politicians and Congressional prostitutes.

Major Miner's picture

That guy looks like a younger, less-Jewey version of Lloyd Blankfein.  

dragoneyes74's picture

Wrong thread, but, personally, I don't believe it matters if the Fed tries to monetize another debt bubble when they consume too much of the Treasury market.  If I'm an institutional buyer of Treasuries, and the Fed tells me it's expanding QE but it will be tapering Treasuries and now buying student loan debt, or muni bonds, all I hear is: slowing down on treasuries.  Must. Sell.  Now.  Rates go up.  Crush economy.  

Got a little lucky bottom ticking the S&P pullback, so I'm taking my 19 points here at 1794.  Not saying we can't break out to new highs tomorrow, I'm just day trading now b/c it's so overextended.  

Duke Dog's picture

Fuck Barry - both of them!

squid427's picture

@Its Only Rock N Roll

"we use non-mark to market term leverage to to enhance the yield of these portfolios" -Linda Pace

What is non-mark to market term leverage?

Haager's picture

You don't need to understand what they say - that's not the intention. You just need to think that they are damn smart and that you can be full of confidence that they know what they are doing.


rp1's picture

The only thing an investor has to do is estimate the future value and buy accordingly.  There is always something to buy.  Who cares what the Dow is, if it is way overvalued?  You don't like it?  It's bullshit?  Ignore it.  Look for something good to invest in and stop speculating in markets where the expected future returns are poor.

JR's picture

Good point, rp1. However, the key point to remember is that the Dow Jones has become the popular major media gauge of the health of the economy. And this gauge is propaganda because in reality it represents the volume of the transfer of wealth from the American middle class labor to the banks who then buy US equities whose exploding returns compete with the devalued purchasing power of the average man on the street.

To me, the Dow Jones has become the symbol of destroyed permanent reserves in America and the Las Vegas casino for the Fed-backed risk takers.

The Dow went up 109 points today, closing over 16,000; there’s your monthly QE $85 billion.

saints51's picture

I don't know what the fed will do. I do know what the Fed should do....FUCKING DIE!!!!!!!! Record that NSA mother fuckers. Come and get Papa Bear!!!

And thats how I really feel.

JR's picture

Using the fudged CPI as a measure of the inflation of money created out of nothing, and the resultant price increases, is a heinous crime. Inflation, of course, is the Fed’s excuse for engaging in extraordinary usury on debt.* The following letter to the editor is worthy of contemplation by Zero Hedge readers.


With regard to the book review “Has the Church Changed Her Teaching on Usury?”, July/August 2013 issue of Culture Wars, I found the review interesting and informative. But I still have several concerns with things in the review which I think need further comment.

First, it seems to assume a dollar is a dollar is a dollar.

Now is seems reasonable to me to assume that, for much of human history, with gold and/or silver being money, and witht the gold/silver supply fixed or very slowly growing, that an ounce of gold/silver equals an ounce of gold/silver, and the analysis applies.

‘but at least since the time of William and Mary and the adoptionof Dutch fractional reserve banking in the Anglo-American and eventually modern world with its inherent high inflation, a dollar (or pound/frac/euro) is not and has not been equal to a dollar except in special circumstances.

In my youth, circa 1968, I can still remember buying gas for $0.27 per gallon; now the same gallon costs close to $4.00.

A gallon of gas loaned back then could be repaid and used equally well now with another gallon of gas. But $0.27 now is not even close to being worth $0.27 in purchasing power back then.

The fact that our currency is still called a dollar, actually a Federal Reserve Note, does not make them all the same thing!

It seems that a complete and modern analysis has to take into account the inflation or the relentless expansion of the money supply by the big New York banks through their wholly owned “Federal Reserve.”

It might begin by doing what modern economists refuse to do, and that is to actually define “money.” the ancients and the scholastics had it done for them since the answer was gold/silver. The moderns don’t both, and they need to.

So it may be that the seeming accommodation of the Church to usury has as much or more to do with the escalating devaluation, the deliberate defrauding, of the local currency that the debt is denominated in as with self defense!

Other concerns are, first, with regard to the price of stocks, (Dr. Anthony) Santelli’s claim that the “Expected future gains are built into the price of what you are selling” derives from a theory of modern portfolio management which history, including the most recent bull and bear markets, as well as more than a few bankruptcies, has shown to be false.

Second, modern commentary on the loaning of actual money, as for example in the purchase of bonds, ignores completely the more heinous charging of interest on mortgages and a lot of the bank financing for corporate takeovers for which the money is just created out of nothing and then loaned out, but for which not only the principal but also the interest are demanded back!

And lastly, we don’t actually have money, except possibly for coins, which are denominated as fractions of a Federal Reserve Note, as did the ancients and scholastics who had gold/silver; we have debt (Federal Reserve notes) floating around parading as money, all of which theoretically demands repayment with interest.

For a brief period in our history we had Mexican silver coins, and gold, and later Lincoln’s greenbacks for money, and, of course, coins we still have, and we flourished; we can do this again.

It just seems to me that eliminating or at least controlling the evil of usury requires a nearly simultaneous issuance of a real (fiat, but not debt) currency and the elimination of the printing (or “electronifying”) of money out of nothing as the banking system does now.

* The average annual percentage rate, or APR, for variable-rate credit cards increased 1 basis point to 15.36 percent from 15.35 percent, according to Bankrate's latest survey of interest rates. A basis point is one-hundredth of 1 percentage point. The APR for fixed-rate cards stayed steady at 13.02 percent, where it has been since mid-February. – Bankrate, November 21, 2013

Clowns on Acid's picture

Of course it begs the question for any critical thinker (are there any left?) - "Is the Fed part of America?"

I suppose we will have to wait until the collapse until 60 Minutes or other Lame Scream Media picks up this meme......

Clowns on Acid's picture

Begs the questions...

What is a "country"?

What is a "currency"?

What is the "Fed"?

Answering these questions en todo, would clear things up for the "average" working person.

pashley1411's picture

Shouldn't there be a term for an economic trend so obvious that even economists see it?   Obviously "bubble" ain't doing it.

medium giraffe's picture

Enjoy it while it lasts more like.  Mr Starlight wants your wallet buddy.

Richard Head's picture

Might as well lie back and enjoy it.