Billionaire Sam Zell Warns The Fed Is Too Late, "Recession Likely In Next 12 Months"

Tyler Durden's picture

When last we checked in with billionaire Sam Zell, the real estate mogul was busy offloading some $5.4 billion in apartments from Equity Residential’s portfolio. The 23,000 units were sold to Barry Sternlicht’s Starwood Capital and as we noted at the time, Zell has traditionally had a very keen nose about such things as "market peaks": the 74 years old is credited with calling the top of the real-estate market in 2007, when he sold another one of his companies, Equity Office Properties Trust, to Blackstone for $23 billion.

Despite his penchant for getting it right, Zell warned last September that when it comes to calling market peaks, “you’ve got to tiptoe [because] if you're wrong on when, that's a problem.”

Well on Wednesday, Zell “tiptoed” into an interview on Bloomberg TV and made a rather decisive prediction about where the economy is headed now that the Fed has waited too long to hike.

“I think this interest rate hike is too late,” Zell said, before suggesting that “this economy is closer to falling over than it is to going up.”

Zell’s conclusion: “I think there’s a high probability that we’re looking at a recession in the next twelve months.”

Note that this is entirely consistent with the notion that if, as a result of the Fed missing its window, NAIRU undershoots, if (or, more appropriately "when") it snaps back, a recession is a virtual certainty if history is any guide. Recall what BNP said last month: "NY Fed Fed President William Dudley recently pointed out that whenever the US unemployment rate has increased by more than 0.3-0.4pp from its low, there has always been a recession. Knowing this, it is perhaps not surprising that the median Fed forecast always shows the unemployment rate levelling off close to its equilibrium. The Fed would presumably be reluctant to forecast that its actions (or lack of them) would cause an undershoot in the unemployment rate, which would more than likely end in a recession."

"The central bank has been too cautious and the economy would already be adjusting if it raised rates six to nine months ago, giving Chair Janet Yellen 'more room if a recession is on the way,'", Zell says.

Again we see the old "hike so we have room to cut after we cause a recession" argument. 

In any event, the interview touches on a number of topics from energy, to the slump in world trade, to real estate. Watch below.

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Soul Glow's picture

Hey Sam I have news for you and your mega rich buddies - we've been in a global depression for over a decade.  See you in hell.

- SG

Captain Debtcrash's picture
Captain Debtcrash (not verified) Soul Glow Dec 16, 2015 3:44 PM

Of course a recession is on the way, a market crash will always cause a recession, and no one can look at THIS and not think a crash is on the way, no matter how much the PPT is pumping markets today. 

Soul Glow's picture

And for any asshole that doesn't think there is such a thing as the PPT, or as it is officially known, The President's Working Group on Financial Markets

OFFICIAL ARCHIVE -

http://www.archives.gov/federal-register/codification/executive-order/12...

Rainman's picture

see ? ...this is why nobody goes to jail

nuubee's picture

Fed is too late?  Recession in 12 months?

Fed should be abolished, its own existence CAUSES booms and busts.

janus's picture

Zealots, 

janus wishes he could be more specific in the following revelation, but in order that i may protect and retain my 'sources', the most provident course is opacity...so, please do forgive the omission of names and institutions.

i was told, in no uncertain terms, that a series of rate hikes are coming...this is just the beginning.  i was told this approximately 2 months ago in answer to my questions regarding why, after years of FED actions succeeding statements to their given effect, in september they reverse course and fail to raise rates after telegraphing that a raise was immanent.  i didn't want to say anything at the time for obvious reasons, and, unfortunately, i can't say anything else about this gentleman's other 'predictions'.  

as to his credentials, i'll only say that he's a member of every golf course you've ever salivated over watching top-tier PGA tournaments, and he's C-level at one of the world's most important financial firms.  one caveat: he's not a member of Augusta National -- but plays the course on occasion.   

furthermore, i, for one, applaud the fed.  low rates are crushing the poor who insist on working.  the prices of all life's basics are wildly askew in proportional cost -- and this is a direct result of ZIRP/NIRP.  look, people do not buy homes with price as their reference, they buy according only to whatever their monthly payment will be...and so we've seen deflationary pressures on wages and wild inflation of rents and real estate.  food, shelter and energy have ballooned the most; and with energy being crushed, next will be rents, followed by a normalization of food prices.  

Christ said, "the worker is worth his wages."  up until now, the FED has been sinning against this benevolent axiom and divine dictum.  now the FED is seeking benediction...good for them.  just kidding, i don't think benevolence is at the heart of this...let's just say that game theory has moved into a new and more coherent arrangement.  additionally, i wouldn't interpret future FED moves in terms of its traditional role -- dual mandate.  the world is about to change radically, and today was one small lurch for a man (in this case, a woman (yellen) and one giant lurch for humanity.

it is entirely possible that many love the world's present arrangement...i despise it.

order out of chaos?  sure, but mark it well TPTB: it's your chaos -- though the order's articulation is the prerogative of other powers.

janus

38BWD22's picture

 

 

Nice rant, janus.  Good analysis, and you're right:

"It's our chaos"

Bay Area Guy's picture

Soul Glow.....I was going to say that I welcome a recession since it would be an improvement on what we've been going through.

MrNosey's picture
MrNosey (not verified) Soul Glow Dec 16, 2015 4:44 PM

There is no real inflation in sight, this decision is politically motivated!

The agenda rolls on......

http://beforeitsnews.com/conspiracy-theories/2015/12/as-events-spiral-out-of-control-its-time-to-take-a-closer-look-at-agenda-2030-video-2472972.html

Soul Glow's picture

Rent and food prices disagree.

gizmotron's picture

 

 

Well yes, Sam, that's the whole point.

Fed is raising rates now so that, when the recession comes, they can lower the rate and look like geniuses.

blindman's picture

or the fed has played the roll of set up
and supplier of financial ammo for the last decade
and will now switch mandates and level the landscape
having provided the ammo and booty for the pirates
to come in and buy off the land, cheap, for the select and their
next cycle of absolute usury; all consistent with established
and lawful idiocy.
.
Idiot, n. A member of a large and powerful tribe whose influence in human affairs has always been dominant and controlling. - Ambrose Bierce
.
:( ... ;) ,,,

Barrack Chavez's picture

The Fed are raising rates now in hope that they won't get blamed for Bernanke's policy.

The guy went on TV (and everywhere) grinning like an idiot because "we have this thing called a printing press!" -- like he was the first one to make this discovery.

Guess what Ben you stupid moron -- Zimbabwe figured out about the printing press decades before you.

Zero interest rates didn't work in Japan -- and they started failing in 1989, long before Bernanke's failure.

When the muppets figure out their economy and future have been destroyed, they are going to want heads to roll -- and just like Jon Corzine or Dick Fuld, Bernanke will be at the top of the list.

Yellen and the FOMC clowns are hoping and praying to be spared Bernanke's fate.

Too late Janet.

pods's picture

The real economy is like a dude in a hospital bed being kept alive by machines.

Or, if you are more humorous, a Weekend at Bernie's kind of thing.

pods

Larry Dallas's picture

Nah. More like a Lamar Odom.

roadhazard's picture

Next twelve months... zzzzzzzzz

G.O.O.D's picture
Billionaire Sam Zell Warns The Fed Is Too Late, "Recession Likely In Next 121 Years

 

FIFY

wmbz's picture

"Recession Likely In Next 12 Months"

Nah... all the big smart money from across the pond will start pouring in fast and furiously.

Now that we all know our economy is strong and getting stronger by the day.

Jacks on a roll, it's all good!

DeanWinchester717's picture

Like the commenter above stated, we've been in a global depression for years now.  There never was a recovery you SOB.  Of course you'd know that if you ever stepped outside your own personal billionaire fantasy reality bubble for 5 seconds to see it.  Enjoy your earthly treasure chest now because you can't take it with you and soon enough you won't be able to do jack shi* with all that money you've collected and continue to worship. 

cougar_w's picture

EMs maybe. Those guys are dead walking over the coming rate hikes. US banks should do okay collecting on the insurance.

So, a mixed bag really.

MASTER OF UNIVERSE's picture

I, for one, did not fathom the level of ignorance emanating out of the dead FED.

mayhem_korner's picture

 

 

Another bona fide illustration that there is no correlation between wealth and intellect.

Mattress Money's picture

Everyone needs to make up their mind, first no one believed the Feds would raise the rates, now they have now we are complaining make up your minds guys

chunga's picture

Zell, Sternlicht, Yellen,,,hmmm, they all look pretty sneaky.

Sudden Debt's picture

We haven't kept up with real inflation for already a long time noww and that's why the middleclass is dying and a lot of people can't get into the middleclass anymore.

And as long as rates aren't at 10% minimum, inflation will keep destroying us and those who are poor will get dirtpoor and the middleclass will become borderline poor.

The poor and the middleclass will fight eachother and insult eachother but as long as they do, they'll, bot get more poor.

And what a billionaire says should be ignored. Those guys live on mars.

Barrack Chavez's picture

If you follow what Zell does (as opposed to says), you do quiet well. If you follow what Zell says, you still do OK. Follow the money.

Its when you take advice from the CNBC / Bloomberg hosts (a difference without a distinction) -- that's when you get in some trouble.

Take advice from a lying cheating politician? Then you deserve to get screwed, and since it was your choice you can't blame anyone else.

cliccami's picture

Great article!

For those of you that are interested in GOLD market:

https://sasafuturestrading.wordpress.com/

 

Bye

besnook's picture

zell is missing the magic of math. the market responded the way it used to. a rise in interest rates causes money to flee bonds and move into equities. in this case the unknown is what effect short covering in the bond market will have.

the dollar drop also reflects the initial flight from the bond market eventually reflected in a drop in the equity market. the  inventory build will be offset by the forex math increasing profit and all is right with the world.

kinda nice to see. let's see if the fed supports the cash drain with something else to make it to .75, at least.

The Ram's picture

Well, this billionaire does not spend enough time on main street.  The recession is here and has been for some time.  

Barrack Chavez's picture

Think you have Zell confused with the Bloomberg hosts. Zell has been saying there are problems for some time, and while Bloomie hosts were saying BUY! BUY! BUY!, Zell sold the $4.5 billion in appartments to suckers who listen to Bloomberg hosts.

Kind of weird, but Zell actually gives muppets some decent advice (which muppets usually ignore in favor of what their "independent" face sucking vampire squid tells them to do)

Mr. Cynic's picture

When you have a billion dollar matress to land on, "recession" sounds academic doesn't it?

Kirk2NCC1701's picture

Sounds like you're either on the Inside, looking out for you and your kind, or on the Outside, looking in. 

The bullet-proof glass separating you, is Membership.  It's an Elite club, and you're not in it. 

Time to form your own Club, or forage the Wilderness on your own.  TPTB want you to choose the latter, and will use every fable, myth or story, to bias your decisions in that direction.

Salsipuedes's picture

Sam Zell is as INSIDER as it gets. Caveat emptor!:  https://en.wikipedia.org/wiki/Sam_Zell

"They usually speak with forked tongue."

    - Pocahontas ("Rebecca Rolfe" 1595-1617)  - A total slut so she should know!

blindman's picture

where is the demand? demand for what?
who will be the suppliers and manufacture
the unidentified service or object of
this hypothetical market? the problem
might be that people just do not need or
want as much as the speculators in finance
would like as per their "money" gospel and
its demands?
no one could have seen this coming.

kelley805's picture

J.P. Morgan analysts wrote that the three best leading indicators for recession have been credit spreads, the shape of the yield curve and profit margins.

Here are some signs of a coming recession.

1. Investors in high-yield bonds are expecting to see their first negative return since the start of the credit crisis in 2008.

http://www.marketwatch.com/story/deteriorating-junk-bonds-flash-warning-signs-for-stocks-2015-12-07?dist=afterbell

2. Factory orders continue to drop

http://www.zerohedge.com/news/2015-10-02/us-factory-orders-flash-recession-warning-drop-yoy-10th-month-row

3. Default risk spikes

http://www.zerohedge.com/news/2015-10-02/us-financials-default-risk-spikes-2-year-high

4.  M&A set record

http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record/  

5. Iron ore prices tumble

http://www.marketwatch.com/story/iron-ore-prices-keep-crashing-adding-to-global-growth-fears-2015-11-30

6. Baltic dry shipping index tumbles

http://www.marketwatch.com/story/shipping-index-falls-to-all-time-low-stoking-fears-about-global-growth-2015-11-19

 

Here is how to prepare.

http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/

 

Here is how to get your mind off this stuff.

http://michaelekelley.com/category/humor/

 

Good luck!

kaa1016's picture

Fuck Sam Zell. Everyone has an opinion. I can care less what he says.

o r c k's picture

Excuse me Sam, do you ever regret not "retiring" after your 1st billion to spend every minute enjoying every physical and mental wonder this planet and your own humanity have to offer? The interesting hobby of multiplying a fortune surely isn't such a joy as to spend every minute of wakefullness pursuing it. If you found a way to take it with you could you let us know? Thank You.

FrankHerbert's picture

perhaps the manipulators should just get the fuck out of the way. in roughly a century those in control of 'monetary policy' have siphoned off about 90% of the value of the dollar. i don't think it is coincidence.

looking forward to a total economic collapse. perhaps it'll cull the herd some.

onmail1's picture

Yellen yellin : I AM GONNA RAISE THE RATES

PervertThiefAddictNiggaObama : wait , wait for some tyme , let mee loot some moar countries , I weel deeposit so mach (looted) gold in NY Fed Reserve Bank dat dere weel be no need to raise the rates, and wee all weel be swimming in gold coins like Donald Duck.

(the american morality since Bretton woods)