http://wolfstreet.com/2016/05/27/market-timer-sam-zell-fed-interest-rate-commercial-real-estate/
I think this is interesting....read the whole thing!
On CNBC, Zell lashed out in his soft-spoken and well-balanced manner against the current zero-interest-rate environment in the US, and the fundamental damage it was doing — the man who so hugely benefited from it:
“In the most simplistic terminology, I would ask you the question, if something is free, is it valued? Is it appropriately risked?”
“I think when you talk about interest rates being close to zero for a long period of time, I’m very concerned about the fact that we have desensitized our business community to the cost of capital.”
“And we know that the cost of capital ain’t free,” he said. “Every time you defer facing up to the cost of capital, it’s going to catch up to you. That I think is the biggest concern.”
“We have distorted markets. Maybe we have bubbles.” Then, on second thought, he said, “I don’t even know what a bubble is, so I wouldn’t want to be the definer of it. But I think that we have too much intervention and not enough market movement in interest rates – and in other assets.”
“You know what the problem is? The problem is I think the Fed should have raised interest rates two years ago, and therefore today would be able to make a much more rational decision as to what to do. The problem is that they’ve so deferred reality for so long that I think they have a serious credibility problem if they don’t raise rates.”
Then he added another twist to this conundrum: “So now we’re talking about raising interest rates because of credibility and not because of economics.”
And the fear of losing “credibility” – what’s left of it after more than a year of flip-flopping on rates – may be why Fed heads are parading up and down in front of the media with suddenly invigorated rate-hike rhetoric. Meanwhile, Zell is selling, at peak prices, unloading assets at the top while he still can.
