Billionaire investor Sam Zell told CNBC on Tuesday an “awful lot” of US stimulus money was probably used to speculate in markets during the recent Reddit-driven frenzy, and said he hopes the next round of stimulus aid is directed towards “people who really need help.”
The Equity Group Investments founder said stimulus money that goes to “everybody,” including households with incomes north of $200,000 could lead to more speculation and risk-taking in the markets.
“What you’re doing is you’re just creating a whole bunch of surplus capital that’s floating around and everybody’s trying to figure out what to do with it, and isn’t this a fun way to gamble?” Zell said.
“And since it’s the government’s money, you didn’t have it before, you didn’t need it, why not roll the dice and see what happens?” he added.
Zell also said that the market speculation that occurred as investors piled into heavily shorted stocks in recent weeks is “very negative for the stock market,” and reminds him of the late 90s, when investor enthusiasm for highly speculative internet stocks eventually led to the dot-com bubble burst.
The investor said he hopes the next round of stimulus aid is directed towards “people who really need help.” Under President Joe Biden’s $1.9 trillion relief package, individual taxpayers making up to $75,000 and couples earning up $150,000 would receive direct stimulus checks of $1,400.
Zell added that outside of the transportation and hotel industries, the economy is in “great shape,” and he’s worried overstimulating the economy would result in the return of inflation.
The investor also voiced his concerns about over-exciting the US economy through issuing too much debt. A massive debt increase would dissipate the US dollar’s reserve currency status, which he called his “single greatest nightmare.”
The billionaire investor Sam Zell questioned Tesla’s valuation and Bitcoin’s worth, predicted many workers would return to offices, and said the US dollar could cease to be the world’s reserve currency in the next decade during a Real Vision interview filmed on December 7 and released on Friday.
The founder and chairman of Equity Group Investments – who made his fortune buying up properties at discount prices in the 1970s, then cashing out just before the commercial real-estate market collapsed in 2008 – also underscored the need for dogged self-belief to succeed in life.
Here are Zell’s 15 best quotes from the interview, lightly edited and condensed for clarity:
1. “If you don’t know that you can’t, then almost anything is doable.”
2. “I didn’t know that a young kid at the University of Michigan couldn’t start a big real-estate company. I didn’t know that I couldn’t buy buildings. I didn’t know that I couldn’t rehab them. I didn’t know that I couldn’t sell them. Because nobody ever told me that I couldn’t. Everybody looked at what I did and said, ‘That’s crazy.'”
3. “I figured out that if nobody in the world agrees with me – if we are right, we get pretty serious margins.”
4. “My favorite 11th commandment is, ‘Thou shalt not take oneself seriously.’ You need to constantly challenge your own thoughts.”
5. “Open competition is a destruction of capital. In all of my investments, I have always been oriented toward barriers to entry. How do I protect myself from the insanity of others?”
6. “We can look at some parts of the stock market today and say, ‘Everybody is crazy.’ I look at valuations and see extraordinary numbers that I can’t support.”
7. “If you move to Nowhere, Iowa, it’s 5 o’clock there every day. And what do you do at 5 o’clock? Go across the street to the pig farm? We are social animals.” – arguing that a mass exodus from cities isn’t realistic.
8. “All these people who today are thinking this is the end of office space and everybody’s going to work from home. I don’t know how to motivate by modem. ” – emphasizing that urban centers have weathered financial crises, pandemics, and other disasters in the past.
9. “Everybody’s going to do Zoom calls. And then one day, a young whippersnapper is going to say, ‘You know, I think I’ve got a better chance if I go sit in front of the guy.’ And so he’s going to get on a plane. And he’s going to sit in front of the guy. And he’s going to get the deal.”
10. “I can’t even begin to give you an intelligent assessment of Tesla. It makes Cisco look cheap.” – pointing out that Tesla barely makes any money despite absorbing billions of dollars in investment and comparing it to Cisco, which was valued at 125 times earnings in 1997, a price tag implying it was responsible for 25% of the US business environment.
11. “Everybody else seems to have a kind of timing game in their own head. ‘Well, I can get out before so and so happens.’ The world is full of skeletons of people who believed they could get out before the bad event came.”
12. “Supposedly, if your index fund matches the market, you’ve succeeded. But if that market is going down like an elevator, I am not sure that’s much success.”
13. “The single greatest risk that we are dealing with today is the loss of the US dollar as the reserve currency. If we keep doing what we are doing right now, I think it is 10 or 15 years away. If we lose the reserve status, I could see a 25% reduction in our standard of living.”
14. “Unlimited debt and irresponsible activity don’t lead to positive outcomes. That’s a disastrous kind of scenario.”
15. “I am very skeptical, frankly, of Bitcoin. 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.”