meds online without prescription alt=”Linneman Zell” width=”400″ height=”267″ />Last week at an event hosted by ULI New York, industry strategist Dr. Peter Linneman interviewed billionaire entrepreneur Sam Zell. I was unable to attend, but fellow NYU Real Estate Institute classmate and head of REISA, James Mack, was nice enough to pass along his notes from the event.
Format: Linneman posed questions to Zell
Sam focused much of his discussion on the economy. I’d love to hear your thoughts on what he had to say and the questions he posed.
Continued Movement to Cities:
Less people are getting married these days, and if they are, it’s much later in their life. Instead, they are moving to the city, which appeals to talent, particularly young talent.
% of U.S. Income Spent on Housing Compared to Other Countries
From a recent survey, around 54% of U.S. income is spent on housing. In the US, this number is high, but compared to other countries, it is not.
Bank Bailouts
Should banks have to lend the money that they’re being given for free from the government? Shouldn’t we make the banks keep the money in the company rather than disburse dividends or bonuses?
Banking is a critical part of our economy, and is needed for the entire economy to succeed, not just the bankers. Governments didn’t save the banks for the sake of the employees of the banks. They saved the banks for everyone’s sake. Too many income caps may turn the banks into what they used to be – the place you go when you can’t get a job anywhere else.
Glass-Steagall – Zell doesn’t like it, but believes no bank should be involved in proprietary trading. Deposits should be used to promote banking, not used in these types of entrepreneurial activities. Using deposits secured by the Fed for this type of entrepreneurial activity is unconscionable.
Freddie & Fannie – What Should Happen to Them?
Zell – first look at what went wrong. In 1999 or 2000, Fannie & Freddie owned almost no subprime debt. In 2004, they received pressure from the government to buy up a ton of paper. Washington watched for “how much”, not “how well”.
Multifamily program has done well because there is no subprime apartment loans. Subprime means “they can’t pay it back”. Multifamily sector may be even more important in the future, because of increased movement to cities. Zell does not anticipate changes in this program over the next few years.
Fannie & Freddie are likely to come out of the multifamily market intact because they own the senior piece, while they own the most junior pieces of the single family market and will continue to hurt there.
TARP and Other Government Initiatives
TARP – Zell felt it was important for reestablishing confidence in the market.
“A panic is one of the few times the government can really help.”
$787 billion stimulus package was unconscionable, omnibus bill even worse. Most of the money was wasted on unemployment benefits and other areas which have not helped.
U.S. Dollar as Reserve Currency
Nobody knows disaster until the U.S. dollar ceases to be the reserve currency.
Zell believes broader inflation will likely occur 3-4 years out
James also passed along an interesting article, not related to this event but relating to the U.S. dollar and inflation:
http://www.financialsense.com/fsu/editorials/amerman/2009/1029.html
Opportunities
Growth in emerging markets is going to bring us out of this – you can invest in debt.
“The solution is dilution” in regards to future inflation.
All in all, in the opinions of Zell and Linneman, the U.S. faces major issues moving forward. Both tend to think that the U.S. will eventually inflate its way out of the problems. Zell is not very bullish on the U.S. at this point, but sees opportunities overseas.
What do you think?
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