Billionaire investorSam Zellis sounding a bearish note on equities and real estate alike, telling Bloomberg TV:"The stock market, despite all its gyrations, is still at an all-time high. Real estate is priced to perfection...I'm a bit like that old Wendy's commercial, "Where's the beef?"... I think it's a very challenging situation, one that requires discipline." Indeed, he feels most comfortable holding cash, agreeing with his Bloomberg interviewer's comment that "There is a ton, a tsunami, of capital chasing too few opportunities."
In January, prior to the stock market correction,Zell told CNBC, "I think the current situation seems like irrational exuberance." He went to say that he saw overvaluation in real estate as well, and thus was content to hold large cash balances. Though stock priceshave dippedsince early January, valuationsare still high by historic standards. The CAPE ratiodeveloped by Nobel Laureate in Economics Robert Shillerhas been in a range similar to that precedingthe1929 Stock Market Crash. (For more, see also: Why The 1929 Market Crash Could Happen in 2018.) Shillerauthored "Irrational Exuberance," the 2000 classic bookon behavioral economics and market volatility.
'Not Enough Tenants'
Regarding real estate, Zelltold Bloombergthat "prices are out of line." He also expressed concerns about rampant overbuilding across the country: "We're building too much industrial space. I'm not sure there are enough tenants." Citing the massive Hudson Yards project on Manhattan's west side as just one example, he continued: "We're adding tremendous office space and I don't think there's enough demand." Scott Minerd, global chief investment officer (CIO)at Guggenheim Partners, also sees overbuilding, particularlyin multi-family housing,that will lead to a steep drop inreal estate values.(For more, see also: Stocks On 'Collision Course With Disaster,' Face 40% Drop.)
Sitting on Cash
In discussing a troubled, underperforming Chicago-based office REIT that his firm bought five years ago, Zell noted: "Since we took it over, we've done nothing but sell. Today we have $3.2 billion in cash, uncommitted, and we're just sitting there, waiting for the world to come to us." Asked aboutsittingon that cash and being patient aboutreinvesting it, he continued: "It's very hard to sit there and not pull the trigger, but it's the guys who don't pull the trigger who are around to pull it when it works."
Dumping Stocks
Zell is not alone in hisunease about stock valuations.Mutual funds and ETFsthat invest primarily in U.S. equities are in line for three straight months of net outflows, pending the compilation of final data for April, The Wall Street Journal reports. From the start of February through April 25, net redemptionshave equaled$72 billion, per analysis by the Investment Company Institute (ICI), as cited by theWSJ.
Prepare for Descent
Based on projections of slowing worldwide economic growth, Barry Bannister, chief equity strategist atbrokerage and investment banking firmStifel Nicolaus & Co., predicts a decline in the to a value of 2,520 by the middle of the third quarter, MarketWatch reports. This would be 5.4% below its close on May 4. This is modestly bearish, given that several other market gurus have been calling for precipitous market declines of 30%, 40% or even 60%. (For more, see also: Contrarian Mobius Sees a 30% Stock Plunge.)
Lowered Expectations
Using analysts' earning projections as its key input, a model developed by Morgan Stanley indicates that the implied growth rates are slowing, pointing to the lowest expectations for future stock market gains since January 2007. Meanwhile, both Scott Minerdof Guggenheim, and longtime stock market bull Jeremy Siegel of The Wharton School, indicate that tax cuts are delivering big year-over-year (YOY)increases in earnings and cash flowthat will not be replicated in 2019.(For more, see also: Stock Investors' Expectations Lowest Since 2008 Crisis.)
'Business Was Waterboarded'
WhileZellsees widespread overpricing of investment assets, he also believes that regulation places an undue burden on the economy. TheBloomberg interviewer noted that Zellhas estimatedthat the cost of regulation is aboutone percent of GDP. Zellalso said, citing a recentcomment byJPMorgan Chase & Co. CEO Jamie Dimon,"in the eight years of the Obama administration, business was waterboarded."
He is encouraged bythe deregulatory effortsof the Trump administration, which he said arerestoring confidence and spurring growth."But that deregulation is still relatively small compared to what happened over thateight year period," he added. By way of an example, he continued,"You have a banking bill right now that's being driven by the fact thatover-regulation has eliminatedcommunity banks;the people who know the borrower thebest are the people who have been put out of business." Zell expressed his hopethat this bill gains passage, and indicated thathe welcomes other efforts to free the economy.
FAQs
The risks are too great with individual stocks
“They often don't know how to do due diligence or research companies. So they're often going to pick stocks without the information they need to make good decisions.” Benz's original statement from June 2020 rings even truer in hindsight.
Why are the rich selling their stocks? ›
He is not the only billionaire who has sold stocks and opted to accumulate cash. In mid-2023, news began to spread about the world's super-rich reducing their ownership of shares in public companies. The reason behind this move is to secure their wealth amidst rising interest rates and economic uncertainty.
Are stocks worth investing in? ›
Stocks have historically proven to be a reliable hedge against inflation. Inflation erodes the purchasing power of your money over time, but stocks have the potential to provide returns that outpace inflation. By investing in stocks, you can help ensure that your portfolio retains its real value over the long term.
Why people don t invest in stock market? ›
Mistrust of financial markets. Humans have a very difficult time assessing and interpreting risk. Our self-bias makes many of us believe that whilst a risk may be real, there is no way it will happen to us.
What's bad about stocks? ›
Disadvantages of investing in stocks Stocks have some distinct disadvantages of which individual investors should be aware: Stock prices are risky and volatile. Prices can be erratic, rising and declining quickly, often in relation to companies' policies, which individual investors do not influence.
Is it dumb to invest in stocks right now? ›
Based on the stock market's historic performance, there's never necessarily a bad time to buy -- as long as you keep a long-term outlook. The market can be volatile in the short term (even in strong economic times), but it has a perfect track record of seeing positive returns over many years.
Why are billionaires dumping stocks? ›
"Billionaire CEOs like [Jeff] Bezos, [Mark] Zuckerberg, Jamie Dimon, and the Walton family are selling off massive amounts of their own stocks, and analysts think the CEOS may be bracing for an economic downturn," he said, adding, “An overheated stock market continues to climb to new heights as investors feed that ...
Why is Walmart selling their stock? ›
The Walton family's sales were also outside of a 10b5-1 plan. A 2015 statement from the Walton family said that its members will sell shares from “time to time” to curb increases in its ownership of the retail giant.
Do stocks build wealth? ›
Yes, it's technically possible to earn higher returns with individual stocks than in an index fund, but you'll need to put some sweat into researching companies to earn those returns, and the likelihood that you'll actually lose money is higher.
How much money do I need to invest to make $1000 a month? ›
Reinvest Your Payments
The truth is that most investors won't have the money to generate $1,000 per month in dividends; not at first, anyway. Even if you find a market-beating series of investments that average 3% annual yield, you would still need $400,000 in up-front capital to hit your targets. And that's okay.
Timing the stock market is difficult, but understanding when to trade stocks can help your portfolio. The best time of day to buy stocks is usually in the morning, shortly after the market opens. Mondays and Fridays tend to be good days to trade stocks, while the middle of the week is less volatile.
What are the 10 best stocks to buy right now? ›
10 Best Value Stocks to Buy Now
- Cisco Systems Inc. (ticker: CSCO)
- Comcast Corp. (CMCSA)
- Telus Corp. (TU)
- Unilever PLC (UL)
- Sony Group Corp. (SONY)
- Toronto-Dominion Bank (TD)
- Solventum Corp. (SOLV)
- Essential Utilities Inc. (WTRG)
A prime culprit: higher expenses that have limited their ability to put money aside for savings and investments.
What happens if you never invest? ›
When you retire, you will still have to pay for food, clothing, and any other living expenses, but likely on a smaller budget. To make up the difference in income, you will need a retirement fund. And without investing, that retirement fund almost certainly won't grow enough to support your retirement income needs.
When should you not invest? ›
If you have debt, especially credit card debt, or really any other personal debt that has a higher interest rate. You should not invest, because you will get a better return by merely paying debt down due to the amount of interest that you're paying.
Why are CEOs selling stock? ›
Just ask JPMorgan's Jamie Dimon, Meta's Mark Zuckerberg, or Amazon's Jeff Bezos — all of whom have been selling a lot of stock of late. Why it matters: It makes sense even for billionaires to diversify out of having the overwhelming majority of their wealth in a single stock. Now's a great time to do just that.
Why is Jamie Dimon selling stocks? ›
The plan expires Aug. 23, and Dimon could sell up to 178,000 more shares under it. Dimon last year disclosed the plan to sell up to a million shares for "financial diversification and tax planning purposes." JPMorgan declined to comment Friday on Dimon's selling beyond what was in that October filing.
Why are billionaires buying bunkers? ›
Aiming to protect themselves from potential threats including civil unrest, cyberattacks, nuclear bombing, power grid failure and drastic climate-change events, many work directly with general contractors to build kitted-out end-times bunkers, while others call on a handful of specialized companies.
Why do people sell good stocks? ›
Investors might sell their stocks is to adjust their portfolio or free up money. Investors might also sell a stock when it hits a price target, or the company's fundamentals have deteriorated. Still, investors might sell a stock for tax purposes or because they need the money in retirement for income.
