Cash vs stocks: legendary investor Sam Zell picks a side

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on Nov 3, 2022
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  • Sam Zell says the U.S. economy is headed for a recession.
  • He finds cash more attractive than equities market for now.
  • S&P 500 index is currently down over 20% year-to-date.

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S&P 500 is trading down on Thursday after the U.S. Fed signalled that rates will have to go higher than previously expected and that it was “very premature” to already be thinking of “pausing”.

Sam Zell sees a recession coming

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Despite the FOMC statement that market initially construed as “dovish”, those remarks from Fed Chair Jay Powell in the news conference pretty much eliminated the possibility of a “pivot” anytime soon.

What that means for the economy is an inflated probability of a recession, said legendary investor Sam Zell on CNBC’s “Squawk Box”.

We overflowed the society with $8.0 of capital. I think the likelihood is that we’ll have a recession. That’s what happens when you flood the world with money and everything is free. Excess leads to a recession.

Chair Powell also agreed a day earlier that the possibility of a “soft landing” was rather slim.

Zell is sticking to cash for now

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At writing, the benchmark index is down more than 20% year-to-date. Still, an environment where rates are clearly set to go higher and the economy is to slowdown, Zell added, cash continues to look more attractive that the equities market.

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It’s still very early and I don’t get any basis for being overly optimistic. I’ve been hoarding cash for some time. I’m convinced that liquidity is value and there’s definitely a liquidity issue that’s rising.

The bear case is also predicated on earnings estimates that are still too high for 2023.

Last month, Jamie Dimon – the Chief Executive of JPMorgan Chase also said the S&P 500 could crash all the way down to the 3,000 level; an impactful remark that Invezz covered here.

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