Real estate tycoon Sam Zell said investors shouldn't believe the panic headlines they read in the newspapers, because 2008 will be a better year than many experts are predicting.
Zell, who expects to close the acquisition of
next week, made the remarks at a luncheon in Chicago. He told those in attendance that "we're not in a liquidity crunch," but instead that the economy is going through "a significant repricing of risk."
Chairman Ben Bernanke's actions in coordinating a liquidity infusion with four other central banks, and he said the U.S. is still "the most secure investment environment in the world."
Zell spread blame for the mortgage mess between the banks and rating agencies, calling the mortgage-securitization craze "a giant game of musical chairs."
And he had harsh words for the way some asset holders are treating their mortgage assets, saying "accounting is taking over for reality."
Pointing out that the mark-to-market process has produced huge writeoffs, not cash losses, Zell said he'd been offered some assets that had been discounted to zero value on balance sheets, even though they were still paying out income.
Zell sees foreign buyers, especially from the Middle East, coming in to recycle their oil dollars into U.S. assets, "unlike the 1970s when they deposited their cash into Citibank, which lent out the money to Latin America." He predicted that 2008 will be a year of "strong currencies buying weak currencies," and said that's nothing to be afraid of.
When it comes to real estate, he figures the recovery in housing will come in early 2009, and he predicts that current commercial real estate owners will benefit from the fact that the crunch has halted many developments, cutting into future supply.
Terry Savage is an expert on personal finance and also appears as a commentator on national television on issues related to investing and the financial markets. Savage's personal finance column in the Chicago Sun-Times is nationally syndicated, and she released her fourth book,
The Savage Number: How Much Money Do You Need?
in June 2005. Savage was the first woman trader on the Chicago Board Options Exchange and is a registered investment adviser for stocks and futures. A Phi Beta Kappa graduate of the University of Michigan, Savage currently serves as a director of the Chicago Mercantile Exchange Corp. She also has served on the boards of McDonald's and Pennzoil.