Sam Zell has called the top again…
Zell is a real estate mogul and self-made billionaire. He made a fortune buying property for pennies on the dollar during recessions in the 1970s and 1990s. This earned him the nickname “The Grave Dancer.”
Zell was also one of the only real estate gurus to spot the last property bubble and get out before it popped. In February 2007, he sold $23 billion worth of office buildings. U.S. commercial property prices peaked nine months later and went on to plunge 42%.
• Zell is seeing a similar situation in today's market…
His company has sold more than $8 billion worth of property over the past 18 months. In January, it sold 23,000 apartment units, about one quarter of its portfolio.
In December, he told Bloomberg Business “it is very hard not to be a seller” with the pricing currently available in the commercial real estate market. Since 2010, commercial property prices have nearly doubled to all-time highs. They’re now 16% above their 2007 highs. But recently, the market has reversed course…
In February, commercial property sales plummeted 47%. And they've now fallen three months straight. That hasn’t happened since the 2009 financial crisis.
This month, Zell warned that prices are still too high.
“If somebody needs a bell ringing to figure out that the real-estate market is pretty frothy right now, then I’m in the business of selling hearing aids,” he said.
• We’ve been warning of a bubble in commercial property for months…
In December, we explained how the government’s cheap money goosed the property market. In short, reckless policies, like printing trillions of dollars and holding interest rates near zero, have caused commercial property prices to skyrocket. The same is true for the stock and bond markets, which have hit all-time highs in recent years.
• Zell thinks the U.S. economy is also in trouble…
The Wall Street Journal reported last week.
Zell, who correctly called the top of the last commercial real-estate cycle, is predicting global problems will likely push the U.S. into a recession in the next year…
“I’m not being pessimistic, I’m being realistic,” he said last week at a real-estate conference in New York. The U.S. economy is now “in the ninth inning,” he said.
• This recession will be worse than most people believe…
Unlike Zell, we think the next downturn will be far worse than the last financial crisis. Casey Research founder Doug Casey explains.
Right now, we are exiting the eye of the giant financial hurricane that we entered in 2007, and we’re going into its trailing edge. It’s going to be much more severe, different, and longer lasting than what we saw in 2008 and 2009.
• The U.S. economy is barely growing today…
According to the government, it grew just 1.4% last quarter, less than half its historic average.
As regular readers know, the government produces many “headline” economic figures, including gross domestic product, unemployment, and inflation. It’s in the government's interest to make these figures look as strong as possible. So we’re always skeptical about government numbers.
Instead of paying too much attention to these “official” stats, we focus on data that’s harder to fake, like corporate sales and earnings. These figures, which represent real cash coming in and out of companies, are a better gauge of how the economy’s doing.
• E.B. Tucker, editor of The Casey Report, says corporate sales are slowing…
Evidence of the weak “real” economy is everywhere. Take Apple Inc. (AAPL), the largest publicly traded company in the world. The company recently announced this year’s first-quarter sales will be less than last year for the first time since 2003…
And it’s not just Apple.
Other well-known companies like Wal-Mart (WMT), Advance Auto Parts (AAP), and Best Buy Co. Inc. (BBY) reported declining sales in their most recent year.
In total, 639 U.S.-listed public companies with market capitalizations of at least $1 billion had declining sales compared to one year prior. Last year, the number of companies was only 324. That means the number of companies reporting declining sales doubled over the last year. And it’s going to get worse.
• Casey Report readers should make money no matter what happens with the economy…
Dispatch readers know E.B. has “crisis-proofed” his portfolio.
He owns gold, the ultimate safe-haven asset. He’s also shorting (betting against) one of America’s most vulnerable companies, a major airliner.
But E.B.’s not avoiding stocks entirely. Earlier this year, he recommended buying companies that “feed the masses.” E.B.’s reasoning was simple: people always need to eat. And world-class companies that put food on the table will do fine, even in a severe economic crisis.
One of his picks, Archer-Daniels-Midland (ADM), has gained 26% since January. That’s more than triple the S&P 500’s return over the same period. E.B. thinks ADM will keep rising even if the U.S. enters a recession. According to several Iowan farmers E.B. spoke with during his research, “ADM always makes money…no matter what.”
After its big jump, E.B. now rates ADM as a Hold. New investors shouldn’t buy the stock at current prices.
If you want to profit from “feeding the masses,” E.B. recommends buying another stock: a high-quality, diversified agricultural product company with an incredibly strong dividend history. You probably have this company's top brand in your pantry right now and don't even realize it…
This company is up 12% since January and is paying a 3.9% dividend yield. That’s nearly double the S&P 500’s 2.1% dividend yield.
You can access this pick – and get all of E.B.'s best ideas – by signing up for The Casey Report. Click here to begin your risk-free trial.
• A FINAL REMINDER: Today is your last chance to invest alongside Agora founder Bill Bonner…
Bill is a millionaire businessman, bestselling author, and a “stock skeptic.” Because he’s never been a big fan of investing in the stock market, he invests most of his net worth in gold, real estate, and private businesses.
But Bill recently announced a special project with his star analyst, Chris Mayer. In short, Bill is committing $5 million to Chris Mayer’s astonishingly successful stock market strategy.
Chris is one of America’s top stock pickers. He’s beat the market 3-to-1 over the past decade. Since 2004, his picks would’ve turned $100,000 into $480,000.
You can learn more about this special project by clicking here. If you’re interested, don’t wait to act. This offer expires tonight.
Chart of the Day
Apple (AAPL) is about to report its worst quarter in 15 years…
The consumer-electronics giant will share its first-quarter results after today’s closing bell. Analysts expect a 10% decline in sales.
You can see in the chart below that Apple hasn’t reported a quarterly sales decline since 2003. And it hasn’t had a double-digit sales decline since 2001. Analysts are expecting sales to decline again this quarter, which ends on June 30.
This is big news. As the world’s largest company, Apple's performance says a lot about the health of the economy. Right now, Apple is telling investors that the economy isn’t as strong as the government is saying.
Delray Beach, Florida
April 26, 2016
We want to hear from you.
If you have a question or comment, please send it to [email protected]. We read every email that comes in, and we'll publish comments, questions, and answers that we think other readers will find useful.