SUPERCALIFRAGILISTICEXPIALIDOC IS. >>>. >> . MARIA: WELCOME BACK BIG STORY OF THE WEEK, FEDERAL RESERVE, RAISING INTEREST RATES, BY 50 BASIS POINTS BIGGEST MOVE OVER 20 YEARS IF HE HAD CHIEF JAY POWELL COMMENTING ON POSSIBILITY OF RECESSION SAYING HE WILL BE ABLE TO HAVE A QUOTE/UNQUOTE SOFTISH LANDING KILLED THE IDEA OF A 75-BASIS POINT HIKE ANY 2350I78 SOON WATCH THIS. >>. >> LABOR MARKET IS EXTREMELY TIGHT INFLATION IS MUCH TO A HIGH AGAINST THE DRABBINGDROP DAY FOMC RAISED POLICY INTEREST RATE A HALF-PERCENTAGE-POINT, NOTHING ABOUT IT SUGGESTS CLOSE TO OR VULNERABLE TO A RELEASINGS 75-BASIS POINT INCREASE IS NOT SOMETHING COMMITTEE IS ACTIVELY CONSIDERING. MARIA: ALL RIGHT. JOINING ME RIGHT NOW REACTION EQUITY INTERNATIONAL CHAIRMAN FOUNDER INVESTOR REAL ESTATE INVESTOR AS WELL SAM ZELL GREAT TO SEE YOU WELCOME BACK. GOOD TO SEE YOU THIS MORNING. >> GREAT TO SEE YOU -- I HAVEN'T BEEN WITH YOU IN LONG TIME SO FUN. >> YOUR REACTION TO JAY POWELL DO YOU BELIEVE THEY WILL TAKE INTEREST RATES UP NOT TAKE THIS ECONOMY INTO RECESSION SAM. >> I DON'T KNOW THE ANSWER TO THAT IF I DID WOULD I BE RICH. BUT I THINK THAT THE FACT THAT FED IS SPENDING SO MUCH TIME NOT DOING WHAT IT SHOULD HAVE BEEN DOING, CREATES A BIG GAP ON THAT CAN BE FILLED WITHOUT MUCH DAMAGE I THINK, 100 BASIS POINTS EVEN 200 BASIS POINTS NEVER NEXT YEAR IS NOT LIKELY TO PUT US INTO A RECESSION. IT IS JUST PROBABLY TO BRING US BACK TO WHERE WE SHOULD BE, WHETHER THAT IS ENOUGH TO SLOW THE INFLATION RATE I THINK A WHOLE DIFFERENT QUESTION. AND ONE THAT YOU KNOW WILL REQUIRE IMPROVEMENT IN SUPPLY CHAIN, REQUIRE ADJUSTING, IN MOST CASES, INFLATION IS VERY MUCH DRIVEN BY THE PRESUMPTION ON THE PART OF CONSUMERS AND DECISION MAKERS THAT IT IS GOING TO COST MORE LATER, THERE FOR WE NEED TO CURE THAT. >> A GOOD DISAPPOINT CONSUMER SPENDING HAS BEEN PRETTY STRONG SAM AS YOU KNOW EVEN IF PEOPLE SHIFTED SPENDING FROM BUYING STUFF TO SPENDING ON TRAVEL AND SERVICES. BUT AT THE SAME TIME, WAGES ARE UP GETTING EATEN BY INFLATION RUNNING 8 1/2% WE ARE GETTING CONSUMER PRICE INDEX OUT NEXT WEEK EVEN A TALKING ABOUT THAT, BEING THE NEXT MAJOR THING TO WATCH. DO YOU SEE INFLATION OR DO YOU TIE CONSUMER PRICES HE LEVELING OUT ANYTIME SOON GIVEN THE FACT WE'VE GOT SUPPLY CHAIN PROBLEM CONTRACTION FIRST QUARTER. >> I DON'T KNOW THE ANSWER I WOULD HOPE THAT IS THE CASE I DON'T THINK THERE IS MUCH SIGN SO FAR, THAT WE ARE SEEING A REDUCTION IN LEGAL OF INFLATION WOULD I BE SURPRISED, IF THE ESTIMATE THAT CAME OUT NEXT WEEK WAS LESS THAN -- THAN WHAT WE'VE BEEN DEAL WITH UP UNTIL NOW. WE'RE A LONG WAY FROM YOU KNOW MAKING ANY SERIOUS ADJUSTMENTS, IT IS BASICALLY CONCERN TO -- YOU KNOW THE EFFORTS BY THE GOVERNMENT TO RESPOND TO COVID WERE TOO MUCH TOO OFTEN, TOO DANGEROUS TO THE HE OVERALL QUESTION OF MANAGE INFLATION CONTROL. MARIA: LET TALK REAL ESTATE SAM BECAUSE I KNOW THAT HOME PRICES ARE WAY UP EVEN RENTS WAY UP ACCESS THE MARKET WHAT ARE YOU SEEING OUT THERE I AM BEING TOLD THAT YOU KNOW MANY PEOPLE ARE BEING LOCKED OUT OF THIS MARKET, BECAUSE PRICES ARE UP SO MUCH. >> WELL, I THINK THERE IS NO QUESTION PRICES HAVE INCREASED. TO ME IT IS KIND OF A SIMPLISTIC EXAMPLE OF SUPPLY AND DEMAND. SINCE GREAT RECESSION OF 2 00 -09 NUMBER ONE OF NEW YOU HOUSES, WHETHER APARTMENTS OR HOW THIS MOBILE HOME PARKS, WE ARE WAY BEHIND THE PACE THAT WE CAN RENT, PRIOR TO 2008. SO, 20 YEARS BUILT A MILLION YOU HOUSES A YEAR I THINK IN 2009, 2010 BUILT 260,000 STILL AREN'T BACK TO MILLION JUST NOW GETTING TO THAT MILLION. SO, WE'VE BEEN IN EFFECT CREATED A BIG HOLE WHEN YOU CREATE THOSE KIND OF HOLES, YOU KNOW YOU END UP WITH PRICES GOING UP BECAUSE IN OTHER DEMAND THAN SUPPLY, THE RESULTS ARE A PERIOD WHERE ALL KIND OF PEOPLE THOUGHT MILLENNIALS COULD BUY HOME I NEVER UNDERSTOOD THAT I JUST DIDN'T UNDERSTAND ANYBODY WOULD ASSUME THAT NUMBER OF HOUSEHOLDS, WE WOULD GO DOWN THE ANSWER IS YOU DON'T BUILD ENOUGH HOUSES YOU DON'T THE CREATE ENOUGH HE MONEY, YOU IN EFFECT HAVE NIMBY KIND OF MENTALITY THE RESULT IS A SCARE -- TO EFFECT THE PRICE OF A WHERE WE ARE RIGHT NOW DID NOT HAVE ENOUGH BUILDING THE SUPPLY IS SCARCE ARE THERE COMPARISONS TO THE 2007 UPSET IN HOUSING THAT YOU OBVIOUSLY, LIVED THROUGH SO WELL? OR IS THE SUPPLY PROBLEM NOW MAKING THIS MOMENT DIFFERENT THAN THE BLOWOFF WE SAW IN 2007 AND 2008? >> A I DO NOT THINK THAT THIS IS THE REPEAT OF 2007 OR 2008. BUT I THINK YOU NEED TO TAKE INTO CONSIDERATION, ONE, THAT THE AMOUNT OF LAND BEING ZONED FOR MULTIFAMILIES IS WAY DOWN. AND THE NUMBER OF SINGLE FAMILY HOUSING BUILT THAT IS NOT CATCHING UP MAKING UP FOR THE PAST YOU KNOW PERIODS WE DIDN'T KEEP UP THE PACE, HOME BUILDERS HAVING TROUBLE FINDING PEOPLE TO WORK, ON YOU KNOW, CARPENTERS ALL KINDS OF TRADESMEN BUILDING THESE HOUSES, SO ALL OF THAT KIND OF COMES TOGETHER, AGAIN, GOING BACK TO AS ASK AS SUPPLY AND DEMANDED NOT PRODUCING SUPPLY THE DEMAND IS REAL ACCENT THE RESULT IS THAT PRICES GO UP. HOW LONG CAN THEY STAY UP, I MEAN YOU HAVE DIVESTSED DIVERSIFIED PORTFOLIO, THE AGRIBUSINESS YOU SEE FIRSTHAND SHORTAGE IN LABOR TRUCK DRIVERS IN SUCH NEED, WAGES GOING UP, STILL GETTING EATEN BY INFLATION. TELL ME WHAT LEVELS THINGS OUT THEN. >> WELL, I THINK THAT -- WHAT WE'RE SEEING IN VARIOUS BUSINESS WE ARE INVOLVED IN A LOT OF WAGE PRESSURE WE HAVE ACTUALLY OWN TRUCKING COMPANY, AND THE DIFFERENCE BETWEEN TWO YEARS AGO AND TODAY, IS THE FACT THAT YOU KNOW WE'VE PROBABLY YOU KNOW HAVE OVERCOME RAISING SALARIES IMPROVING WORKING CONDITIONS, OVERCOME THE SHORTAGE OF DRIVERS, NOW THERE IS SHORTAGE OF CONTAINERS, OTHER THINGS I MENTIONED, AND WE HE OWN A BIG HOSPITAL CHAIN GETTING PUMMELED BY THE COST OF EMPLOYEES IN PARTICULARLY NURSES. WE JUST DON'T HAVE ENOUGH PEOPLE WILL TO FULFILL THE DEMAND OBVIOUSLY, WHEN A SHORTAGE OF SUPPLY PRICES GO UP I THINK THAT IS WHAT WE'RE DEALING WITH. MARIA: HOW MUCH HIGHER CAN THEY GO SAM? DO YOU THINK THIS -- OR DO YOU THINK PRICES ARE STILL ON THEIR WAY UP. >> WELL, I -- YOU KNOW I AM HOPEFUL THAT INTEREST RATES -- WILL ADJUST IMPACT OF WHAT IS GOING ON. BUT ALSO KIND OF SEND A SIGNAL THAT INTEREST RATES WILL CONTINUE TO GO UP, UNTIL YOU KNOW, THINGS IMPROVE. I -- YOU KNOW, NOT OPTIMISTIC THAT WE'RE GOING TO SEE A REDUCTION I THINK WE HAVE A BETTER CHANCE OF ON UPSIDE THAN REVERSING SO FAR. >> WHAT HAS BEEN IMPACT OF 5% MORTGAGE RATES IN YOUR VIEW SAM LOOK WE HAVE TO MENTION THAT RATES WERE UP TO 16.6% BACK IN 1981. BUT WHEN YOU CONSIDER THE MOVE TO 5% THAT HAPPENED FAST ABOUT WHAT HAS BEEN THE IMPACT? >> THE NUMBER INTEREST RATES, YOU KNOW INTERESTING POINT OF REFERENCE, BUT, YOU KNOW, THE REAL CONTROLLING FACTOR IS WHAT IS THE MONTHLY PAYMENT. AND THAT IS THE MONTHLY PAYMENT YOU KNOW A YEAR AGO WAS BASED ON 2 1/2%, AND NOW TODAY IT IS 5. AND I THINK THAT THAT IS THAT IS KNOW ELIMINATING A LOT OF POTENTIAL BUYERS IN THE MARKET. I THINK IT IS PUTTING A LOT OF ADDITIONAL PRESSURE ON THOSE PEOPLE THAT DO BUY. AND THAT CLEARLY GOING TO HAVES SOMEWHAT IMPACT ON HOUSING PRICES, AND I THINK VERY POSSIBLE THAT YOU KNOW WE MAY BE SEEING THE CREST THE OF HOUSING APPRECIATION. >> THE CREST OF HOUSING APPRECIATION. SO, IT HAS PUT PEOPLE -- >> -- THAT IS -- GOING TO GO DOWN -- BUT I THINK THAT YOU KNOW IT IS THE -- THE RAISING INTEREST RATES QUICKLY AS IT HAPPENED CERTAINLY HAS AN IMPACT IN A SLOWING OF THE DEMAND AND PRESSURE ON PRICES. I ALSO THINK HE SELECTIVE MARKETS, YOU HAVE BIG I DIFFERENCES BETWEEN SOME MARKETS, WHERE HOUSE OF WENT ABOVE ASKING PRICE, SIX MONTHS AGO AGO NOW IN EFFECT BACK KIND OF A NORMAL GIVE-AND-TAKE. ANOTHER MARKETS THEY STILL APPRECIATE. >> SAM WE'RE GETTING BREAKING NEWS FIRST QUARTER LABOR COST, UP 11.6%, MUCH HIGHER THAN THE ESTIMATE 9.9% ON LABOR COSTS, SAM. I MEAN YOU ARE LIVING IT WITH THE BUSINESSES THAT YOU ARE INVESTED IN RIGHT IN TERMS OF THE WAGE INCREASES, WHAT IS YOUR REACTION TO THIS DATA? >> WELL, I THINK THAT OUR EXPERIENCE WOULD HAVE SUGGESTED THAT 11 IS MUCH MORE LIKELY THAN 9. I AM NOT AN ECONOMIST I DON'T KNOW HOW THEY CONCLUDE ESTIMATES, ACROSS THE BOARD EVERY BUSINESS WE ARE INVOLVED IN WE ARE FACING SIGNIFICANT WAGE PRESSURE. . YEAH. MARIA: WAGE PRESSURE IS JUST ONE PRESSURE, ON THE PART OF CORPORATIONS WHY YOU KNOW PEOPLE LIKE STEPHANIE POMBOY, ON THIS PROGRAM A REGULAR BACK TOMORROW, ARE SAYING LOOK, ARE THE FED IS OUT OF CONTROL, AND MISSED THE MARK WE ARE PROBABLY GOING TO SEE A BIG SELL-OFF THE MARKET WAY TOO ABOUT THE OPTIMISTIC ABOUT THIS. ABOUT WHAT DO YOU THINK. >> INOT QUITE THAT SANGUINE, I DEFINITELY AGREE WITH HER THE CONFESSED MISSED OPPORTUNITY TO BE A DISCIPLINARIAN THAT IT SHOULD BE. WE HAVE TO -- WE HAVE TO DRAMATICALLY REDUCE LIQUIDITY AVAILABLE IN THE MARKET I MEAN WE'VE GOT TO SELL ALL THOSE BONDS BEEN BUYING EVERY MONTH WE GOT TO PUSH INTEREST RATES UP, I DON'T THINK THAT A INTEREST RATES GOING IP A HUNDRED BASIS POINTS NEXT 12 MURPS IS GOING TO SLOW US INTO A RECESSION I THINK MUCH MORE LIKELY IF THEY DON'T GO UP 100 BASIS POINTS NEXT 12 MONTHS THAT WE WILL HAVE SERIOUS PROBLEMS. WE NEED TO REDUCE LIQUIDITY. WE NEED TO STOP THAT SLOSHINGS AROUND EXTRA CAPITAL MIGHT MEAN REDUCTION IN CUSTOMER DEMAND, INITIALLY MORE THAN I WAS SUGGESTING I DON'T THINK A CASE. >> I MODERATED A PANEL YESTERDAY AT MILKEN INSTITUTE CONFERENCE IN LOS ANGELES YOUR NAME CAME UP I WAS TALKING TO STARWOOD CAPITAL CHAIRMAN CEO TALKED ABOUT WHAT HE IS HAPPENING FROM THIS MARKET DESPITE FED SAYING WE ARE GOING TO HAVE A SOFTISH LANDING. WASH THIS. >> -- >> YEAH. >> HOW MUCH WORSE. >> GOING TO GET WORSE I MEAN THE FED WILL RAISE RATES, GOING TO FREAK PEOPLE OUT MARKET CONTINUE TO JUSTIFY WE SAY DURABLE, RATE WON'T MOVE AS FAR AS IN U.S. THEY ARE NOT GOING TO THEY CAN'T AFFORD IN TERMS OF NEVER GROWING THAT QUICKLY IF CAN'T AFFORD 3 OR 4% ONS GERMANY BUNDS FROM NEGATIVE, A CATASTROPHE OVER THERE. >> WHAT ABOUT GLOBAL STORY YOUR TAKE ON EUROPE BANK OF ENGLAND THIS MORNING RAISED RATES THEY SAID THEY ARE EXPECTING A CONTRACTION IN THE UK ECONOMY IN 2023. >> YEAH, I THINK THAT IN HAVE I AM GOING TO STAY IN AGREEMENT WITH BARRY ON HIS VIEWS, BUT I THINK, THE PROBLEM EXISTS IN THE EUROPE AND EXISTS IN AMERICA PROBLEM EXISTS IN JAPAN, YOU KNOW, THE WORLD IS -- IS OVERRUN WITH LIQUIDITY, AND OVERRUN WITH LACK OF DISCIPLINE. AND THINGS LIKE UKRAINE, ET CETERA, AND FOOD SECURITY ONLY MAKING THINGS WORSE. BUT I THINK THE FIRST AND MOST IMPORTANT THING IS TO REDUCE THE LIQUIDITY. MARIA: YEAH, YOU KNOW UNFORTUNATELY, THE FEDERAL RESERVE WAS BUYING SECURITIES, LIKE 3 SECONDED BEFORE THEY STARTED RAISING INTEREST RATES, I DON'T KNOW WHY MOVING YOU KNOW THE RUNOFF BACK A MONTH AS WELL. WHY SO SLOW IN WINDING THIS BALANCE SHEET IS IT RIGHT MOVE. >> I THINK THAT WE WOULD LIKE TO THINK THE FED IS INDEPENDENT. MAYBE THE FED WAS INDEPENDENT A LONG TIME AGO IT CERTAINLY DOESN'T SEEM TO BE AS INDEPENDENT TODAYND AND JUST LIKE THE FED, DELAYED ACTION WHEN TRUMP WAS BEATING THEM UP THE SAME SCENARIO THE FED TRYING TO MIX SOME KIND OF A FORMULA THAT WILL AVOID YOU KNOW GETTING THEM IN POLITICAL TROUBLE. AND THAT SHOULD NOT BE A CRITERIA BUT THEY'RE DOING IT. MARIA: A GREAT POINT, OF COURSE, I THINK THAT IS ONE OF THE REASONS HE SAID TRANSIENT WE KEPT HEARING BEFORE SUPPOSED TO BE CONCERNED. >> WHEN I HEARD THE TRANSITORY INFLATION I LOOKED UP TO SEE WHAT IT MEANT, OF COURSE,S MEANT -- INFLATION BEFORE A FEW WEEKS BEFORE HE WAS CONFIRMED. YOU KNOW I THOUGHT IT WAS -- >> I AM GLAD YOU BROUGHT UP FOOD SECURITY UKRAINE MAJOR ISSUE, SAM IT HAS BEEN WONDERFUL TALKING WITH Y
