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Sam Zell: Tapering won’t end this year and housing is not recovering

Billionaire investor thinks he won’t live to see end of QE3

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Billionaire Investor Sam Zell says he doesn’t believe the Federal Reserve will be done tapering quantitative easing by the October, as most on the Fed and most observers seem to think.

“I just do not know whether the Fed has the guts to really complete the taper,” said Tuesday on FOX Business Network’s Opening Bell with Maria Bartiromo. “I'm worried about whether I'm young enough to be around when QE3 ends.”

In a wide-ranging interview Zell talked about the Federal Reserve, the stock market and growth sectors in the economy.

“I think the stock market is over exuberant” and “I think that the stock market reflects the fact that there's very little other options” for investors.

“I think that, first of all, I am skeptical about, ‘the tapering process,’” Zell said. “I am encouraging by Stanley Fischer’s presence, who I think is a terrific, terrific addition to the Fed.  But I do not think that the Fed will be able to end tapering as quickly as they thought. 

“And I think the potential for inflation in a QE2 environment like this is very high,” Zell continued. “And as far as interest rates are concerned, it is pretty easy to say they are going up when they're at zero today.  But it is hard for me to imagine that you are going to have a scenario like this without it having a very negative impact on our country.”

Zell also talked about real estate and housing.

“I think that the single family market is, I don't know, benign would be a good way to describe it.  The traffic is relatively slow, certainly at the first homebuyer level,” he said on FBN.  “As a matter of fact, most of the traffic between the top and between the very top and down is down.” 

He’s also very down on the Polly Anna optimism on housing that most of the trade associations, financial press and analysts have engaged in during 2014.

“So, you have a whole issue here of how is our society changing.  Are we de-suburbanizing?  Is the focus coming back to urban and higher levels of density?  And I think that's partially what's going on.  I think at the same time, you know…buy a house and it will go up in value has been destroyed… ,” Zell said. “And so the result is the urge to commit is dramatically less and if you add in the deferral and marriage you've taken six or seven years of prime home buying years out of the equation. 

“Now, will it catch up?  Remains to be seen, but I think that the Kumbaya, over-enthusiasm about this ‘massive housing recovery’ is nothing more than a good song,” Zell told Bartiromo. 

On housing prices, Zell was analytical.

“I think prices are up because there's not a lot of supply and I think that mobility is down and when mobility is down, that means that houses don't move because people are concerned about moving,” he said.” When you cut it all to the very chase I don't think there's any other explanation than we've created this environment of uncertainty and that environment of uncertainty translates into everything.  And it for sure translates into 30-year commitments on mortgages and stuff like that.” 

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