Stock market is disconnected from reality: Billionaire investor Sam Zell Description video: Billionaire real estate investor Sam Zell told \”Squawk Box\” on Tuesday that the markets are disconnected from reality and actual valuations of companies. To see the full interview […]
Stock market is disconnected from reality: Billionaire investor Sam Zell
Billionaire real estate investor Sam Zell told \”Squawk Box\” on Tuesday that the markets are disconnected from reality and actual valuations of companies. To see the full interview with Zell sign up for a free trial to CNBC Pro: https://cnb.cx/3jvWdcc\n\nBillionaire investor Sam Zell told CNBC on Tuesday that some deals involving special purpose acquisition companies, or SPACs, remind him of the speculation in internet companies during the 1990s dot-com bubble.\n\nIn an interview on “Squawk Box,” Zell said he believes SPACs do offer positive benefits for investors who buy in at the creation of the so-called blank-check companies. However, the founder of Equity Group Investments said he’s worried about the fundamental business prospects for some companies that go public via a SPAC.\n\n“If done well, it’s a very effective transaction. It’s one of the few times where the quote-unquote buyer has enormous power,” Zell said. “In other words, if you’re a buyer of an IPO SPAC, the worst thing that can happen is you get your money back in the cost to carry. The best thing that can happen is they make a very attractive deal and then you have a decision to make as to whether you want to play or not.”\n\nBut in some cases, Zell said, the SPAC’s target company is not that attractive. He did not mention any names. “In this speculative environment we’re talking, you’ve had a number of these SPACs done with making money going to the moon and I saw one the other day on electric charging stations” where the company did not project positive cash flow for years, Zell said. “This is rampant speculation again, very much like the dot-com boom.”\n\nInvestor enthusiasm for highly speculative internet stocks helped push the tech-heavy Nasdaq up more than 500% from 1995 until the bubble burst in March 2000.\n\nZell, who started Equity Group Investments more than 50 years ago, launched his own SPAC called Equity Distribution Acquisition Corp., which is described as “targeting opportunities to apply technological advancement within the industrial industry.” EGI’s portfolio over the years also branched out from real estate to industries including health care, logistics, manufacturing, transportation and media. Zell also chairs five NYSE-listed firms, including three real estate investment trusts.\n\nZell said his concern about action in the stock market extends to other recent developments, including the Reddit-fueled short squeeze in GameStop shares. \n\nRetail traders piled into the heavily bet-against stock, prompting hedge funds and other bearish investors to try to minimize their losses by buying up shares at their current higher prices. Both groups of people buying GameStop’s stock helped cause a meteoric rise, with shares gaining 400% in a single week in late January. \n\nThe video-game retailer’s stock has plunged in February, ending Monday’s session at $60 per share. That’s down from its Jan. 28 intraday high of $483 apiece. In August, GameStop traded below $5.\n\n“There’s no reality attached to that, and so it’s just pure speculation,” Zell said. “I think this is very negative for the stock market. It’s very negative for the capital-raising markets. It’s just creating and perpetuating just an incredible sense of disbelief and ‘can you top this?’”\n\nThe headline-grabbing GameStop saga turned parts of the U.S. equity market into a game of musical chairs, Zell said, in which “everybody knows there’s going to be one less chair when the music stops and 18-year-old mavens are betting they can get out before somebody else gets out.”\n\n» Subscribe to CNBC TV: https://cnb.cx/SubscribeCNBCtelevision\n» Subscribe to CNBC: https://cnb.cx/SubscribeCNBC\n» Subscribe to CNBC Classic: https://cnb.cx/SubscribeCNBCclassic\n\nTurn to CNBC TV for the latest stock market news and analysis. From market futures to live price updates CNBC is the leader in business news worldwide.\n\nThe News with Shepard Smith is CNBC’s daily news podcast providing deep, non-partisan coverage and perspective on the day’s most important stories. Available to listen by 8:30pm ET / 5:30pm PT daily beginning September 30: https://www.cnbc.com/2020/09/29/the-news-with-shepard-smith-podcast.html?__source=youtube%7Cshepsmith%7Cpodcast \n \nConnect with CNBC News Online\nGet the latest news: http://www.cnbc.com/\nFollow CNBC on LinkedIn: https://cnb.cx/LinkedInCNBC\nFollow CNBC News on Facebook: https://cnb.cx/LikeCNBC\nFollow CNBC News on Twitter: https://cnb.cx/FollowCNBC\nFollow CNBC News on Instagram: https://cnb.cx/InstagramCNBC\n\nhttps://www.cnbc.com/select/best-credit-cards/ \n\n#CNBC\n#CNBCTV
While retail investors inflated the GameStop bubble, big players were buying up tech stocks
Big investors poured a record $ 4.2 billion into big tech stocks last week, BofA data released Friday showed. Professional market participants took advantage of the slight pullback on Wall Street, while retail traders were busy buying stocks of memes like GameStop..
Last month, an army of retail investors clashed with Wall Street professionals by buying up stocks in which hedge funds have plummeted. During the struggle, some funds had to sell their long positions to cover losses, which led to a wider fall in share prices.
«Over the past two weeks, customer sentiment has been unambiguously expressed in purchases amid poor performance in FAANMG (Facebook, Amazon, Apple, Netflix, Microsoft, and Alphabet, which owns Google)», – said Michael Hartnett, Chief Investment Strategist BofA.
Big Tech companies have become one of the main beneficiaries of the pandemic, as their revenues have increased simultaneously with the introduction of lockdowns, in parallel, they have grown in interest from investors who took advantage of the cheap money available..
Meanwhile, a sudden surge in stock market volatility last week also sent investors fleeing in bonds that raised $ 21.2 billion, the largest in four months. This week, however, concerns have eased as major Wall Street indices hit record highs..
Far from the noise of Wall Street, emerging market equities have been a favorite with investors as they put in $ 5.7 billion in the week from Wednesday to Wednesday. This sector has experienced 19 of the last 20 weeks.
The fever among retail investors also saw silver prices jump above $ 30 an ounce for the first time since 2013 before prices fell. The precious metal raised a record $ 2.8 billion in the week before Wednesday, according to BofA.