Mort Zuckerman, Forbes 400 billionaire and owner of Boston Properties and media companies such as US News & World Report, discussed his thoughts on the economy with Steve Forbes.
Highlights include Zuckerman’s thoughts on the economy, commercial real estate market, and why he will never buy property in Chicago (it’s not what you think). He also mentioned that the US is spending more on fiscal stimulus than FDR did during the Great Depression.
I haven’t found a way to embedded the video, so here’s the link: Mort Zuckerman Interview with Steve Forbes
Best Quotes from Mort Zuckerman Interview
It’s certainly a terrible recovery when you think of the fact we have the most stimulating monetary program and we’ve never had interest rates this low for this long. And the largest fiscal stimulus program which is 10% of GDP. FDR never had a fiscal stimulus above 6% of GDP.
Now why is this? I suppose on one level it’s because we still have an overwhelming amount of debt which nobody really paid any attention to, at all levels of the society: at the individual level, at the corporate level, at the state level, onto the federal level. And we have to work our way through that and that’s going to take much longer than anybody expected.
But in my judgment, there may have been a time to turn this around a little bit. But the only way you could do it — before it starts feeding on itself, which is where it is now — is to try and get as much into the economy in the right areas to create job multipliers, not just job savers, which is what they did. That way, in a sense, you’ve prevented at least the pattern of feeding on itself.
The stimulus program, in my judgment, was virtually a failure. For all the money that was spent we accomplished very little.
The other thing that we needed were investments into job multipliers not job savers. Investment in infrastructure creates 1.5 to 1.7 jobs for every dollar invested.
And then, throw on top of that the healthcare program, where 85% of the country wanted to get healthcare costs under control and this administration just wants to expand it by the remaining 15%.
At that point I think a lot of people in the business community went. They just left the ship and so did the public. That’s when the president lost the center of the country.
I think he (Obama) does not believe or understand that the bureaucracies of government are even worse than the bureaucracies in the private sector and we have them in both.
Now one of the problems that we have in terms of the unemployment issue is that the mobility of people to move to where there are jobs is seriously limited by the fact that a lot of them have homes. They can’t sell the homes at any kind of a number that they’re comfortable with. So they get locked in geographically, which is a real impediment.
And even if you free up some of the financing, people will not buy homes as long as they think home prices are going down.
[Foreclosed homes] sell for somewhere between 10 and 20% below the market. In other words, they drive the market down. And the problem there is that the price of the foreclosed home determines the price of everybody on that street. So you could break that market now.
First, you have to disaggregate the market. We are in very specific markets. Boston, New York, Washington, San Francisco, Cambridge — where you have real restraints on new supply. So when you have that kind of supply constraint, you don’t have as much of a problem.
But we also focus in on the highest quality buildings in the markets, otherwise we don’t go near them.
So we had (Boston Properties bought) Lehman Brothers, we had General Motors, we had a couple of big bankruptcies, a couple of big law firms. We have re-leased all of that space admittedly at lower rents. But at least it’s all full.
We like to be in markets where you can’t add a lot of new supply. That’s why when demand goes up, rents go up.
Warren Buffett had it right, needless to say — surprise, surprise. [He] had a preferred, it was a convertible preferred. He got a very high interest rate.
Why the Federal government got much worse terms than Warren Buffett
The federal government of course in a sense looked at it and said, “Our major, major objective here is to save the banking system, not to maximize the profitability of our investment.”
We’re very lucky that Ben Bernanke was the chairman of the Federal Reserve at that point because his whole field of expertise was the Great Depression.
And I think print (newspapers) is in for a very, very, very challenging time, both on circulation grounds and on advertising grounds. The new technologies are really going to transform the audience for the printed product.
And so we get [on our websites] both advertising and something called lead generation. What is lead gen? Don’t get the feeling I knew what the hell I was doing, because I didn’t. But lead generation is people who sort of go to universities or to mutual funds or the automobiles or to travel plans through our site and we get a referral fee.
There is a reason why there’s a first amendment to protect the printed press. Because we are a part of the national dialogue and a very important part of it.
