Barry Sternlicht: Massive amounts of stimulus have fundamentally changed the economy

Global investor Barry Sternlicht told CNBC on Thursday he has some long-term concerns about the U.S. economy, saying there are risks beyond the immediate boom from the Covid recovery.

In a wide-ranging interview on “Squawk Box,” the billionaire businessman worried about numerous shortages in the economy and criticized the Federal Reserve’s highly accommodative monetary policy policy and legislative proposals in Washington.

“I do think the Fed, interest rates, are being suppressed by the government. .... We have to get off of this sugar-cane and Fluffernutter economy and get to the meat-and-the-potatoes economy,” Sternlicht said. “We have to get back to a sustainable economy and people coming back to work.”

The chairman and CEO of Starwood Capital Group pointed to recent Labor Department data that showed a record number of job openings in March. “Something is wrong,” he said.

Sternlicht, whose firm operates hotels as part of its broader portfolio, said hiring challenges for businesses are largely the result of enhanced unemployment benefits that were included in a federal coronavirus relief package.

However, economists say the reason people may still be hesitant to return to work is due to many factors, including Covid concerns and a lack of reliable child care.

The supply-chain challenges that have hit numerous industries including poultry and lumber are worrisome, Sternlicht said, and so are the delays at cargo ports.

“You’re seeing unbelievable shortages in the U.S. economy from chicken wings to sheet rock to curtain wall to couches that everyone is ordering on Pottery Barn and West Elm that they can’t get for six months because they’re all coming from China,” Sternlicht said. “So what we did was write a giant stimulus package and now we’re shopping and buying everything from offshore. We’re not doing anything to fix long-term issues in the U.S. economy.”

Sternlicht noted that some of the shortages will resolve over time as the immediate demand surge from the economic reopening wears off, calling it a “bottleneck.”

“I will probably be able to get the curtain wall I need for my hotel that we’re building in Nashville. Some day,” he said. “But it has fundamentally changed the economy because of the amount of stimulus.”

As the Biden administration proposes a set of legislative packages carrying collective price tags in the trillions, Sternlicht said: “We need precise, laser-like legislation to help the industries in need and to promote the business investments we want.”

The housing market is another area of concern, Sternlicht said. Home sales heated up last year, driven in part by low mortgage rates and workers beginning to have greater geographic flexibility.

“The housing market is in an unsustainable, euphoric increase in prices,” Sternlicht said.

Sternlicht said the broad economic and political landscape has changed his outlook on the stock market. He noted that during the March 2020 coronavirus-driven plunge, he correctly predicted a swift recovery in equities.

“I was wildly bullish. ... I thought we would get through this and the markets would rally, and they did. I’m probably equally negative on the situation almost today. Although the one thing holding stocks up is just the sheer weight of all the money printed around the world and very little places to put it.”

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[tookie]

We never should of given PPP loans to businesses. Too many handouts

[rpror]

Spoken like a true corporate welfare recipient

[QuestoinEverything]

Sky seems to be falling for this guy. He’s sore because working class are getting some relief.

[LJ-nnrs]

The government considered an amount that enabled survival and corporate was like damn our slaves have escaped

[ShaolinRopeDart]

I clicked on this because he looks like a bald Chuck Norris. You either see it or your don’t. You’re welcome.

[joemac]

People in the YouTube comments are the couch sitters he is talking about

[musashi-san____]

So all of sudden he's offering $16 with full benefits... where was all this money before the Rona? These companies can pay a lot more, but for the longest time they gave their employees scraps. Make them pay more! Hold the line.

[sinali]

People getting too much free money don’t want to go back to work getting more lazy getting more greedy just want free money from people has money

[forthehomies]

I was raised in a poor community and still live very modestly. I'll tell you straight up that stimulus is not what we need. We need better education. Financial freedom isn't taught at any level of education unless you pay big bucks for very specific college courses. Most of the people "fighting for poor people" are not even poor themselves and have no idea what they are talking about. Poor people are not poor because others are rich, they are poor because they choose to be poor; if you don't understand this concept then you have proven my first point about lack of education

[camadams]

2:25 $16 an hour? Hmmm do those "full benefits" include childcare?
No?
Then how exactly would $16 an hour make sense? With schools closed it would cost more in childcare to work than it would cost just to stay home

[marcrestivo]

Gotta give him credit: lots of great one-liners here...

[no-vaccines-neededto-see-f]

Since the communist businesses will not pay livable wages of $25/Hour and up; they forced me to invest in longterm ETF stocks! To invest in squeezing $1, 000 or more every two weeks out out crypto currencies! Why do they hate us so??? Why do they not like paying livable wages? What; worried you will have a LAMBORGHINI shortage 🤣

[sruler]

I like Barry a lot - on of the more thoughtful guests

[stevenschocket]

HEY BARRY ..if 16.00 hr ain't bringing the workers ...try 18.00$$$ REMEMBER ..SUPPLY N DEMAND !!!

[camadams]

1:30 Funny how you say we are "throwing money away" when that money goes to the American people
Wall Street got 4.2 Trillion through Quantitative Easing in 2020.
So, how about we:
1) Claw back all that money
2) Use the IRS to collect the trillion dollars in uncollected taxes from the wealthy/companies
3) Eliminate tax law and apply person income tax law directly to companies (no special perks)
4) Tax long term capital gains as ordinary income

Then we can talk about "throwing away money"

[MrLRowe]

The people are not going to be treated like slaves anymore these companies CEO make 300 x there employees come on pay people

[josephparrish]

Rich guy doesn’t want to pay a living wage. Poor guy.

[annhowells]

Think about what Barry Sternlicht just said. $16/hour times 40 hrs/week = $640 a week. $640 times 48 working weeks/year is about $31, 000 a year. All before federal, state, and local taxes, housing expenses, child care, food, utilities, medical deductibles, auto expenses, and retirement savings. Wow. What a wonderful opportunity!

[philfortner]

To act like the last 3 years of spending is the problem totally ignores the last 100+ years of debt spending. The problem is simple, we have printed money, financialized the entire economy, and created debt dependency throughout the entire economy that will break the dollar.

[spectrader]

"The Throw Money Away Act." Well said.