Chris O'Meara/AP
- Jeff Greene warned the real estate sector and wider US economy are facing stiff headwinds.
- Consumer savings have dried up as higher interest rates bite, and construction has stalled, he said.
- The billionaire investor touted Big Tech stocks and Treasuries, and echoed Warren Buffett's advice.
Billionaire investor Jeff Greene just rang the alarm on the real-estate industry and wider US economy, revealed what he's betting on, and shared two of Warren Buffett's teachings that he's taken to heart.
"The extraordinary amount of new wealth that people got from the liquidity, that caused housing prices to go up, and stock prices to go up and everything else, that's dropping a little bit, so people don't have the same wealth and the same savings," he told Forbes in a recent interview. "Now's the time where these high rates could really rear their ugly head."
Greene was referring to the Treasury and Federal Reserve's scramble to shore up the economy from pandemic-related disruptions in 2020 and 2021. The liquidity they pumped in helped drive inflation to a 40-year high last year, spurring the Fed to hike interest rates from nearly zero to north of 5% in the space of 18 months to curb price growth.
The upshot is that Americans are now paying a lot more for food, fuel, rent, and other essentials, while also facing steeper monthly payments on their credit cards, car loans, mortgages, and other debts. The housing market has effectively frozen as buyers and sellers wait for mortgage rates to fall again.
Plus, the commercial real estate sector is feeling serious pain as it relies heavily on debt that's now much more costly, it depends on smaller banks that have pulled back from lending, and it's seeing muted demand in part due to the shift to remote working.
Greene underlined the grim outlook for real estate and the economy as consumers and developers continue to retreat.
"Nobody's starting any new ones. There's no financing. There's nobody buying houses, nobody's buying condos, no one's building office buildings. It was a long runoff from the excess period, and it's now coming to an end. That's why a lot of people are thinking we could have a significant economic downturn, starting now or early next year, as people run out of excess savings and don't feel as wealthy," he said.
The investor — who made a fortune from the housing crash of 2008 with the help of John Paulson, a storied hedge fund manager — shared some details of his personal portfolio with Forbes.
Greene made sure to lock in lower rates before the Fed's hikes, meaning he's paying relatively little on 90% of his current debts. He owns a "fair amount" of Treasuries, divided between 1-month, 3-month, and 6-month durations and yielding around 5%. He counts Apple, Meta, and Alphabet among the core stocks that he plans to own for the long term, regardless of the "noise of the markets."
Warren Buffett's teachings have shaped how Greene approaches investing, he said. The Berkshire Hathaway chief seeks to buy "wonderful businesses at a fair price," and equally, Greene aims to make savvy bets on great properties that produce stable, predictable cash flows and have good long-term prospects.
Greene encouraged investors to keep some cash in reserve and diversify their portfolios to protect themselves from disaster. He also hailed Buffett's advice to be disciplined, and said he's guilty of making too many deals.
"I feel like I'm in a batting cage and I'm just swinging at everything just coming at me so fast," Greene said. "But sometimes, [you have to] let them go by, and that's what he does. He lets his cash get up to billions of dollars. But then when Goldman Sachs needs money in the financial crisis, he steps up and he just waits for that big fat pitch."