Great Moments in Financial History: Zell’s Theory of Relativity


Sam Zell’s warning at the end of 2005 in his annual “holiday card” that excess liquidity, falling yields and narrowing spreads will violently return to equilibrium seems awfully prescient. Zell produced a parody of the song “Raindrops Keep Falling On My Head,” with lyrics detailing his take on the current economic situation.
It’s not that there was a lack of doomsday prophesizing before the subprime shoe dropped and credit started drying up, but not that many people were out of the closet as early as 2005 (there was still another record year to juice returns from!) and in such a fancy musical outfit.
Zell’s take is so prescient that he ran out of ideas by 2006, when his holiday card consisted of a typical anti-SarbOx rant. You can view all of Zell’s musical endeavors here (with a special shout to TMQ for reminding us this existed in the first place), but here’s the Theory of Relativity vid:

The lyrics for those unable to harness the YouTubes after the jump...

Capital is raining on my head.
Everything is liquid, we’re awash with cash to spend –
The flood has drowned returns,
‘Cause assets keep liquefying, monetizing, raining…
So I just did me some Econ 101.
Seems like we’ve gotten out of
Liquidity abounds,
But relative yields keep falling as more capital keeps raining
What lies ahead, we’re old
The western world is aging, we’ll need income
From our pension funds.
Where’s it coming from?
The yields we see won’t fuel no party.
Tho’ capital is raining on my head,
Interest and inflation rates are narrowing their spread
To half what textbooks said –
The ratios that we’re used to
Have been squeezed by so much cash flow.
The world is monetizing faster every day,
Illiquid assets alchemized
To currency in play
Competing for return,
Black gold prices rising, still more money changing assets…
Capital keeps raining on my head,
So much is out there that the world is out of whack.
When will we see balance back?
It’s gonna be a long time ‘til returns meet expectations.
We need to be prepared for slim annuities…