Chairman of Equity Group Investments, Sam Zell, explained his unconventional buying techniques in a market he believes is “distorted” on CNBC’s Squawk Box. Zell discussed how his company has been investing in certain energy assets because he thinks the opportunities are cheap, and, “in many respects, they’re purchasable at huge discounts to any kind of replacement costs or future competition.”

Crude prices are down about 55 percent from their 2014 high. “The price rout, stoked by a global oil glut, has pushed nearly 80 North American companies into bankruptcy and put the entire U.S. oil patch under pressure.” Zell continues: “Equity Group Investments is investing less today because it sees fewer opportunities and selling more because it doesn’t understand buyers’ optimism. Some investors are using the principle of relative comparison to justify virtually any asset price on the market. Well, the fact that a whole bunch of idiots have priced it on the market has very little impact on what I’m going to decide to do.”

What he believes is that years of low U.S. interest rates have desensitized the business community to the cost of capital and distorted markets, which is supported by the falling value of global trade. “If something is free, is it valued? Is it appropriately risked? . . . We know that the cost of capital ain’t free. Despite knowing this we continue to keep interest rates as close to zero as possible.” Zell then argues that, deferring the true cost of capital “is going to catch up to you” and will only become more of an issue as time passes.