Monday, June 27, 2005

Roach is Now a Bond Bull

A few weeks ago, Pimco’s Bill Gross said that he expects long-term interest rates to remain low and now Roach is heading in that direction. Even though Roach doesn’t seem to think that high interest rates will burst the real estate bubble immediately, he is still concerned that the housing market seems to be displaying maniacal like conditions.


“Meanwhile, the excesses in the US property market are now starting to display all the classic symptoms of a mania -- underscoring the inherent vulnerability that Yale professor Robert Shiller has long warned of. It’s not just the growing profusion of exotic financing schemes -- the interest-only and negative-amortization mortgage loans that have become the rage in the hottest of real estate markets. Equally worrisome is evidence that “asset flipping” is now reaching Ponzi-like proportions. The latest rage is -- a website dedicated to creating an electronic market whereby “buyers of preconstruction condos resell or assign those condos to new buyers.” Debuting in Miami, expansion is set shortly for Las Vegas, Los Angeles, Dallas, Chicago, and New York. If you hurry, you may even be able to own a “Condo-Flip” franchise of your own. Five years later, this is nothing more than a reincarnation of the day-traders of the dot-com era.”



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