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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: russwinter who started this subject	7/11/2003 6:50:45 PM
From: KM	Read Replies (1) of 110194

Here's one more tidbit from the Rap today State of the Real Estate Bubble: First we'll hear from a professional investor in the real estate market: I am a partner in a private real estate equity fund that targets opportunistic investments. I have been doing this for about 15 years, and I witnessed the meltdown in real estate during the early 1990s. What I have seen in the last few months in the real estate capital markets is the most terrifying misallocation of capital that I have seen in my career. Our firm is avoiding new investments right now and trying to liquidate the investments we currently have in our portfolio as quickly as possible. There is literally an unprecedented flood of capital, most of it completely ignorant and uninterested in real estate fundamentals, coming into the market right now. He continues: Commercial banks are fighting to finance speculative construction projects in markets that are already overbuilt and where rents are declining. The same commercial banks are now making mezzanine and equity investments themselves. Fee-driven syndicators have raised literally billions of dollars, much of it from retail investors in small increments, and they are using it to bid cash-flowing properties up to unbelievable prices. Pension funds are actually the relatively conservative players in the market, although they are being forced to buy properties on ever-lower-cap rates in order to invest their dollars. Even opportunity funds such as our competitors are making speculative bets on condo conversions, condo development, even industrial and office condos, anything to justify the high prices people are paying for the real estate. He concludes: All of it is driven by these artificially low interest rates engineered by Alan Greenspan. My expectation is that Greenspan's reckless experiment will destroy the real estate market, just as his previous experiment destroyed the stock market. Why is this imbecile allowed to keep acting like God and playing with people's lives like this? Will he ever be stopped? What has to happen for this monster to finally be driven from office?

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