Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: Crimson Ghost who wrote (4021)	4/9/2004 1:04:35 PM
From: mishedlo	Read Replies (5) of 116555

Well What Have We Here? Look who is suggesting ARMs The biggest Treasury Bear of a bond manager in the world! You mean 4 years ago right? No... I mean in Dec 2003. Say it ain't sooo... It Can't be It Couldn't be It Isn't be Is it? Why yes, IT IS BE! ... None other than Bill Gross himself is suggesting ARMs! Here it is. In black and white. From Gross..... One last point. Since a home can be an attractive investment in a reflationary environment and since homes are generally financed via a mortgage, a brief comment is in order. First of all, no comment on housing prices in general despite their bubbly appearance. Like politics, most home prices are local so you should know more than I do. If you choose to buy or refinance a home however, I have perhaps a controversial recommendation: avoid the 30-year fixed rate mortgage. Expecting higher interest rates in future years, it seems strange to be arguing for anything other than locking up low rates now. I take the opposite view by recognizing that a 15-year mortgage, which is longer than most homeowner’s horizons anyway, comes with yields 50 basis points or lower than the 30-year alternative. In addition, even shorter term mortgages are so much lower in yield, that they effectively reduce the risk of higher future rates. The way for homeowners to borrow close to 1% is to finance their home via an adjustable rate mortgage geared to the short rate. If you can live with the volatility, you’ll have more in the bank over the long term. ======================================================================= There you have it folks. Right there in black and white from his dec 2003 investment outlook. One of the biggest treasury bears around telling people to switch to ARMS. Here's the proof pimco.com Mish

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