Buy bonds, baby!

William H. Gross, Managing Director, Pimco, in a report to shareholders last month, said homes are likely 15-20% overvalued. “PIMCO’s statistical chart suggests that mortgage rates must decline a minimum of 60 basis points and the sooner the better.” The upshot: An "ongoing bond bull market of still undefined proportions," he said.

By the way, who bought all the subprime mortgages (in the form of collateralized debt obligations)? Unsophisticated foreign lenders, Gross says, who needed “yield as opposed to 0.25% bank deposits (read Japan/Yen carry trade).”