Does this mark the top for bond prices?

[stratton]

Does this mark the top for bond prices?

Last year I posted a photo of the early construction phase of the PIMCO Taj Mahal. Now they are working on the interior of the building (building on the left).

Heh.

Using real estate boom worlds tallest building metric for top for bond prices.

Paul

[Browser]

Yes, they started down at the beginning of the year. The bear went over the mountain.

[nisiprius]

I honestly do believe in the "edifice complex"--that it's often a sign of hubris at the top when a corporation erects a monumental new headquarters building. But it wouldn't be an indicator of something about the bond market, it would be an indicator of something about PIMCO.

[Valuethinker]

I honestly do believe in the "edifice complex"--that it's often a sign of hubris at the top when a corporation erects a monumental new headquarters building. But it wouldn't be an indicator of something about the bond market, it would be an indicator of something about PIMCO.

indeed. And when the founders sold out to Allianz, usually calls the top on asset manager firms' performance. Asset managers turn out to be remarkably good at forecasting their own future degree of outperformance.

There is a very neat correlation between stock market levels and height of office buildings. The Chrysler Building in New York and 1929 (and I think the Empire State had actually begun). In fact there is a book 'Form follows Finance' about the architecture of skyscrapers. The ?Biraj? in Dubai peaked out just when the financial crash hit.

This has a logical basis. When assets are in a bubble, there's an on paper gain for building the highest office building in the city most affected-- New York in the 1920s, Dubai in the 00s, Petronas Tower in Kuala Lumpur in 1998, etc. Since these things take 4-5 years to build, by the time it is finished, the bubble has blown.

London's Shard (100 storeys, not yet fully let) is perhaps the interesting counterexample but *London* is doing well, even if the country is not. Like the Empire State, I suspect it is iconic (it is certainly the most visibly structure in London) but will struggle to be financially viable.

Stories of the Tower of Babel and Icarus are both proof that this human tendency is long and old. No doubt the Romans finished their most impressive amphitheatres just before the Empire began its long decline of civil war and barbarian invasion.

Certainly the gothic cathedrals were started at the peak of the Middle Ages, around 1300, and the collapse on the 1340s and onwards so bad that some were never finished, or not finished until the late 1400s.

There's a whole literature of Systems Dynamics modelling which explains this phenomenon. Originally Jay Forrester at MIT.

http://www.amazon.co.uk/Thinking-System ... 1844077268

Donella Meadows book is the best introduction I know, also an MBA exercise called 'The Beer Game'.

[Valuethinker]

Does this mark the top for bond prices?

Last year I posted a photo of the early construction phase of the PIMCO Taj Mahal. Now they are working on the interior of the building (building on the left).

Heh.

Using real estate boom worlds tallest building metric for top for bond prices.

Paul

http://www.calculatedriskblog.com/2012/ ... mahal.html

it's interesting about metrics. By London or Toronto or New York standards this looks like a plain jane ordinary office building. Granted in Santa Monica (where I imagine tall buildings are just less common?).

This does not look like a Taj Mahal to those of us who live in big western cities.

But it's not an obvious bubble marker in the way Empire State or Biraj or Petronas Tower was/ is.

It occurs to me the best metric for the Shard (London) is probably the World Trade Center. Built during a recession, a financial disaster (until the developer ie the Port Authority, agreed to move its own operations into the WTC, it lacked tenants). Iconic architecture (or height) but not so much a symptom of the bubble as the human nature to underestimate the length of the bubble.

(like the WTC, the Shard is in the wrong place, lacks context, is not tenant friendly).

John Hancock Center in Boston struck me as similar-- out of scale, not a particularly nice building, wrong place (ie not downtown). Probably built at a time when Boston was struggling (the decline of traditional industries plus Boston had some of the worst wars over busing of any US city) to 'regenerate' an area. Regeneration by architectural ambition seldom works, alas.

[Tom_T]

There were several occasions in 2012 when interest rates were higher -- not lower, higher -- than they are today.

[Phineas J. Whoopee]

Does this mark the top for bond prices?

Last year I posted a photo of the early construction phase of the PIMCO Taj Mahal. Now they are working on the interior of the building (building on the left).

Heh.

Using real estate boom worlds tallest building metric for top for bond prices.

Paul

Real estate or not, we'll know in about 50 years whether bond prices were more-or-less at the top (with the mathematically-equivalent yields at the bottom) of a short term cycle.

To really sort it out we'll probably have to wait about 300 years.

Pinochle anyone?

PJW

[Browser]

We may not be exactly at the top but, since bonds have been going up since 1981, I'm willing to bet that we're about 32 years closer to the exact top than we were then.