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2010 The Year of Real Estate Bull

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2010 The Year of Real Estate Bull

Last updated: March 30 2010
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  • #91

    #91

    Re : 2010 The Year of Real Estate Bull

    Aagaya bhai phir se doomsman

    Originally posted by wiseman View Post
    Thanks for the discussion on inflation and hyperinflation folks!

    But what you are talking about is price inflation - which shows up as increase in prices for the same thing over time; example 10 bucks for petrol in the 80s as compared to today. Did you know that back in 1898 Re 1 bought 1.5 pound sterling and a tola of gold was less than 10 rupees.110 years later 1 pound fetches 75 rupees and 1 tola of gold is 13500 or so. The effects of inflation.

    For the purists, inflation is about increase in money supply on the same base of assets. Obviously, for us ordinary folks when all this excess money chases the same base of assets, prices rise and "price inflation" manifests.

    But currently, if you noticed, the world is in a deflationary spiral. This does not mean most Govts in the world are rapidly destroying (reducing) money in the economy. Whats happening is, since much of the developed world's population (even the developing world's) has borrowed way too much, their appetite for taking on more debt to acquire assets (loans for TVs, Cars, Homes, etc) is declining.

    Which means - as a result of lower demand - most assets either stagnate OR decline in value over time (as you would have seen even for RE in the last 2 years in India and a sharp decline in the US, etc). In such environment, prices also decline in general (except for agricultural commodities which are rising due to shortages).

    So, for the foreseeable future, till interest rates are kept artificially low, inflation is not a serious threat! And most assets will stagnate ot go down in price (the 2008-2010 stagnation/decline will continue).

    But sooner or later, when lenders no longer think it safe to lend to countries like US and Japan, in order to continue with deficit financing, they will be forced to not only raise interest, but inflation will race ahead of interest!!!

    In such situations, hyperinflation soon catches hold. Paul Volker acted in late 1970s to raise intrest rates to well over 16% (which is like raising Indian interest rates to 40 - 50%!!!) and killed inflation before it went out of control. The side effect was a big blow to the US economy which suffered it and rebounded quickly. Thats why Obama is starting to listen to him and hopefully before its too late - but then he may not have the spine to act and force the US into very deep recession or depression.

    If you see a meal at Rs.10000 you will be very poor whatever you may be earning. I know because I spent some time in Africa where people used to tell me that at one time the Ugandan Shilling was worth much more than it is today. The smallest denomination was 100 shillings. Imagine the time when the smallest denomination is Rs 100!!!

    Be careful the hike you wish for in your homes. By then, for all practical purposes the rest of your savings will be worthless!!!

    The US and Japan are almost surely headed this way since they are almost into a debt trap (given their borrowing needs over the next decade and more). And when the 2 largest economies collapse where do you think we will be? Consider this seriously.

    cheers
    Hi doomsayer what is the point keep on saying the same thing again and again. no need to repeat the same msg again,

    Guys in hyperinflation era, only assets like gold and RE have got some respect and no respect for currency.

    Japan and India cannot be compared

    US and India cannot be compared.

    even then if these two collapses, it is good for Indian economy in the long run, RE is in win-win in any case in India.

    If you are very confident about yourself, you short at the every available avenenue and make tons of money.

    Indian market is fully priced for the time being.

    US is paying the price for keeping the lower interest rates for long time earlier, I am the one who expects stable interest rates, for that matter RBI is good. The FED was keeping low interest rates at about 1% and which prompted everyone to get/give the loans, then they raised the rates to 5% and everyone got sucked including the small time businessmen which lead to collapse, again this guys are not learing any leassons and now keeping the interest rates near zero, I once the economy starts to rebound, they should keep the interest rates at 2 to 3 %

    Comment

    • #92

      #92

      Re : 2010 The Year of Real Estate Bull

      CRR hiked to 5.75% to curb 36000 Crores; RBI taking the first stick
      OBAMA's protectionism to affect Indian IT.

      Effect on Indian Realty?

      Comment

      • #93

        #93

        Re : 2010 The Year of Real Estate Bull

        Very interesting post, REuser and Wiseman.

        My estimate of CRR hike? It will make the RE slowdown more pronounced in 2010. RBI acting against "teaser rates" will also have same effect.

        Isnt it amazing that 2 years after the US RE/banks blow up, Indian banks are now giving teaser rates?

        Almost as if they learnt about it only then, with all the publicity, and decided to try it out!!!!

        Idiots.

        REuser, bubbles do not necessarily burst. RE prices are likely to stand still rather than fall. Effect will be generation of resource scarcity rather than price fall.

        In other words, new RE projects will dry up. Most new launches of 2010 will stall IMHO.

        Wiseman, in deflation, there is no general price fall.

        Instead, there is a fall in prices of non-essentials and a rise in price of essentials.

        Salary falls, car price falls. Oil falls. Metals fall.

        Food rises. Transport rises even as oil falls. Rent rises.

        In RE, luxury housing falls.

        Essential housing i.e. basic 2BHK (1BHK in Bombay - poor saps), prices will hold or rise.

        See, people with money (rich/banks) invest in RE in the hope of return. When there is no return, they do not invest and create resourse scarcity.

        Sufferer is the poor guy who has to hunt for a flat to buy/rent.

        Those who speak of 1/5 rent/EMI ratio, please do not underestimate rise of rentals in the next decade. I expect 1/1 ratio by 2015.

        We saw this in 70s and 80s. Huge shortage of flats (remember Gharonda?)

        If you are an end user, the time to buy is when you can afford it, even if it is for future use.

        Not when you need it - it might be unaffordable.

        Not with market timing - nobody is that good, not even Warren Buffet.

        We live in interesting times.
        Venky (Please read watch a or before posting)

        Comment

        • #94

          #94

          Re : 2010 The Year of Real Estate Bull

          Originally posted by REUser View Post
          Also, India is heading for Civil War
          Agree.

          Comment

          • #95

            #95

            Re : 2010 The Year of Real Estate Bull

            Nice post ...

            Originally posted by Venkytalks View Post
            Very interesting post, REuser and Wiseman.

            My estimate of CRR hike? It will make the RE slowdown more pronounced in 2010. RBI acting against "teaser rates" will also have same effect.

            Isnt it amazing that 2 years after the US RE/banks blow up, Indian banks are now giving teaser rates?

            Almost as if they learnt about it only then, with all the publicity, and decided to try it out!!!!

            Idiots.

            We live in interesting times.

            Venky,

            Nice post. Keep it coming.

            I have turned deeply bearish since the beginning of this year when I was ambivalent. I work with a company in the Capital Goods business and the bottom has fallen out of the markets I'm looking at. 2010 looks like a year with some nasty surprises in store for us!

            Did you notice that the Shanghai Composite Index has entered bear territory again falling below 3000 (as I had mentioned 2 weeks back?). And this is the country that going to get us out of this depression?! As I have already shown in a chart earlier, the Shanghai Index leads other markets by 2-3 months ....

            With the Sensx 200 DMA (which is generally considered the border separating the Bull from the bear phase) around 15700, today we fell to within 300 points ( a single day's downswing) of that level when we went just below 16000. There is no support for sensx until 15400 which was the big early Nov fall to 15400. Though not certain we should see it take support around that level. For the Nifty the 200 DMA is around 4700 (another bad day's fall!).

            When will the Indices cross over convincingly into Bear Territory? I wonder ... This is also a sign of FII hot money taking flight back home (with Dollar Index decisively breaking past 79 level) and increasing turmoil worldwide with Japan getting de-rated, CRR hikes tightening the already bad credit situation, etc, etc.

            People did not take me seriously when I was calling for wave 2 to be ending and wave 3 to start sooner than later and also that wave 3 is a violent one (it took only 2 weeks to take out the rise that took 3 months to create). Made a hefty packet going short in the last 2 weeks!

            As you said, things are getting very interesting very quickly.

            Bear_baiter, the reason I keep repeating myself is because folks like you do not seem to still accept my kind of opinion and thereby keep me in business! Keep it coming!

            cheers
            Last edited by wiseman; January 29 2010, 10:43 PM.

            Comment

            • #96

              #96

              Re : 2010 The Year of Real Estate Bull

              Originally posted by wiseman View Post
              Venky,

              People did not take me seriously when I was calling for wave 2 to be ending and wave 3 to start sooner than later and also that wave 3 is a violent one (it took only 2 weeks to take out the rise that took 3 months to create). Made a hefty packet going short in the last 2 weeks!

              cheers
              About waves, et. al., Are you a Tsunami expert as well?

              Comment

              • #97

                #97

                Re : 2010 The Year of Real Estate Bull

                show some proof

                agree with bear baiter...wiseman singing the same tune repeatedly does not evoke any interest nowadays.

                he has been saying the crash is just few months away ...and he has been saying it for a few years !!

                all the analysis of fundamentals is fine, show me proof of any fall (leave alone 50%...even 10% is fine ) in RE in chennai- lets not forget this forum is primarily about RE.

                from my personal experience (i have mentioned this before in another post) june 2009 price of rs 8200 psft has increased to rs10,000 by end of 2009...

                Comment

                • #98

                  #98

                  Re : 2010 The Year of Real Estate Bull

                  Dear Wiseman,
                  Like me silent listener really care and benifitted with your valuable analysis and forecast trend.Don't buy out the bear-baiters comment.You are also educating the current generation about value of savings. There are alot of them silently listening and acting upon based on their own judgment. Please pour your service as usual .

                  Comment

                  • #99

                    #99

                    Re : 2010 The Year of Real Estate Bull

                    Phir aa gaya doomsman!

                    Originally posted by bear_baiter View Post
                    Hi doomsayer what is the point keep on saying the same thing again and again. no need to repeat the same msg again,

                    Guys in hyperinflation era, only assets like gold and RE have got some respect and no respect for currency.

                    Japan and India cannot be compared

                    US and India cannot be compared.

                    even then if these two collapses, it is good for Indian economy in the long run, RE is in win-win in any case in India.

                    If you are very confident about yourself, you short at the every available avenenue and make tons of money.

                    Indian market is fully priced for the time being.

                    US is paying the price for keeping the lower interest rates for long time earlier, I am the one who expects stable interest rates, for that matter RBI is good. The FED was keeping low interest rates at about 1% and which prompted everyone to get/give the loans, then they raised the rates to 5% and everyone got sucked including the small time businessmen which lead to collapse, again this guys are not learing any leassons and now keeping the interest rates near zero, I once the economy starts to rebound, they should keep the interest rates at 2 to 3 %

                    When the baiter baits, can the bear refuse to take it?

                    Baiter, I'm not comparing US, Japan and India. Just laying out the cause-effect relationships between events in the above countries and trying to project where we will land up. Comparing countries in terms of their socio-economic parameters is safe and rewarding in the insights it provides.

                    Whether you like it or not I find it revealling that every day a new part of this puzzle gets revealed and enlightens us about how we landed here and where we are headed. Most times, being forewarned is being forearmed! And that prevents one from making strategic, long-term blunders like going in for RE at its highs in 2007 when it was quite clear to some people that this crash was coming (it was clear to me in early 2006 itself - only the timeframe was unknown)!

                    Last few months I made more money going long than short as the markets were more up than down. Last 2 weeks I turned short and made much more short than long. To give you an example, a short position taken on 19 Jan at Rs105 was just terminated on 29th Jan around Rs.415 which was a nice profit. From now on, being short will be more profitable and one should short everytime there is a rally.

                    Indian market is not only fully priced. It is a mini-bubble since the Sensx is (was) around 24 times trailing P/E (and in these times of slow growth and low profitability this is way too high). Future P/E is complete nonsense even in normal times and these are very abnormal times (and jokers today talk about Sensx being cheap based on 2011 earning - why not simply take 2025 earnings, show a P/E of 3.0 and bedone with it?). Last 2 weeks Sensx has declined nearly 10% which is a sharp fall by any standards that too in such a short time. My target over next few months is in the range of 10000-12000 depending on how badly the rest of the world does.

                    Globally, Severeign Debt is too high. India's Debt to GDP ratio is just under 60%. The US is already 87%. The UK is over 100% and Japan takes the prize at 270%. As RE companies have shown, when debt is so high and revenues sluggish, there is only one of two ways out. Crash the debt by reducing money-supply. Or hyper-inflate the currency. Either way, it will result in a recession, or in cases like this where debt is too high, it will result in depression. And globally, we are in a depression already.

                    And by the way, when shortly rates will be hiked, it will not restrict to 2-3% as you hope it will. Rates in the US will go much, much higher and so it will in India too (even higher). Remember, Volker is back. And he took it up to 16% in the 70s to kill inflation and bring back the economy before it went nearly out of control. Expect this or worse this time once the deflation is over and inflation takes hold in the next few years!

                    The reason I keep repeating it (as you say) is because people find it so hard to assimilate these facts and the impact on their lives it will have going forward and continue to make decisions that will affect them negatively in future. Maybe I should simply stick to making use of this information to help myself?

                    And others - baad me jaye?

                    cheers
                    Last edited by wiseman; January 30 2010, 06:36 AM.

                    Comment


                    • Re : 2010 The Year of Real Estate Bull

                      Originally posted by wiseman View Post
                      When the baiter baits, can the bear refuse to take it?

                      Baiter, I'm not comparing US, Japan and India. Just laying out the cause-effect relationships between events in the above countries and trying to project where we will land up. Comparing countries in terms of their socio-economic parameters is safe and rewarding in the insights it provides.

                      Whether you like it or not I find it revealling that every day a new part of this puzzle gets revealed and enlightens us about how we landed here and where we are headed. Most times, being forewarned is being forearmed! And that prevents one from making strategic, long-term blunders like going in for RE at its highs in 2007 when it was quite clear to some people that this crash was coming (it was clear to me in early 2006 itself - only the timeframe was unknown)!

                      Last few months I made more money going long than short as the markets were more up than down. Last 2 weeks I turned short and made much more short than long. To give you an example, a short position taken on 19 Jan at Rs105 was just terminated on 29th Jan around Rs.415 which was a nice profit. From now on, being short will be more profitable and one should short everytime there is a rally.

                      Indian market is not only fully priced. It is a mini-bubble since the Sensx is (was) around 24 times trailing P/E (and in these times of slow growth and low profitability this is way too high). Future P/E is complete nonsense even in normal times and these are very abnormal times (and jokers today talk about Sensx being cheap based on 2011 earning - why not simply take 2025 earnings, show a P/E of 3.0 and bedone with it?). Last 2 weeks Sensx has declined nearly 10% which is a sharp fall by any standards that too in such a short time. My target over next few months is in the range of 10000-12000 depending on how badly the rest of the world does.

                      Globally, Severeign Debt is too high. India's Debt to GDP ratio is just under 60%. The US is already 87%. The UK is over 100% and Japan takes the prize at 270%. As RE companies have shown, when debt is so high and revenues sluggish, there is only one of two ways out. Crash the debt by reducing money-supply. Or hyper-inflate the currency. Either way, it will result in a recession, or in cases like this where debt is too high, it will result in depression. And globally, we are in a depression already.

                      And by the way, when shortly rates will be hiked, it will not restrict to 2-3% as you hope it will. Rates in the US will go much, much higher and so it will in India too (even higher). Remember, Volker is back. And he took it up to 16% in the 70s to kill inflation and bring back the economy before it went nearly out of control. Expect this or worse this time once the deflation is over and inflation takes hold in the next few years!

                      The reason I keep repeating it (as you say) is because people find it so hard to assimilate these facts and the impact on their lives it will have going forward and continue to make decisions that will affect them negatively in future. Maybe I should simply stick to making use of this information to help myself?

                      And others - baad me jaye?

                      cheers

                      wiseman --completely agree with you..you are bang on target..
                      volker ahead means builders behind
                      People -- no one has really learnt from the sen fall in 08. May be there were not burnt enuf !! But if RE falls they will be chhared!!

                      Comment

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