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Builders & Real Estate Bulls Theory Proved Wrong

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Builders & Real Estate Bulls Theory Proved Wrong

Last updated: November 1 2016
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  • Re : Builders & Real Estate Bulls Theory Proved Wrong

    Debt Deleveraging Process Will Take Many Years

    Originally posted by wiseman View Post
    As it is widely known, I've been very bearish from 2008 when I joined this board and before that had advised all my clients to exit in Dec 2007 itself. The reasons are becoming clear now.

    US market is now starting the C leg of a 5 or 7 leg downward move. Historically this is the most violent and sharp leg as well as being the largest leg. This is the leg when most people having hopes of recovery after the first violent fall and recovery, lose hope after having thrown in all their money into the market to recover from losses made in the first leg down. Therefore it will be the most painful. Most of my clients sold out at least 50% of holdings in the 17500-18000 levels and are selling more every small rally today.

    There will be another leg up after this down leg, the D leg which will be fairly weak (32% - 40% of C leg). The last leg E will also be a fairly small one (100% - 150% of D leg) when the last people holding out hope will give up.

    Expect the DOW to go below the previous low of 6400. The final target for DOW is between 4000-5000 in the good case and between 1000-1500 in the worst case. If there is catastrophe like a global war, the DOW can technically go all the way to 3-digits.

    The Indian market may not see new lows from 8000 levels and even if it does it will be brief.

    In a very significant move the FinMin is proposing to change the rules regarding Govt sticking to Fiscal limits (Fiscal Responsibility law) in the event the Govt has to print huge amounts of money to do similar bailouts for India when the world goes down the toilet. So, they are also seeing a possibility of such an event.

    Hold onto your hats. We are still in the early stages of a very lng bear market, the longest you will ever see in your life.

    cheers
    I agree with Wiseman ....
    if too much boring then just read the bold lines ..

    "...market reactions are widely out of proportion to the real problems...recent events are a disturbing comment on the power of fear...brave people will make a fortune buying in these days, and then we'll all wonder what the scare was about".
    "Right now the U.S. financial markets are trading very much out of fear and not any fundamentals."
    The first quote was written by a well-known "expert", and appeared in the Sunday New York Times on August 12, 2007. The S&P 500 had closed that week at 1453 on the way to 666. The second quote is from another "expert" on TV earlier this week. Human beings seem wired to always disbelieve the first move down from a market peak and, invariably, see it as a great buying opportunity. In our view the current fear is well-grounded in fundamentals, and the second observer will be proven to be as wrong as the first.
    The current debt crisis cannot be solved by mere declarations from official authorities. The debt crisis began with the decline of the housing market in 2006 and is continuing to this day. Phase I involved the transfer of private debt to sovereign debt by means of massive monetary and fiscal stimulus that has led to statistical economic recovery that remains anemic by historical standards. The problems that emerged with the Dubai crisis heralded the beginning of a sovereign debt crisis and phase ll---the transfer of weak sovereign debt to relatively stronger sovereign debt. The problem is that total debt is not reduced, but keeps getting shifted from weaker to stronger entities. Overall debt is too huge to ever be paid off and the relatively stronger nations will run out of ammunition long before the crisis is resolved.
    The only long-term solution is a deleveraging of global debt, a process that cannot be solved with a magic wand waved by central bankers and prime ministers. It is a process that will take many years and will be accompanied by slow growth, numerous recessions and financial turmoil. The weaker European nations are already going on austerity, and there is more to come. Greece will have to undergo severe budget cuts without the benefit of an independent monetary policy or the ability to devalue its currency. Spain is cutting its budget by $18 billion and Italy by $15 billion. The UK, too, had announced major reductions in healthcare, IT and civil service. This will lead to a sharp slowdown or recession in Europe with negative implications for the rest of the world at a time when the U.S. economy is still fragile and China is trying to restrain a major housing boom. The entire globe is in danger of becoming like Japan, which is still struggling after two decades of monetary and fiscal stimulus---and Japan was operating within a global economy which was still robust during most of its time of trouble.
    In that kind of financial and economic climate it is hard to conclude that the stock market is cheap or that it is oversold on anything other than the very short-term. Most major stock market bottoms have occurred with the S&P 500 selling at 20% or more under its 200-day moving average. The index sold at 28% under its 200-day average at the 2002 bottom and 26% under at the 2009 bottom. Even at the recent lows the market was only 6% under its 200-day average. In addition sentiment is nowhere near as gloomy as it usually gets at major lows. The Investors' Intelligence Survey show 29% of participants bearish as opposed to 50% or more at most of the past significant bottoms.
    Valuation metrics, too, do not indicate that investors are really fearful at current levels with the S&P 500 selling at slightly over 17 times trailing smoothed reported earnings. At major past market bottoms the P/E was below 10. In fact the P/E was below 10 at some point in 17 of the last 60 years going back to 1950. If anything, the current P/E is more indicative of complacency rather than fear. As we have stated many times "it's all about debt" and the deleveraging process has a long way to go.

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    • Re : Builders & Real Estate Bulls Theory Proved Wrong

      Arithmetic, Population and Energy

      http://www.youtube.com/watch?v=F-QA2rkpBSY

      Check this video (8 part video, the link is for first part.) A professor giving lecture on the Exponential function, Population growth, Economic Growth and the Energy reserve.
      It gives some mind blowing examples and explains the Exponential functions, doubling time, etc...

      The professor predicts a very gloom picture of our Economy. A huge hit video.

      Comment


      • Re : Builders & Real Estate Bulls Theory Proved Wrong

        Browsing through the data this way is very difficult with so many new launches happenning from time to time. To save us all time and make data more informative i have compiled the information as an excel and shared it for view and edit purpose
        below is the link...happy researching

        http://spreadsheets.google.com/ccc?k...kdmdaVlE&hl=en

        Comment


        • Re : Builders & Real Estate Bulls Theory Proved Wrong

          Originally posted by aditi sharma View Post
          http://www.youtube.com/watch?v=F-QA2rkpBSY

          Check this video (8 part video, the link is for first part.) A professor giving lecture on the Exponential function, Population growth, Economic Growth and the Energy reserve.
          It gives some mind blowing examples and explains the Exponential functions, doubling time, etc...

          The professor predicts a very gloom picture of our Economy. A huge hit video.
          Nice. excessive cell growth leeds to cancer in the body... excessive growth in anything is bad.

          Comment


          • Re : Builders & Real Estate Bulls Theory Proved Wrong

            Buying a house on resale? Four experts you need to take along

            A very useful info for all of us:-

            Walking through the house like a tourist will cost you big. You need experts on your side for the right deal:-

            http://www.livemint.com/2010/05/1021...-Four.html?h=B
            If you are happy, you are successful.

            Comment


            • Re : Builders & Real Estate Bulls Theory Proved Wrong

              Clarifications ...

              Originally posted by enduser View Post
              C leg, D leg? E leg? What is all this boss?
              I thought only letter L stands for leg.

              Printing money means more money in the market, more inflation,
              more inflated RE prices, etc. '20L flat, 1-crore mein' type ...

              And rather than the Hats, I guess we need to hold our pants,
              since Builders have put so many Hats (Topis) till now that it would
              anyway be difficult to hold so many of them ...

              puser, enduser and others,

              puser - You do me a disservice by saying I only appear during down times. Maybe you only notice my posts during down phases!

              In general, the world is suffering from a massive overdose of excess debt and consumption levels based on that. This debt has created huge levels of excess liquidity globally. This is one of the reasons why you are able to afford a car as soon as you pass out of college while your father's times most people never owned a car in their entire lives!

              One of the problems of excess debt is that, you do not make enough money to repay it and as income always remains below expenditure a deficit is created (like when you use a Credit Card to pay your way through the rest of the month because your salary ran out too soon) and this is covered with even more debt.

              At an extremity, this is called a debt trap where the borrower is just able to cover the interest on debt through earnings and does not even have enough to eat. The final end is bankruptcy. This is what is facing Greece and a whole host of nations, including Japan and the US eventually.

              There is no way out of this situation except to reduce debt to serviceable levels. And the only way to do this is to face a reduction in consumption and thereby poduction. This means less things produced which implies lesser employment levels (job losses), much lower salaries, very low savings and a general drop in living standards.

              Normally this is called a recession. When it is long and deep its called a depression. In extreme cases, its called a Great Depression. We are already in a depression in many regions of the world. Govts of the world are following policies that will lead us into a Great Depression.

              GDs normally last over a decade and come around once in 70-80 years like the Haley's Comet!

              GDs also do not spare countries / people who have high debt levels and who have put this money into assets of most kind. Gld (and to a small extent land) are the only exceptions.

              Within this period there will be huge falls and significant rallies. We just saw two of them. There will be more in the coming years. If you are not carefuland spend like you did before 2008 in the belief that jobs are always easy and ever-increasing salaries will ensure that any amount of debt is repayable, you could find yourself facing many years of hardships with crippling debt and no way to repay it.

              I'm not hiding when markets are going up. I'm making money on both sides. Since 99% of people are bullish I mostly come out during bearish times to continue the warning that most people refuse to acknowledge - that we are in a long-term bear market that can cripple you or make you very rich, depending on the actions you take!!! And taking on huge amounts of debt at very high leverage ratios (RE is normally taken on at 9:1 ratios) is the most wrong thing you can do in such a market. In the first 5 years after taking on a loan at 10% down payment, any drop of 15-20% in price will see you underwater and 3 EMIs not paid will see you being foreclosed. All it takes for 3 EMIs being missed is being out of a job for 4-6 months (as most people do not save in the belief that they will always get plenty of offers). And even if you can sell the home, poor liquidity will see it take 3-4 months to sell and you will run out of time.

              cheers
              Last edited by wiseman; May 31 2010, 03:49 AM.

              Comment


              • Re : Builders & Real Estate Bulls Theory Proved Wrong

                Strane behaviour...

                People have an strange investment habit.. be it stocl exchange or real estate.. they invest in a bullish market.. and panic and exit in a bearish market...

                Property prices are so high.. but people still feel it will never go down and want to buy.. There are a few waiting for a crack in price to invest..

                which gives an impression property prices in metro cities will not see any major decline.. there is enough demand.. Eurozone crisis or the decline of DOw Jones that the charts indicte..

                Comment


                • Re : Builders & Real Estate Bulls Theory Proved Wrong

                  Originally posted by wiseman View Post
                  Normally this is called a recession. When it is long and deep its called a depression.
                  As always good post Wiseman.

                  Here is a different definition of the above - "It's a recession when your neighbor loses his job; it's a depression when you lose yours."

                  VK

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                  • Re : Builders & Real Estate Bulls Theory Proved Wrong

                    RBI Dy Governor indicates rise in interest rates

                    http://www.indianexpress.com/news/rb...rates/627288/0
                    If you are happy, you are successful.

                    Comment


                    • Re : Builders & Real Estate Bulls Theory Proved Wrong

                      Unitech Reports 43.64 Per Cent Decline in Net Profit

                      http://www.indianrealtynews.com/real...Realty+News%29
                      If you are happy, you are successful.

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