Hereby I will prove how the realty boomers arguments are false.

What are the boomers arguments?

1.) Buy today, houses always increase in value in the long run.
WRONG. House prices cannot increase more than incomes in the long run. This is obvious if you think about it. If house prices go up more than people can afford to pay, buying stops, like it has stopped now.
Even Warren Buffett have pointed out that houses don't increase in intrinsic value. Unless there's a bubble or a crash, house prices simply reflect current salaries and interest rates. If a house is 100 years old, it's value in sheltering you is exactly the same as it was 100 years ago. Then came the maintenance as the house didn't renovate itself. It also has taxes, and insurance - costs that always increase and never go away. The price of the house went up about as much as salaries went up.
To put this is simple perspective, vegetable were costing Rs.5-6/kg when 5 digit salary was a rarity.
Today, the prices have gone up by about 4 times but so have the salaries. So, sounds very much like the reasoning people use now when they talk about how much their father's house appreciated "in the long run" without considering that salaries rose a proportional amount.

2.) Renting is just wastage of money.
WRONG. As said before renting is now much cheaper per month than owning. If you don't rent, you either:

* Have a mortgage, in which case you are throwing away money on interest, tax, insurance, maintenance, costs that increase forever.
* Own outright, in which case you are throwing away the extra income you could get by converting your house to cash, investing in bonds, and renting a similar place to live for much less money. This extra income is sufficient for emergency expenses,retirement etc.

Either way, owners lose much more money every month than renters and that's assuming prices don't correct to very high level & everything is smooth in the economy.

3.) As a renter, you won't have any money left as you will spend them on vacations,cars & hence won't have equity/savings etc.
WRONG. Equity is just money. Renters are actually in a better position to build equity/savings through investing in anything but housing. Renters can get rich much faster than owners, just by investing in conservative stocks & bonds.

* Owners are losing every month by paying much more for interest than they would pay for rent. The tax deduction does not come close to making owing competitive with renting.
* Owners must pay taxes simply to own a house. That is not true of stocks, bonds, or any other asset that can build equity/savings. Only houses are such a guaranteed drain on cash.
* Owners must insure a house, but not most other investments.
* Owners must pay to repair a house, but not a stock or a bond.
* Owners lose their money as house prices reduce. The EMI's remain constant in spite of reduction in rates. At the end of loan tenure, they would have paid almost twice than that of current renters who will buy at logical rates. Keep interest rates in mind. Most of the EMI is not principal amount but interest.

4.) There are great tax advantages to owning a house.
WRONG. Many people believe you can just reduce your income tax by the amount you pay in interest, but they are wrong. Buyers may not deduct interest from income tax; they deduct interest from taxable income. And even then, the tax advantage is not significant compared to the large monthly loss from owning.

If you don't own a house but want to live in one, your choice is to rent a house or rent money to buy a house. To rent money is to take out a loan. A mortgage is a money-rental agreement. House renters take no risk at all, but money-renting owners take on the huge risk of falling house prices, as well as all the costs of repairs, insurance, property taxes, etc.

5.) RE is based on local factors, it's not a national phenomenon. RE of Delhi-NCR,Bangalore & rest of the cities has nothing to do with Pune RE.
WRONG. Lending rates remain the same throughout the country. ALL loans are harder to get. This will drive prices down everywhere.

6.) A rental house provides good income. So, you can rent if you have purchased as investment.
WRONG. Rental houses provide very poor income in hyped areas and certainly cannot cover mortgage payments. Remember there is almost 300% difference between EMIs & rent for the same house.

It's pointless to do the work of being a landlord if you can make more money with no risk, no work, and no state income tax by investing in assured good returns bond.

7.) If owning is a loss in monthly cash flow, but appreciation will make up for it.
WRONG. Appreciation is negative. Prices are going down. It only adds to the injury of already high EMI's.

8.) As soon as prices drop a little, the number of buyers on the sidelines willing to jump back in increases.
WRONG. There are very few buyers left, and those who do want to buy will be limited by increasing difficulty of borrowing now that many house owners are near bankrupt as they don't save anything at the end of the month due to high EMI's.
No one has to buy, but there will be more and more people who have no choice but to sell as their payments rise. That will keep driving prices downward for a long time.

9.) House prices never fall atleast in Pune.
WRONG. If you see the RE scenario of 1996, prices crashed by 50% & took a whole 7+ years to recover.
Exact 1996 scenario may not be there today but strong correction is inevitable across the city.

10.) House prices don't fall to zero like stock prices, so it's safer to invest in real estate.
WRONG. House prices won't be zero, but the equity or the principal amount you paid can be zero or even negative. What you will pay as EMIs later in actual terms is not for the principal amount but only the interest as house prices dip. So, you will be only serving the bank.

11.) Prices will soften gradually, won't crash immediately.
WRONG. Prices are falling off a cliff. No one knows exactly what will happen, but it looks like prices will continue to fall for long time. These are just more manipulation of buyer emotions, to get them to buy even while prices are falling.

12.) The bubble prices were driven by supply and demand alone.
WRONG. Prices were driven by low interest rates and risky loans & good returns for investors in initial phases of boom in 2004-05.
Prices went up, interest rates went up & buyers savings went down. So prices are violating the most basic assumptions about supply and demand.

13.) There is lack of land.
WRONG. Ample of land is available & continue to be even in future in Pune. Sales volume are down. Even in Japan (small country with less land), prices went down. Current prices here are the same as that of 23 years ago. If we really had a housing shortage, there would not be so many vacant rentals.

14.) If you don't own, you'll live in a cheap neighborhood later.
WRONG. For the any given monthly payment, you can rent a much better house than you can buy. Renters live better, not worse. There are downsides to renting, such as being told to move at the end of your lease, or having your rent raised, but since there are thousands of vacant rentals, you can take your pick and be quite happy renting during the crash. There are similar but worse problems for owners anyway, such as being fired and losing your house, or having your interest rate and property taxes adjust upward. Remember, property taxes are forever.

15.) There's always someone predicting a real estate crash.
TRUE, yet irrelevant. There are very real crashes every decade or so. Even a broken clock is right twice a day.

16.) Local incomes justify the high prices.
WRONG. The mortgage should be more than your 3 years earning. It is much higher today. Most are already in danger/red zone.

17.) You have to live somewhere.
CORRECT. But that doesn't mean you should waste your life savings on a bad investment. You can live in a better house for much less money by renting during the down slide in RE.

18.) It's not a house, it's a home.
WRONG. Wherever one lives in it is home, be it apartment, condo, bungalow , mansion or house. Calling a house a "home" is a manipulation of your emotions for profit.

19.) If you don't buy now, you'll never get another chance.
WRONG. History proves otherwise.
Here's a beautiful quote from a analyst:-
"The real issue isn't whether you will be stuck being a renter all your life, she says. Its whether you'll get so scared about being shut out that you'll buy at the market's peak and be stuck in a property you can't afford or sell."

20.) It would take major economic recession or a major earthquake that wipes out this area in order for the price to fall by over 50%.
WRONG. Even today, if the prices fall by 50%, there will still be very few people who can buy at this levels due to uncertainty in jobs & most importantly high EMIs. Also, look at the rental rates for equivalent houses. Which loss per month is larger? EMI or rent?

contd....
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  • What do you have to say on Japan's lost decade ?

    It could have been avoided had they acted as swiftly as Feds did or maybe we would have a "global lost decade" if it werent for the lessons learnt from Japan.

    Also more recently the kind of belt tightening hasnt helped much in europe either?

    Feds money printing wasnt a perfect solution but who said we live in perfect world?

    Originally Posted by wiseman
    Neeraj,


    Lastly, try to forget this Keyensian nonsense about spending your way out of a high-debt situation. Keynes did not have an answer to the ultimate question we are facing today globally. Fortunately for him WW2 came and he did not have to answer that question as the War and its aftermath resolved the interminable global depression the world faced back in the 1930s (due to exactly the same problem we have created today - too much debt). So, is a global war the only possible solution to an interminable depression going forward? When people (and Govts) cannot borrow anymore because of debt-exhausion, what then? The answer is coming down the road in a short while. Debt implosion, huge deflation and a correction to the imbalance. A lot of our assets will lose paper value. Sometimes they will lose more value than the money we have "invested" in these "safe" assets.


    cheers
    CommentQuote
  • Originally Posted by Venkytalks
    Great post wisey. Some time ago there was some discussion in GGN about what is the global wealth. After a lot of discussion the answer was - nobody knows!

    One estimation valued all assets (infrastructure and minerals also) prepared by economists with left leaning and environmentalist credentials (very suspect lot in my view) and came up with 200 odd trillions.



    The "left leaning" people were the United Nations, so good to know that they are left leaning and in the process you have proved wrong UN sponsored study by a world renowned economist from Univeristy of Cambridge. hmm?


    Originally Posted by Venkytalks
    My own estimate was 400 plus trillions, including "everything" - including gold, stocks, unlisted, infrastructure, minerals and human capital - unscientific but useful ball park figure. It probably grows by about 3-5% and depreciates by about 1/3rd of growth i.e 1-1.5% per annum. Another useful way is that global wealth is 10 times global GDP of 40 trillion.



    This is same as saying if I make 10 Lakh an year then the "rough estimate" of my net worth is around 40L. hmm?
    CommentQuote
  • Originally Posted by sheeshu
    The "left leaning" people were the United Nations, so good to know that they are left leaning and in the process you have proved wrong UN sponsored study by a world renowned economist from Univeristy of Cambridge. hmm?




    This is same as saying if I make 10 Lakh an year then the "rough estimate" of my net worth is around 40L. hmm?


    Kim Philby was also an economist from Cambridge before he worked for the British Intelligence - and we all know what he did, right? Or should I say left?
    CommentQuote
  • Originally Posted by nridesi
    Realacres - you wrote this more than 3 years ago. How wrong were you in your analysis? You have deprived many from purchasing their house. Your analysis was so dumb is proven by the following fact . I purchased a 2 bed house in Jasminium in Jul 2009 for 39 lakhs and sold the same property a week back ( had to wait for 3 years - for long term capital gains benefit) for 68 lakhs.

    LoL. :D
    I can show you several egs where people have booked in 2009 & still are waiting to see their flat getting completed. And yes, hardly handful of people must have got this type of returns. It would have been better if you would have opted for gold then, as mentioned before, the returns would have been lot more than RE.
    And why didn't you wait for another year ? You could have sold the same flat for 1 Cr !! Man, look around, already correction has started to take place. In Mumbai, NCR, it is huge & in cash discounts. Pune builders are now throwing white goods free. Will post details for the same.
    CommentQuote
  • Originally Posted by real_pro
    Wait for sometime...realacres will come up with yet another dumb calculation to prove you that you are still wrong!!

    Is Vascon Forest County sold out ? How many persons have got possession ?
    BTW, your dear builder recently laid off several mid-level management guys. Seems PR guys are still there :D.

    Wisey,

    Nice posts as usual. What bulls here forget is RE recovered in 2009 due to restructure of loan & teaser rates. What they forget now is NPAs of banks have increased between 30-70% YoY !! And this includes realty to large extent. The builder first restructured loans, banks got teaser rates & now builders & buyers, both are defaulting & bank are taking beatings. No wonder then their ratings are being downgraded every passing day :D.

    And you wanted some political news, well here is latest one which I got from a member of MPCC (Mah Pradesh Cong Committee ) -

    The situation of Vilasrao Deshmukh is extremely critical. He was diagnosed with cancer last year itself & was on dialysis & regular check-ups from then. The marriage of his actor son could have been done late but was pre-pone for the same reason. However, no one expected his health to deteriorate to this extent in such short period of time. Though no one is commenting in media, reports indicate that he has already suffered multiple organ failures which may not recover & chances of recovery are extremely slim.

    Other update is about Bobada Pawar -

    His cancer has increased & his frequency to his doc has drastically gone up in past few months. Apart from this, Udhav Thakre is also having some serious health complications. Not talked to any senior SS guy recently, so can't give detailed info but it is serious. Will find out & inform.

    And Narayan Rane has in past few weeks facing severe probs from high sugar while Gopinath Munde is suffering from high BP & spondylitis. The health of former petro minister, Murli Deora is also weak but no one is commenting in detail about his illness. And after Arun Jaitely underwent heart operation, docs have asked him to see to it nothing should be done so as to deteriorate the situation of heart further.

    And the sad part is despite being in such conditions, these leaders simply refuse to act for the betterment of the country.
    CommentQuote
  • Veritas frowns at Indiabulls

    The Canada based brokerage Veritas has frowned upon the financials and corporate governance at Indiabulls Real Estate and Indiabulls Power.

    Veritas said the merger of Indiabulls Infrastructure Development Ltd with Indiabulls Power is not helpful to the company’s shareholders and that the claimed net worth of Indiabulls is unverifiable.

    Veritas frowns at Indiabulls, co hits back - Money - DNA

    >> And this is just the start. Already reports indicate hyped worth of RE cos like DLF, Unitech etc.
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  • SBI ups monsoon alert on banks NPAs

    Amid concerns over rising bad loans, SBI today sounded a note of caution saying that failure of monsoon will not only affect the economy but also banks as re-paying capacity of borrowers will come under pressure.

    Gross non-performing assets (NPA) of PNB has risen to 3.34 per cent at the end of three-month period ended June 30, 2012 as against 2 per cent during the same period of last fiscal.

    NPAs in public sector banks stood at about 3.3 per cent of the assets in 2011-12 against 2.3 per cent a year ago.

    >> This means avg hike in NPAs by whopping 41% YoY !

    SBI ups monsoon alert on banks NPAs - Indian Express
    CommentQuote
  • Originally Posted by wiseman
    Are bhai,

    When I didn't bring home the wealth, family is kicking me out saying, "first go get the wealth, otherwise you are useless!" :)

    When I try to go get the wealth by posting and reading on this forum about how to get wealth, you are saying, "Don't waste time on this blog thinking about how to get wealth; rather go back to family, which is your true wealth!"

    Between one and the other, batao Rembrants, which comes first, family or wealth!!! :D

    cheers


    Go home to family WITH wealth ..waise what wealth you get by reading posting ?? .. Wealth of knowledge .... yeah right!
    CommentQuote
  • Yeah with Sonia being diagnosed and treated for some unknown ailment.. hopefully it will replace the old political crop with some fresh blood.. Any day Supriya Sule seems a better choice to Ajit Pawar..

    As far as RE is concerned, if you had the courage to borrow and invest in RE before 2004, you are sitting pretty comfortable now..

    If you did not have the courage then.. maybe prices are unreasonable for the shit hole we get..



    Originally Posted by realacres

    And you wanted some political news, well here is latest one which I got from a member of MPCC (Mah Pradesh Cong Committee ) -

    The situation of Vilasrao Deshmukh is extremely critical. He was diagnosed with cancer last year itself & was on dialysis & regular check-ups from then. The marriage of his actor son could have been done late but was pre-pone for the same reason. However, no one expected his health to deteriorate to this extent in such short period of time. Though no one is commenting in media, reports indicate that he has already suffered multiple organ failures which may not recover & chances of recovery are extremely slim.

    Other update is about Bobada Pawar -

    His cancer has increased & his frequency to his doc has drastically gone up in past few months. Apart from this, Udhav Thakre is also having some serious health complications. Not talked to any senior SS guy recently, so can't give detailed info but it is serious. Will find out & inform.

    And Narayan Rane has in past few weeks facing severe probs from high sugar while Gopinath Munde is suffering from high BP & spondylitis. The health of former petro minister, Murli Deora is also weak but no one is commenting in detail about his illness. And after Arun Jaitely underwent heart operation, docs have asked him to see to it nothing should be done so as to deteriorate the situation of heart further.

    And the sad part is despite being in such conditions, these leaders simply refuse to act for the betterment of the country.
    CommentQuote
  • Originally Posted by nridesi


    Originally Posted by realacres
    contd....

    21.) My wife will divorce me if I don't buy a house or shall I show her the savings by not buying the house.

    WRONG. She will divorce you if you do buy a house and go bankrupt trying to pay the mortgage. She won't divorce you if you rent a much nicer place than you can buy, and then take her to Paris for a month in an year, which you can do just by avoiding that suicidal mortgage.

    22.) Drop in interest rates would make people jump into market again which will increase the prices or atleast won't let RE prices crash.

    WRONG. The RE prices reflect the median income of the area. RE market in Pune was largely driven by IT, NRIs & investors. IT industry is slashing jobs or cutting the pays & perks. Due to global economic crunch, NRIs lack funds today. Several investors have burnt their fingers in stock market & they see no appreciation but a RE correction today (some may call it as rates are ‘Softening’). Hence, all these elements that were the main drivers for RE boom are absent today. At the end of the day what matters is whether one can afford EMIs or not. To what extent is priciple amount & interest component is altogether diferent issue. Try to see to it that what is fixed (RE rates) are low so that interest rates fluctuation won't bother you much. The RBI figs. posted by fellow blogger clearly shows how loan dibersement has decrerased despite hike in RE prices. This only means that people aren't simply taking loans. Home loan NPAs are increasing every day passing by. Hence, banks are in no mood to lend further for a highly depreciating asset.

    23.) Demand is there hence, drop won't take place.

    WRONG. Demand is there but definately not at current levels. Current market is dictated by end users & end users alone. Hence, builders can't today enjoy on investors money & neglect the end users.

    24.) No new projects are being announced. This will lead to low supply hence pushing up the rates.

    WRONG. Even if 58% of the projects are abandoned, there simply aren't any buyers for the rest 42%. Add to it the investors 40% additional supply which will flood the market this year.

    25.) Small correction here & there doesn't amount to crash.

    WRONG. The correction of 20% & more, if is small, then another 'Small correction' is sufficient for crash. Consider this as a 'Whirlpool'. Once you are in, you are not out unless you sink to the bottom.

    26.) I just want to own my own house.

    CORRECT. Most people do and that's fine. Buyers will get their chance when housing costs half as much and they have saved a fortune by renting. House ownership is great - unless you ruin your life paying for it. If you can save even just 10% on the price of a house, you can retire several years earlier than you would otherwise. If you can save 50%, then you can easily take a ten year vacation and still come out ahead.

    Conclusion:-


    1.) People are simply not spending due to current RE & economic scenario.


    2.) Investors aren't there, ending the speculation.


    3.) Current market is end user dictated. End user doesn't find rates affordable/logical.


    4.) Builder>> End User or

    Builder>> Investor/speculator>> End user.
    The chain ends with end user. End user is the king. Hence, expect distress sales from investors too.

    5.) Result is visible on ground. Builders slashing prices, thus defying PBAP diktat. One builder reduces rates & now it is catching steam that will set off chain reaction for RE crash.


    6.) Most importantly, the buyers are not homeless. They have a house even if it means rented one. Those who want to upgrade from 2BHK to 3/4BHK have put their plans on hold, as they too are not desperate. Due to several layoffs, people are going back to their native place, thus increasing the number of flats on rent.


    7.) Several news posted earlier, clearly indicate that bankers, economic analysts as well as realty observers state that the RE prices will come down by 50-60% from their peak value, irrespective of place, location. These people are neither bears nor bulls, but analysts with neutral perspective.


    8.) Most importantly, the holding capacity of buyers is greater than builders. Builders have taken loans from various finance sources with interest rates as high as 20-35%. These are turning defaulters & if they want the finance institutions not to put an attachment to their properties, they will have no other option but to sell off current inventory a very low rates.


    Who blinks first was the question late last year. Today we have the answer:- Builders.


    Like it or not, the current Pune RE scenario is similar to that of a ship heading inside the ‘Bermuda triangle’. What is visible today is just a deflection of ‘Compass’. Once it reaches the epicenter of the ‘Bermuda Triangle’, no one can help it from sinking.


    To conclude, the builders require your money. So, whom should you believe? Facts or theories put forth by boomers? Think for yourself.


    I would be very glad if you can share your thoughts on my article.

    Comments most welcome & I would be happy to hear from you.

    Regards,

    Realacres

    --concluded--



    Realacres - you wrote this more than 3 years ago. How wrong were you in your analysis? You have deprived many from purchasing their house. Your analysis was so dumb is proven by the following fact . I purchased a 2 bed house in Jasminium in Jul 2009 for 39 lakhs and sold the same property a week back ( had to wait for 3 years - for long term capital gains benefit) for 68 lakhs.



    nriDesi you have joined this forum in Jul 2009 and just 4 post -
    So is it ok for us to consider you as an Observer.

    Now you being rated as NRI observer - at least you must have observed a lot whats going in whole world ?

    had you been RE agent who doesn't know the spelling of Toilet or Luxury then it’s expected that he is not well informed and only comes to know what is propagated in TOI paper etc.

    Does this point needs even a debate that had not there been QE/Govt. intervention in the free market the prices of flat would have been HALF that of Jul 2009.

    If you can debate on this - Free market is like Flowing water ... sooner or later it finds its level.

    Subprime lending is equivalent to cloudburst and US Govt. intervention is like blocking the cloudburst later downstream.

    The Blocking is being done in such a way that it simply doubles(2.5 times) the cloud burst. So now the weather is ripe .. or will be Ripe soon.

    While it has been raining really well in the upstream(U.S. poverty rate expected to climb to highest levels since the 1960s | Mail Online) and upstream community is preparing well(Gun sales on the rise : News : FOX21News.com)

    Its only the downstream thinks all is dry and safe .... (Indian Metro ?)

    Will the Dam hold ? .. even if .. it can overflow right ..

    {
    From 2009 to the first quarter of 2012—the supposed recovery since the financial crisis—it has taken an average of $2.50 of debt or quantitative easing (QE) to produce $1.00 of GDP growth.
    }

    This is the case of US the world biggest GDP wise country.

    Is there any point to talk about Europe....
    UK ?
    Why Stock market is kicking RE listed companies?

    Why is RBI rigid?

    Its like you blame the doctor who told not to drink ... your liver is gone ....

    so the drunkard says ... see ... I have been deprived of three yrs of drinking ...

    While a Knowledgeable drunkard will thank doctor on the reverse the poor uninformed drunkard will curse the doc.

    PS: the Liquor is necessity of drunkard
    CommentQuote
  • An a day keeps a life killing loan away!

    If you give more importance to eating apples than allowing banks-builders to eat your apples , I guess, you would be more safer! Does this make sense to anyone? Well, i will read this after a week to find out!

    But that is so obnoxious- local 160-170 rs./kg and Washington 200rs/kg :bab (45):

    I have stopped buying apples. Completely.

    What do i need to stay alive? 1500-2000 calories and mostly lean protein-low carbs thats all!

    Still i visit every fruit vendor while shopping in the market, ask them, how much does it cost and when they say 200rs/kilo, I say-AAP HE KHAO!

    I DO THIS TO EVERY OTHER VENDOR ALMOST EVERY DAY!

    I guess i will be on their hit-list very soon!

    I don't know if this will help reduce inflation but surely many will recognize that there is a bear in the market!
    ;)




    Originally Posted by wiseman
    You are right. It appears as though I have mixed it up, though that was not my intention.

    I wanted to say, we may see deflation. We may alternately see stagflation (perhaps the latter rather than the former).

    Have you guys been shopping food items lately. Fruits are going through the roof. The scheming thieves have been exporting our Himachal Apples (so it can fetch a high price there) and selling imported apples here. Washington Red has crossed the 200 level and people are quoting 220!

    Pomegranates are 190 for the Baghalkot/Bijapur variety and 90 for local variety. I think these trader types must be shown a hard life for some time from now on. I believe Govt will be forced to bring in price controls in the near future (unless they want to face Harakiri at the polls in the next elections).

    Stagflation it will be!

    cheers
    CommentQuote
  • Originally Posted by Venkytalks
    Problem comes with valuation.

    If Dow falls from 12000 to 6000, does it mean it has wiped out 50% of wealth? From 16 trillion to 8 trillion?



    Dow = stocks. how you value them will depend on how you have classified then - long term investments or short term investment. If short term then mark them to market and if long term then mark them to cost.


    If gold falls from 1600 to 800, does it mean that 4.5 trillion out of 9 trillion just ceased to exist?
    Same as above


    What is the value of unlisted companies? Discounted cash flow? Book value?


    Net worth is book value. Wealth would have to be summation of net worth


    What is the value of infrastructure? Replacement cost? Increase in output because of it? Or the capital expended?
    If a balance sheet approach is used them it will be the cost adjusted for depreciation.


    Then we have derivatives - which are supposed to be zero sum - except when someone makes a mistake in the sum and then we get Lehman Brothers or Soc Gen or Nick Leeson.
    Derivatives are a zero sum game so at a any given time one profitable bet would be cancelled out by a loss making bet.


    Does Shahrukh Khan create any wealth at all? If so how much?

    At the start of SRK's career the amount marked against his intangible asset line item would have been low - assume a value of 10. At that same time some other established star would have had a very high value - say 1000.

    over the next yrs as the earning potential and brand value of SRK increased the intangible asset entry would have risen - say from 10 to 300 to 10000. The other established star would have to take a non-cash right down.


    How much wealth does Mona Lisa represent and why?
    depends again how it has been marked on the balance sheet - short term investment of long term investment. If short term valuation would have to be done every accounting period - difficult but not impossible.
    CommentQuote
  • Originally Posted by herohiralal
    Dow = stocks. how you value them will depend on how you have classified then - long term investments or short term investment. If short term then mark them to market and if long term then mark them to cost.

    Same as above


    What is the value of unlisted companies? Discounted cash flow? Book value?


    Net worth is book value. Wealth would have to be summation of net worth

    If a balance sheet approach is used them it will be the cost adjusted for depreciation.

    Derivatives are a zero sum game so at a any given time one profitable bet would be cancelled out by a loss making bet.



    At the start of SRK's career the amount marked against his intangible asset line item would have been low - assume a value of 10. At that same time some other established star would have had a very high value - say 1000.

    over the next yrs as the earning potential and brand value of SRK increased the intangible asset entry would have risen - say from 10 to 300 to 10000. The other established star would have to take a non-cash right down.


    depends again how it has been marked on the balance sheet - short term investment of long term investment. If short term valuation would have to be done every accounting period - difficult but not impossible.


    So how would you go about calculating total global wealth and what is its total value? That is what we were discussing.
    CommentQuote
  • Originally Posted by sheeshu
    What do you have to say on Japan's lost decade ?

    It could have been avoided had they acted as swiftly as Feds did or maybe we would have a "global lost decade" if it werent for the lessons learnt from Japan.

    Also more recently the kind of belt tightening hasnt helped much in europe either?

    Feds money printing wasnt a perfect solution but who said we live in perfect world?


    Just applying one cure does not normally solve the problem.

    Japan - Along with QE they needed rapid cleanup of the banking system and a break up of the cozy relationship that exists with business and govt. They also need pension reform so that trade surplus does not end up in govt bonds but are invested in productive enterprise. Demographics also plays a major role in Japan.

    Europe - Just cutting cost wont help as the monetary union prevents each individual countries from adjusting the exchange rate to reflect productivity. The moment debt is reduced the Euro would go up again and make exports from Spain and Italy and Greece expensive. A monetary union can only be applied in countries / regions with similar economies. Makes me wonder why we have a rupee across India :)
    CommentQuote
  • Originally Posted by Venkytalks
    So how would you go about calculating total global wealth and what is its total value? That is what we were discussing.


    Have a balance sheet of each person. Then sum up the net worth of the global population (include kids as wells).
    CommentQuote