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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  • Originally Posted by pune_friend
    Hero,
    TCS is a stingy payer. Very very stingy. Infy is still having cost cutting by customers (this is real data, not meant to sound like bear but real data). Macro picture presented in company results does not reveal ground level realities as numbers are meant to meet some targets.

    So are you suggesting that TCS and Infy are lying in the results? I dont think so. There is a genuine increase in demand for IT companies. Jobs will be added at brisk pace in the future.
    Check what mindtree management has to say. Even smaller IT companies are seeing demand in Europe and US.

    Look at the data and check with people who are deep in the IT sector - not just working in their own well (i.e client) - and you see that the results and and the analysis put out by TCS and Infosys is correct. Bench strength is reducing, attrition is still very high and demand is going up. All of this is good news for jobs. Wait till cogni publishes its results.



    Rupee going down the drain is not a sign of bad economy ? Or will Re keep getting depreciated to keep things going (more importantly, Pune and Hinjewadi RE) ? So people buy houses with lifelong debt and buy automobiles with hope of salaried jobs ?

    Is India's economic vision so short sighted ? Or is this THE way Indian economy is ?


    Maybe you dont know where I stand on RE and the Indian economy in general. You need to refer to my past posts but I will give u a flavour here - RE and the Indian economy will burst after 4-5 yrs but till that happens the RE bubble get bigger and the Indian economy will come back on track.

    The govt - builder nexus is very strong and the govt still have many options available to handle the CAD issue and the rupee slide - It has already used some options but there are more still available.

    Now on the question on where people should invest. I dont recommend RE to an investor. Its best to invest in US stocks. But that does not mean that everyone is going to follow my advice and stop buying RE. There are many reason why people in India believe in investing in gold and RE and that trend will continue. Now if you have ever invested in the market for short term profit you will realise that the trend if your friend. Even if the long term outlook of the company is pathetic smart investors do make money by following the trend. So if you are an investors planning to bet against the Indian RE market (and specifically the RE market around Hinjewadi) then my analysis says that you are going to lose money.

    I have said this many times before that the Indian RE market cannot be analysed using sound logic. The market is rigged and the players control not only the land and the price but all control the ability to change and make laws.

    nanafadnavis.blogspot.com/ or @NanaFadna
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  • Originally Posted by Carefree
    In 2001, over 6 lakh IT employees were recruited per year throughout India. In 2009 less than 3 lakh employees were recruited. In 2013 , less than 1.5 lakh it employees were recruited . Going forward even this growth rate will be doubtful. With stagnant salaries, I am not sure how can we say that IT is booming.


    600,000 IT jobs in India in 2001!!! when this was before or after the dot-com boom? Pls check your data. Majority of the Indian IT companies were tiny in 2001.

    This is from Infosys's Q1 result for 2000-01 "For the first time, quarterly addition in employees, net of separations, surpassed 1000" I doubt there were on avg 150 companies in India in 2001 doing a recruitment of 4000 employee per yr back in 2001.
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  • Originally Posted by herohiralal
    600,000 IT jobs in India in 2001!!! when this was before or after the dot-com boom? Pls check your data. Majority of the Indian IT companies were tiny in 2001.

    This is from Infosys's Q1 result for 2000-01 "For the first time, quarterly addition in employees, net of separations, surpassed 1000" I doubt there were on avg 150 companies in India in 2001 doing a recruitment of 4000 employee per yr back in 2001.

    This is the data that i collected from news sourced from Google. This is as per NASSCOM published in news reports ( real data for year or estimated for future year). I could not find for all the years ....but you can get the trend on where it is going....

    2002 - 122,000 (Real data)
    2003 - 250,000 (Estimation)
    2006 - 320,000 (estimation)
    2007 - 400,000 (estimation)
    2008 - 345,000 (Real data)
    2010 - 170,000 (Real data)

    2011 - 200,000 (Estimation)
    2012 - 245,000 (Estimation)
    2013 - 180,000 (Real data)
    2014 - 130,000 (Estimation)

    The data for year 2001 is wrong i agree. My bad. There were totally around 6 lakh professional then.
    But as you can see in the initial years of 2000's IT job creation was around 3 to 4 lakh per year ( growth rate of avg 30%) which has fallen to 1 to 2 lakh now ( growth rate avg 10%) . The trend is clearly falling.
    That is why i was wondering how can we say that IT is booming.

    P.S: The estimation of NASSCOM almost matches real data maybe with deviation of 5 to 10%. As per NASSCOM there are avg. 30 lakh IT professionals in India.
    CommentQuote
  • Originally Posted by Carefree
    This is the data that i collected from news sourced from Google. This is as per NASSCOM published in news reports ( real data for year or estimated for future year). I could not find for all the years ....but you can get the trend on where it is going....

    2002 - 522,000 (Real data)
    2003 - 650,000 (Estimation)
    2006 - 320,000 (estimation)
    2007 - 400,000 (estimation)
    2008 - 345,000 (Real data)
    2010 - 170,000 (Real data)

    2011 - 200,000 (Estimation)
    2012 - 245,000 (Estimation)
    2013 - 180,000 (Real data)
    2014 - 130,000 (Estimation)

    As you can see in the initial years of 2000's it was around 4 to 5 lakh per year ( growth rate of avg 30%) which has fallen to 1 to 2 lakh now ( growth rate avg 10%) .
    That is why i was wondering how can we say that IT is booming.

    P.S: the year was 2003 not 2001 for that 6 lakh per year job data. The estimation of NASSCOM almost matches real data maybe with deviation of 5 to 10%. As per NASSCOM there are avg. 30 lakh IT professionals in India.


    The data you have put for 2002 and 2003 is the number of jobs in total in the Indian IT sector - export, domestic, captive etc etc. So that figure now today I believe is in millions.

    So this is what Nasscom has to say about just the domestic IT and BPO sector - "Direct employment within the domestic IT-BPO sector is expected to grow by 7 per cent over FY2011 to cross 600,000 employees with the industry creating immense job opportunities in Tier II and Tier III cities"

    So just in the domestic IT and BPO sector i.e catering to the internal Indian market (call centers for Airtel, Vodafone, Idea or software services for Reliance retail, banks, airlines etc etc) there will be 6 lakh people employed in total by the end of 2012.

    The image below is the data on number of IT jobs in total in the 3 yrs - 2000, 2001 and 2002.

    And this is again from Nasscom and that figures match with what you have above for 2002. So the IT jobs created for the IT export sector were very small in 2002 about 8K - which is quite obvious given that we had the IT and Telecom bust in 2001.

    This is the reason I am saying that Indian IT didnt add 6 lakhs jobs back in 2001. Maybe there were 6 lakhs jobs in total in the Indian IT sector back in 2001 and that number today is in the millions and growing every yr. your figures from 2006 seem correct and the key thing to note is that the number has never become -ve i.e job losses across the IT sector in total.

    Some people were predicting on this forum that IT people will get fired this yr and last yr due to all that was happening in Europe and US and how the IT companies were guiding the markets on their performance. All that has turned out to be utter crap.

    IT is India's cash cow and will continue to be so for some more time. Dont bet against this cash cow and also dont bet against the sectors that depend on this cash cow

    nanafadnavis.blogspot.com or @NanaFadna
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  • Originally Posted by herohiralal
    The data you have put for 2002 and 2003 is the number of jobs in total in the Indian IT sector - export, domestic, captive etc etc. So that figure now today I believe is in millions.

    So this is what Nasscom has to say about just the domestic IT and BPO sector - "Direct employment within the domestic IT-BPO sector is expected to grow by 7 per cent over FY2011 to cross 600,000 employees with the industry creating immense job opportunities in Tier II and Tier III cities"

    So just in the domestic IT and BPO sector i.e catering to the internal Indian market (call centers for Airtel, Vodafone, Idea or software services for Reliance retail, banks, airlines etc etc) there will be 6 lakh people employed in total by the end of 2012.

    The image below is the data on number of IT jobs in total in the 3 yrs - 2000, 2001 and 2002.

    And this is again from Nasscom and that figures match with what you have above for 2002. So the IT jobs created for the IT export sector were very small in 2002 about 8K - which is quite obvious given that we had the IT and Telecom bust in 2001.

    This is the reason I am saying that Indian IT didnt add 6 lakhs jobs back in 2001. Maybe there were 6 lakhs jobs in total in the Indian IT sector back in 2001 and that number today is in the millions and growing every yr. your figures from 2006 seem correct and the key thing to note is that the number has never become -ve i.e job losses across the IT sector in total.

    Some people were predicting on this forum that IT people will get fired this yr and last yr due to all that was happening in Europe and US and how the IT companies were guiding the markets on their performance. All that has turned out to be utter crap.

    IT is India's cash cow and will continue to be so for some more time. Dont bet against this cash cow and also dont bet against the sectors that depend on this cash cow

    nanafadnavis.blogspot.com or @NanaFadna

    Yeah I agree . There was a mistake in data for 2001.
    I have corrected it now.
    2002 - 122,000 (Real data)
    2003 - 250,000 (Estimation)
    2006 - 320,000 (estimation)
    2007 - 400,000 (estimation)
    2008 - 345,000 (Real data)
    2010 - 170,000 (Real data)

    2011 - 200,000 (Estimation)
    2012 - 245,000 (Estimation)
    2013 - 180,000 (Real data)
    2014 - 130,000 (Estimation)

    But you can see the trend. It is clearly falling....
    CommentQuote
  • Originally Posted by herohiralal
    The data you have put for 2002 and 2003 is the number of jobs in total in the Indian IT sector - export, domestic, captive etc etc. So that figure now today I believe is in millions.

    So this is what Nasscom has to say about just the domestic IT and BPO sector - "Direct employment within the domestic IT-BPO sector is expected to grow by 7 per cent over FY2011 to cross 600,000 employees with the industry creating immense job opportunities in Tier II and Tier III cities"

    So just in the domestic IT and BPO sector i.e catering to the internal Indian market (call centers for Airtel, Vodafone, Idea or software services for Reliance retail, banks, airlines etc etc) there will be 6 lakh people employed in total by the end of 2012.

    The image below is the data on number of IT jobs in total in the 3 yrs - 2000, 2001 and 2002.

    And this is again from Nasscom and that figures match with what you have above for 2002. So the IT jobs created for the IT export sector were very small in 2002 about 8K - which is quite obvious given that we had the IT and Telecom bust in 2001.

    This is the reason I am saying that Indian IT didnt add 6 lakhs jobs back in 2001. Maybe there were 6 lakhs jobs in total in the Indian IT sector back in 2001 and that number today is in the millions and growing every yr. your figures from 2006 seem correct and the key thing to note is that the number has never become -ve i.e job losses across the IT sector in total.

    Some people were predicting on this forum that IT people will get fired this yr and last yr due to all that was happening in Europe and US and how the IT companies were guiding the markets on their performance. All that has turned out to be utter crap.

    IT is India's cash cow and will continue to be so for some more time. Dont bet against this cash cow and also dont bet against the sectors that depend on this cash cow

    nanafadnavis.blogspot.com or @NanaFadna

    There are roughly 30 lakh IT professionals in India. This includes IT as well as BPO employees.
    Even if we consider effective utilization of 90%, there may be around 3 lakh people sitting on bench.
    My whole point is buying RE thinking that the job in IT will be stable for next 20 years.
    Because as we go into future, when the growth rate of IT falls , demand for profit raises, companies will stop increments and go for less experienced folks to cut costs and increase profit. Getting hike in the range of 6 to 8% now a days is the indicator of the times coming.
    For IT folks, buying RE now thinking that they will earn salary for next 20 year with hike each year is just wishful thinking. this is just my pov.
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  • Originally Posted by Carefree
    There are roughly 30 lakh IT professionals in India. This includes IT as well as BPO employees.
    Even if we consider effective utilization of 90%, there may be around 3 lakh people sitting on bench.
    My whole point is buying RE thinking that the job in IT will be stable for next 20 years.
    Because as we go into future, when the growth rate of IT falls , demand for profit raises, companies will stop increments and go for less experienced folks to cut costs and increase profit. Getting hike in the range of 6 to 8% now a days is the indicator of the times coming.
    For IT folks, buying RE now thinking that they will earn salary for next 20 year with hike each year is just wishful thinking. this is just my pov.


    So you think that if India has to prosper over the next 20 yrs then its going to do that only on the back of 1 sector? I am sure some where in some car company's cafeteria back in the early 1990s people must have thought like u are doing right now - the future is uncertain, how long can the company continue to give us salary hikes - when the Indian IT industry was just taking shape.

    I dont know for certain how the future will shape up but I will be very surprised if after 20 yrs the standard of living is lower than it is today.

    No job is stable and no sector is immune to competitive pressures.
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  • Originally Posted by realacres
    And will these 8000 PROPOSED EMPLOYEES buy in Pune or afford to buy in Pune ?
    And man, if you think only Hinjewadi is what drives RE in Pune, you should be shocked, if you see how volatile their working atmosphere now has become. Rather than PROPOSED employees, look at current inventory with builders : total no. of ITGs (even if we consider all ITGs will buy flat in Pune).

    Btw, what will be the basic salary of these 8k employees ? 20L/annum ?


    I doubt whether all those 8000 employees will be freshers. Lets do some math and figure out their avg salary.

    I am using March 2013 data. Infosys paid 22K crores as employee + sub-con + professional salaries. The total emp count on March 31st 2013 was 156,688. So the avg salary comes out to 12.7 lakhs. Now lets half this figure and say those 8K employees will earn 6 lakhs on avg. So on avg they wont be able to afford to buy a house but they might rent a house.

    Lets assume 5 people stay in one 2BHK. So that 1600 2BHK that will needed. Lets again half that figure ( I just want to leave a very big margin of safety) and say actually only 800 flats will be needed by say June 2014 - assuming what the Infosys guy has said is true.

    How many other companies - TCS, Cogni, Wipro, TechM, Accenture, IBM, KPIT, Persistent, Cisco, etc etc are going to increase hiring in and around Pune? Do the math and assume that no one is going to be able to afford a house.

    I am sure the builders have associations who are doing all of this. Otherwise they are not that dumb to lower rates and clear the inventory.

    Hinjewadi alone does not drive Pune RE. There are other IT and manufacturing hubs which drive local demand but the city isnt so large that say a area like Katraj which does not have its own IT hub is going to have prices which are 50% lower as compared to baner or wakad which are areas totally dependent on Hinjewadi. So yes what happens in Hinjewadi impacts the Pune RE market heavily.

    nanafadnavis.blogspot.com or @NanaFadna
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  • Do we guys really know and understand what is the actual position in USA?

    The middle class and lower class in US is getting butchered due to QE. No savings and no interest on savings and high inflation( unreported). The US ponzi scheme is slowly getting known now. And in India in last 10 years all growth was due to BPO/KPO/IT which are completely dependent on the west especially US
    How will this sector survive when US itself in dying slowly????

    Thinking IT/BPO/KPO growth for 20 years is really wishful.

    PS: I am a KPO employee .

    I really fear what will happen when sanity prevails and truth comes out. People have so got used to reckless spending . 1-2-3 credit cards etc like the west...

    22 Reasons To Be Concerned About The U.S. Economy As We Head Into The Holiday Season
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  • Originally Posted by CFA_aspirant
    Do we guys really know and understand what is the actual position in USA?

    The middle class and lower class in US is getting butchered due to QE. No savings and no interest on savings and high inflation( unreported). The US ponzi scheme is slowly getting known now. And in India in last 10 years all growth was due to BPO/KPO/IT which are completely dependent on the west especially US
    How will this sector survive when US itself in dying slowly????

    Thinking IT/BPO/KPO growth for 20 years is really wishful.

    PS: I am a KPO employee .

    I really fear what will happen when sanity prevails and truth comes out. People have so got used to reckless spending . 1-2-3 credit cards etc like the west...

    22 Reasons To Be Concerned About The U.S. Economy As We Head Into The Holiday Season


    That link you provided is really interesting...

    Point 2 : The retailer mentioned in the list are bound to experience lower sales. They sells goods that people dont need that often or can find them much cheaper in other places. The adoption of smartphones has made is very easy for people to compare prices and shop for the cheapest price.

    I stay in the US and I can guarantee you that no one I know shops at stores like - Chico's, Williams-Sonoma, Zale, DSW and Aeropostale. People who have money and time to burn or no access to the internet will probably go to such places.

    Point 3 : Domestic vehicle sales just experienced their largest "miss" relative to expectations since January 2009. So people are now supposed to freak out cause there was a missed expectations? Car sales are booming in the US and that it thanks to lower leases due to cheaper money thanks to QE. US car sales have grown tremendously over the last few yrs and they will cool down as people who postponed buying a car after the 2008 crises must have bought a car in the last few yr but specifically about the sales miss that this website is referring to, here is what reuters has to say

    "This marked the industry's first year-on-year sales decline in more than two years. There were two fewer shopping days in September compared with the previous year, and part of the Labor Day shopping weekend fell in August.

    One question looming over the U.S. auto industry as it heads into the final quarter of the year is the potential impact of the federal government shutdown on October car sales."

    Ford up, GM down in subdued month for U.S. auto sales | Reuters

    You will see bumpy car sales figures in the future cause people have bought too many cars in the last 3-4 yrs. here is a link with the figures - Why U.S. car sales can grow by early a million in 2014 - The Tell - MarketWatch


    That link you provided is for a site which says this "The Economic Collapse
    Are You Prepared For The Coming Economic Collapse And The Next Great Depression?"

    We all know there will be depression sometime in the future. Can this site or you tell us specifically when cause without a real date we can pick out all the -ve news in the world everyday and keep on making the list bigger.

    I wish there was a site which showed show strong the economy really is. Conveniently this website misses the facts about the booming oil and gas production, the emergence of US as the leader in software, strength of the US telecom companies, research dollars spent on nano tech and bio tech, manufacturing growth due to lower gas prices, innovation around the electric car, house price increases, domination of the US companies in the FMCG sector, domination of US companies in the entertainment sector etc etc.
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  • The questions is this debt based buying sustainable ? is this not a ponzi scheme which will collapse causing a depression like 1939 sooner than later.... I am not worried about car sales going down. I am worried that there are no new jobs in US and slowly full time jobs are being converted into part time
    Come on US govt was about to default officially. This is not a joke ..

    But woi hai jab tak collapse nai hoga tab tak log sochenge its not possible.
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  • I too am like you---some gold but only judicious investment.
    Such debates have raged for a long time now.Many have wondered about the utility of gold as something productive.Another study mentioned that maximum amount of gold is in the hands of rural folk .
    For cultural reasons they never sell.It is distributed among heirs later.
    So much wealth out of economy.Read now about the digging for gold in UP.
    Two avenues have become mania "RE AND GOLD".
    People earn and accumulate and die leaving everything behind.Economy goes down the drain.
    In the past also there was fiat money issued by kings but valid only in a kingdom while outside it was gold.
    Small kingdoms, constant wars,uncertain future,and fear of robbers made people buy gold for safety.It was buried and if they left the area perhaps they never returned.Hence even now we find buried gold sometimes .
    Historical reasons and cultural reasons have added to the desire for gold.
    YET ANOTHER REASON NOW IS THAT YOU CAN AVOID TAX.
    The article shows the cultural reasons.It also shows that wealth is going out of economy.
    So much gold accumulated over the past but still we are lagging.
    Elsewhere it was shown that 50 % of gold is for investment,40% for jewellery, and 10% for some industrial use .
    The biggest beneficiaries are goldsmiths .
    Jewellery buyers are shortchanged.That is another blow to common man.Something given as gold may not even be gold.A terrible blow but since many people don't sell they may never know,even their heirs may not find out for the millennium to come.They live happily calculating the increase in the value of what they hold and it is just NOTIONAL as they don't sell.
    FD,gold,RE,business etc are the avenues where investment should be spread out to avoid imbalance.
    Finally, what we call wealth is there in mind. You guess what I mean.



    Originally Posted by Sat234
    I now believe world gold prices are driven by the Indian hunger for gold rather than any utility value.
    We slog for the world , sell our best resources and talent and products and buy gold in return.

    But even if we stop buying ridiculous amounts of gold.... why does it have so much value?
    How many currencies in the world are backed by gold? China is buying more gold than anyone. Why?
    In olden days money was gold itself. Then paper backed by gold. What is money now.... the willingness of Central banks to print money?

    Disclaimer I myself own some gold and do invest once a year. I am just trying to get the picture.

    Edit - another thought. what is money itself to the central bank. The one who can print money at will? But cannot produce gold at will.
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  • That import curbs imposed on gold are working is clear from the official trade data. The latest Commerce Ministry numbers show the value of monthly imports dropping from a peak of $7.7 billion in May to $739 million in August. Even in physical terms, imports have fallen from some 162 tonnes in May to an average five tonnes in the last two months. True, these estimates do not account for smuggled gold. But it is unlikely that smuggling has reduced the impact of the steep drop in official imports, which has followed the hike in Customs duty to 10 per cent and the requirement that importers earmark at least a fifth of every lot they bring in for re-export as jewellery.

    The best proof that there is huge unmet demand now for gold is the prices of units of gold exchange-traded funds (ETFs). Today, they are ruling 5-6 per cent higher than their ‘real’ net asset values (NAV). Since the NAVs are based on international gold prices at prevailing exchange rates — after adding import duties, local levies, transportation and other handling charges — any premium payable over them reflects a short supply of the underlying asset. ETF units are trading above their NAVs only because funds don’t have the physical metal necessary to back any fresh issue of ‘paper gold’. The fact that domestic gold itself is currently priced about Rs 2,000/10 gm more than what it costs to import (after factoring in all charges) shows the extent of physical shortage which, unlike in the past, is not getting bridged through smuggled gold. While this may seem a victory of sorts for the Government’s concerted attempts to reduce imports, it is not sustainable. The very existence of a domestic gold premium is evidence of suppressed demand, which will manifest itself as a spurt in imports once the existing curbs go. So even if India’s gold import bill declines this year from the $54 billion it notched in 2012-13 — accounting for a sizable chunk of an $88 billion-plus current account deficit — it will only be a temporary reprieve.

    Any long-term solution would lie in loosening up imports while simultaneously ensuring this gold doesn’t entirely end up as idle hoards with households. The estimated 20,000 tonnes of gold lying in Indian homes is a source worth tapping through more attractive interest-paying schemes. If such internally mobilised gold emerges as an alternative to imports and helps save the country foreign exchange, there is wisdom in inducing families to part with idle hoards by an aggressive marketing of schemes in which banks mop up gold after certifying purity. The gold deposited can be lent to jewellers and the depositor given an attractive enough interest rate and a promise of safety.

    The sudden scarcity of gold is proof that import curbs are working, but only for now.

    (This article was published in the Business Line print edition dated October 19, 2013)
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  • Originally Posted by rambler
    I too am like you---some gold but only judicious investment.
    Such debates have raged for a long time now.Many have wondered about the utility of gold as something productive.Another study mentioned that maximum amount of gold is in the hands of rural folk .
    For cultural reasons they never sell.It is distributed among heirs later.
    So much wealth out of economy.Read now about the digging for gold in UP.
    Two avenues have become mania "RE AND GOLD".
    People earn and accumulate and die leaving everything behind.Economy goes down the drain.
    In the past also there was fiat money issued by kings but valid only in a kingdom while outside it was gold.
    Small kingdoms, constant wars,uncertain future,and fear of robbers made people buy gold for safety.It was buried and if they left the area perhaps they never returned.Hence even now we find buried gold sometimes .
    Historical reasons and cultural reasons have added to the desire for gold.
    YET ANOTHER REASON NOW IS THAT YOU CAN AVOID TAX.
    The article shows the cultural reasons.It also shows that wealth is going out of economy.
    So much gold accumulated over the past but still we are lagging.
    Elsewhere it was shown that 50 % of gold is for investment,40% for jewellery, and 10% for some industrial use .
    The biggest beneficiaries are goldsmiths .
    Jewellery buyers are shortchanged.That is another blow to common man.Something given as gold may not even be gold.A terrible blow but since many people don't sell they may never know,even their heirs may not find out for the millennium to come.They live happily calculating the increase in the value of what they hold and it is just NOTIONAL as they don't sell.
    FD,gold,RE,business etc are the avenues where investment should be spread out to avoid imbalance.
    Finally, what we call wealth is there in mind. You guess what I mean.

    Hello Rambler,

    True.

    That gold hunt in UP seems to be a hoax. I guess they ll find some copper utensils.

    >>made people buy gold for safety

    Today, most of our wealth is electronic. I dont keep even Rs 2000 at home in cash. Even after that, gold has value. why? Why is China buying so much gold? US still holds the largest amount of state owned gold in the world. Whom are they going to sell to when it comes down to the worst? It is only Indians who hold it in so much charm, and then, maybe Chinese.

    >> Jewellery buyers are shortchanged.
    My mother forced me to buy gold jewellery. I resisted. I bought 24k gold coins from the bank instead of jewellery. Because pure gold, even if i cannot wear it, is still pure. And I can carry lot of wealth in such a compact form :-) if I ever need to carry it to some place else.

    >> Finally, what we call wealth is there in mind. You guess what I mean.
    I know :) "Golden" words :D
    I hope people who spend crores on weddings and jewellery just to show off to their neighbours and society understand this.

    Hello Rambler,

    True.

    That gold hunt in UP seems to be a hoax. I guess they ll find some copper utensils.

    >>made people buy gold for safety

    Today, most of our wealth is electronic. I dont keep even Rs 2000 at home in cash. Even after that, gold has value. why? Why is China buying so much gold? US still holds the largest amount of state owned gold in the world. Whom are they going to sell to when it comes down to the worst? It is only Indians who hold it in so much charm, and then, maybe Chinese.

    >> Jewellery buyers are shortchanged.
    My mother forced me to buy gold jewellery. I resisted. I bought 24k gold coins from the bank instead of jewellery. Because pure gold, even if i cannot wear it, is still pure. And I can carry lot of wealth in such a compact form :-) if I ever need to carry it to some place else.

    >> Finally, what we call wealth is there in mind. You guess what I mean.
    I know :) "Golden" words :D
    I hope people who spend crores on weddings and jewellery just to show off to their neighbours and society understand this.

    Hello Rambler,

    True.

    That gold hunt in UP seems to be a hoax. I guess they ll find some copper utensils.

    >>made people buy gold for safety

    Today, most of our wealth is electronic. I dont keep even Rs 2000 at home in cash. Even after that, gold has value. why? Why is China buying so much gold? US still holds the largest amount of state owned gold in the world. Whom are they going to sell to when it comes down to the worst? It is only Indians who hold it in so much charm, and then, maybe Chinese.

    >> Jewellery buyers are shortchanged.
    My mother forced me to buy gold jewellery. I resisted. I bought 24k gold coins from the bank instead of jewellery. Because pure gold, even if i cannot wear it, is still pure. And I can carry lot of wealth in such a compact form :-) if I ever need to carry it to some place else.

    >> Finally, what we call wealth is there in mind. You guess what I mean.
    I know :) "Golden" words :D
    I hope people who spend crores on weddings and jewellery just to show off to their neighbours and society understand this.

    Hello Rambler,

    True.

    That gold hunt in UP seems to be a hoax. I guess they ll find some copper utensils.

    >>made people buy gold for safety

    Today, most of our wealth is electronic. I dont keep even Rs 2000 at home in cash. Even after that, gold has value. why? Why is China buying so much gold? US still holds the largest amount of state owned gold in the world. Whom are they going to sell to when it comes down to the worst? It is only Indians who hold it in so much charm, and then, maybe Chinese.

    >> Jewellery buyers are shortchanged.
    My mother forced me to buy gold jewellery. I resisted. I bought 24k gold coins from the bank instead of jewellery. Because pure gold, even if i cannot wear it, is still pure. And I can carry lot of wealth in such a compact form :-) if I ever need to carry it to some place else.

    >> Finally, what we call wealth is there in mind. You guess what I mean.
    I know :) "Golden" words :D
    I hope people who spend crores on weddings and jewellery just to show off to their neighbours and society understand this.

    Hello Rambler,

    True.

    That gold hunt in UP seems to be a hoax. I guess they ll find some copper utensils.

    >>made people buy gold for safety

    Today, most of our wealth is electronic. I dont keep even Rs 2000 at home in cash. Even after that, gold has value. why? Why is China buying so much gold? US still holds the largest amount of state owned gold in the world. Whom are they going to sell to when it comes down to the worst? It is only Indians who hold it in so much charm, and then, maybe Chinese.

    >> Jewellery buyers are shortchanged.
    My mother forced me to buy gold jewellery. I resisted. I bought 24k gold coins from the bank instead of jewellery. Because pure gold, even if i cannot wear it, is still pure. And I can carry lot of wealth in such a compact form :-) if I ever need to carry it to some place else.

    >> Finally, what we call wealth is there in mind. You guess what I mean.
    I know :) "Golden" words :D
    I hope people who spend crores on weddings and jewellery just to show off to their neighbours and society understand this.

    Hello Rambler,

    True.

    That gold hunt in UP seems to be a hoax. I guess they ll find some copper utensils.

    >>made people buy gold for safety

    Today, most of our wealth is electronic. I dont keep even Rs 2000 at home in cash. Even after that, gold has value. why? Why is China buying so much gold? US still holds the largest amount of state owned gold in the world. Whom are they going to sell to when it comes down to the worst? It is only Indians who hold it in so much charm, and then, maybe Chinese.

    >> Jewellery buyers are shortchanged.
    My mother forced me to buy gold jewellery. I resisted. I bought 24k gold coins from the bank instead of jewellery. Because pure gold, even if i cannot wear it, is still pure. And I can carry lot of wealth in such a compact form :-) if I ever need to carry it to some place else.

    >> Finally, what we call wealth is there in mind. You guess what I mean.
    I know :) "Golden" words :D
    I hope people who spend crores on weddings and jewellery just to show off to their neighbours and society understand this.

    Hello Rambler,

    True.

    That gold hunt in UP seems to be a hoax. I guess they ll find some copper utensils.

    >>made people buy gold for safety

    Today, most of our wealth is electronic. I dont keep even Rs 2000 at home in cash. Even after that, gold has value. why? Why is China buying so much gold? US still holds the largest amount of state owned gold in the world. Whom are they going to sell to when it comes down to the worst? It is only Indians who hold it in so much charm, and then, maybe Chinese.

    >> Jewellery buyers are shortchanged.
    My mother forced me to buy gold jewellery. I resisted. I bought 24k gold coins from the bank instead of jewellery. Because pure gold, even if i cannot wear it, is still pure. And I can carry lot of wealth in such a compact form :-) if I ever need to carry it to some place else.

    >> Finally, what we call wealth is there in mind. You guess what I mean.
    I know :) "Golden" words :D
    I hope people who spend crores on weddings and jewellery just to show off to their neighbours and society understand this.
    CommentQuote
  • Originally Posted by herohiralal
    So are you suggesting that TCS and Infy are lying in the results? I dont think so. There is a genuine increase in demand for IT companies. Jobs will be added at brisk pace in the future.
    Check what mindtree management has to say. Even smaller IT companies are seeing demand in Europe and US.


    No. They are not lying. All I am saying is the company quarterly results are meant to be macro level. For all you know, you may have been fired while company you were working in declares it will hire XYZ employees. At macro level, we are just talking about some aggregate numbers.

    Work does not disappear in a second. But following happens
    - Work is reduced or capped i.e. customer has fixed budget. Even if no. of people are kept same or increased, they may want billing for less than 12 months for each of them. That is what I meant by cost cutting. This is key concern of those who are neck deep in managing accounts.

    - People hired can be hired for < 15K / month or 20L / annum. There is huge difference here. Even those hired in upper bracket have problem with current costs. So just headcount does not tell much.

    Originally Posted by herohiralal

    Look at the data and check with people who are deep in the IT sector - not just working in their own well (i.e client) - and you see that the results and and the analysis put out by TCS and Infosys is correct. Bench strength is reducing, attrition is still very high and demand is going up. All of this is good news for jobs. Wait till cogni publishes its results.


    Attrition: It does not always mean people are getting huge salary raises. There are tons of reasons for attrition. Lots of people are also fired to cut down the fat and improve operational efficiency as well as numbers. That number shows up in attrition as well.

    Most important - people just keep rotating among companies. Poaching of business is rampant. So for all you know, net net XYZ people may moved out of a company only to be absorbed in other companies around. Each of those companies will show attrition numbers and hiring numbers. Do we know DISTINCT no. of new jobs/work based on these numbers plus their longevity ? Probably not.

    I understand the sentiment that things look to be looking up. If Re was at 35 / USD, would the situation be same ? No. This is like living on the edge. If things are really good, they need to show up in overall economy.

    And if govt is going to blow off all that is earned anyway, economy will always be in trouble no matter what. There is nothing to be cheered about at least in coming 5 years.

    Originally Posted by herohiralal

    Maybe you dont know where I stand on RE and the Indian economy in general. You need to refer to my past posts but I will give u a flavour here - RE and the Indian economy will burst after 4-5 yrs but till that happens the RE bubble get bigger and the Indian economy will come back on track.

    The govt - builder nexus is very strong and the govt still have many options available to handle the CAD issue and the rupee slide - It has already used some options but there are more still available.


    I know. All that I was wondering was do these few companies decide Indian economy's condition ?

    Otherwise, it looks like the cost of these few thousand jobs hopefully getting created is HUGE as these will cost each of us individual a lot in daily veggies to travel to home.

    Originally Posted by herohiralal

    Now on the question on where people should invest. I dont recommend RE to an investor. Its best to invest in US stocks. But that does not mean that everyone is going to follow my advice and stop buying RE. There are many reason why people in India believe in investing in gold and RE and that trend will continue. Now if you have ever invested in the market for short term profit you will realise that the trend if your friend. Even if the long term outlook of the company is pathetic smart investors do make money by following the trend. So if you are an investors planning to bet against the Indian RE market (and specifically the RE market around Hinjewadi) then my analysis says that you are going to lose money.

    I have said this many times before that the Indian RE market cannot be analysed using sound logic. The market is rigged and the players control not only the land and the price but all control the ability to change and make laws.


    Agreed.

    Pune RE market has been sold to investors in last 3 years (of course with some exceptions) so it may have been able to push ahead delivery dates, reduce quality, cheat on completeness and hang on. It obviously now needs end buyers.

    Just like gold has lost sheen in short term and people are not rushing to buy gold with hope and fear that it's price will increase. You can see it from so many offers, jacked up making charges and so many diamond-selling stores opening up to make the sale of gold. Even then, the sale has not been great (I mean crazy like in past). Someone correct me if this is wrong perception.

    Hopefully same will happen with people buying RE.
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