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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  • "Need to do a simple audit in all banks to see in how many banks this switch is off?""
    Simple change in software code hould do the trick,when you switch off the NPA alert system,email should go to RBI Vigilcnce and highest official fo Bnak etc.
    CommentQuote
  • Originally Posted by realacres
    Sorry for delayed response man, came back to Pune today only.
    See speculative markets in India :- MMR, Pune & NCR. The first 2 are driven by 'Clock' while last one is driven by 'Panja'. Historically, whenever Congis are in power, RE goes up for the simple reason RE is the favourite place for Congis to park their ill-gotten wealth. Junk Vadra is classic eg. of it, earn crores without single rupee investment.

    Congis out not only from Centre but from state will be good, not just for RE but overall quality of life in the state, including industries & agri.
    Something like 3rd front Govt would put India on wheelchair, handicapped & powerless.
    RE is minor stuff man, entire FIIs & investments in India will run out. Even if Congis come back to power, India will loose its charm (whatever is left now), 3rd front would put India at par with African countries. The US Aviation agency, FAA has downgraded India & India is in league with African grade countries. :(



    As far as builders are concerned, no matter what, they will have to sell flats as money is needed more before elections. Estimates suggests that atleast 15,000 Cr will be pulled out from RE from Pune-Mumbai belt before elections.

    Btw, Pune airport is now looking much better man. :) Earlier it looked typical IAF airport, now some civilian look is visible & I must appreciate the efforts put up by ground handling staff, they manage a flight for every 7 mins now !!
    Anyone here saw Mumbai T2 ? Heard lot of praise about it. Want to compare it with IGI T3 (this my current fav in India).


    +10000
    And add to it that RETAIL INVESTORS have moved out of RE.
    To simply put, earlier one would find RE brokers no. on tree, paan-tapri, photocopy/XEROX shop etc. now it's gone.
    1 local ex-RE agent has joined his brother to look after their laundry shop. Just shows the real situation on ground.



    >>> Anyone here saw Mumbai T2 ? Heard lot of praise about it.

    I happened to visit it in the last few days, it has very recently started. I was lucky to see it on third day after it started. I would say it is amazing. Even though smaller than other Asian international airports, it is much cleaner, smells better and has better aesthetics.

    In India, in places where people do not spit gutkha or litter, those places are much better than similar places (e.g. airports, malls) in at least Asian countries. Sadly, such places where only sensible people visit are fewer in India.

    But the typical sarkari gruff attitude of staff and security personnel needs attention. They really need to learn from the Asian tourist destinations about how to be polite and helpful to tourists.

    Good part about Delhi terminal is that it is still well maintained. It would be atleast two years old, wouldnt it ?

    >>> Want to compare it with IGI T3 (this my current fav in India).

    I guess only time will tell. Lets see how well Mumbai T2 is able to maintain itself. The Delhi T3 is still better right now. Maybe because there was a bit of confusion in Mumbai T2 because it started operations recently. Parking system was confusing, my cabbie said. Mumbai T2 can streamline and improve further.
    CommentQuote
  • Shock and dismay in IT sector

    The IT capital of India is in a state of shock as following the sacking of around 800 staffers from IBM's Bangalore office, there is also the possibility of large-scale sackings from Infosys, Intel, Dell and Cognizant.

    There has been no official confirmation from senior officials of IBM as a curtain of silence and gloom fell over the company.

    It is learnt that all employees who were sacked by IBM were asked not to speak to media. One of the IBM India staffers who was sacked told dna he would like to comply with the diktat because he would not like to be blacklisted by the IT industry at large. "Word spreads fast. So, I'd rather stay quiet. There are lots of opportunities out there in the IT industry. I'm confident I'll land a new job within 2-3 months."

    "You treated Indians like resource widgets. These people are human beings," read one angry posting by Solidarity4IBMIndia.

    "People broke down after seeing the inhuman treatment," read a post in the Alliance@IBM employees' union website.

    Even more worryingly, according to industry sources, Infosys is already working on a massive lay-off plan that is being implemented in its products, platforms and solutions (PPS) unit – said to be a key part of chief executive SD Shibulal's Infosys 3.0 strategy – which was set up in 2011. The idea behind this unit, media reports suggested, was to be able to get at least one-third of Infosys' revenues through intellectual property-based software products, platforms and solutions, by 2020.

    This initiative – headed by Sanjay Purohit and also has Samson David as COO – however, is understood to be bleeding big time and hence the company management is working on a plan to turn it around and make it profitable. The first part of the plan, which is usual in this sector, is cutting down on employee strength.

    Karthik Shekhar, general secretary, Unites Professionals, the 'only union for IT & ITES employees in India', said, "This (IBM job cuts) is extremely unjustified and sad. I don't have the official figures yet. But sacked employees are unlikely to take a stand against IBM, given the diktat not to speak to media. Doing so could get them blacklisted by Nasscom, harming their chances of being hired by other IT firms."

    According to an analyst from a top IT consulting firm, close to 2,500 people from various topnotch companies are likely to be shown the door from January to March. "With the focus completely on profitability, bringing down the employee base is being viewed as the key approach to start with. Surprisingly, 25-30% of the number includes good performers and the balance are reasonable performers.

    A source in Tata Group's IT company TCS, said that it's very typical of IT services companies to cut employee base especially when there is a project that's either completed or gone out of hand (for various reasons). "Companies either feel disinterested or see not much merit / returns on pursuing a particular type of services business projects as a result they will have a blanket lay-off irrespective of whether people being asked to leave include great/good performers or otherwise. And given that overall markets are not looking favourable, the Infosys possibility cannot be completely denied," said the source.

    A senior Infosys source told dna that the downsizing may not be to that extent since the PPS unit is a very lean team as it is. " Even if they have to ask people to leave they will be given the option to join Infosys limited." That does not seem likely now.

    Last month, Intel India president Kumud Srinivasan stated that the company was re-assigning roles from low-priority areas to high-priority areas. "We are getting to reduce our own head count, we generally see about 4% every year anyway. This is a bit of a stress over and above that," Srinivasan had said. She had even said that the company was looking at measures like voluntary retirement to achieve the target of an ideal headcount number. "We don't know what the impact on India will be. It is not going to be exceptional," she said while acknowledging that there would be a hiring freeze in the 2014 fiscal.

    All said, fear and apprehension has overtaken the otherwise gung-ho IT sector in Bangalore.

    Shock and dismay in IT sector | Latest News & Updates at DNAIndia.com
    CommentQuote
  • Originally Posted by realacres
    The IT capital of India is in a state of shock as following the sacking of around 800 staffers from IBM's Bangalore office, there is also the possibility of large-scale sackings from Infosys, Intel, Dell and Cognizant.


    i think there is going to be a short-term pain in the IT industry. the real estate market is going to crash as the unimaginative IT folks will now be more worried about keeping their jobs rather than thinking about paying 80K EMI for the next 15 years.

    some of the secular trends i have seen in the IT industry are:

    - Growth has started plateauing. Look at the growth forecast of all the major IT companies for 2014
    - Salary hikes not enough to match inflation
    - Tough immigration policies in the west, especially the biggest market US. Companies have started trying out hybrid models to reduce dependency on visas and outsourcing
    - More automation in the works for IT services. Mundane activities like Level 0 or Level 1 support will be done via artificial intelligence. Indian IT biggy Infosys has already signed pact with automation companies like IPSoft and others will follow suit. I am seeing layoffs in the support and BPO space because of this.
    - Lack of fresher recruitment in IT companies. This will have an adverse affect on demand for rental properties. Rental rates are going to drop and the gap between buy vs. rent ratio is going to widen.

    Sooner or later the real estate bubble is going to pop. most of the genuine end buyers are out of the markets as the market is just unaffordable and insensible to buy at these levels. when the investors get tired fooling each other and when RBI comes knocking down their doors with rising NPAs, finally some sense should prevail in this unreal real estate market.
    CommentQuote
  • Originally Posted by ThodiSiZamin
    i think there is going to be a short-term pain in the IT industry. the real estate market is going to crash as the unimaginative IT folks will now be more worried about keeping their jobs rather than thinking about paying 80K EMI for the next 15 years.

    some of the secular trends i have seen in the IT industry are:

    - Growth has started plateauing. Look at the growth forecast of all the major IT companies for 2014
    - Salary hikes not enough to match inflation
    - Tough immigration policies in the west, especially the biggest market US. Companies have started trying out hybrid models to reduce dependency on visas and outsourcing
    - More automation in the works for IT services. Mundane activities like Level 0 or Level 1 support will be done via artificial intelligence. Indian IT biggy Infosys has already signed pact with automation companies like IPSoft and others will follow suit. I am seeing layoffs in the support and BPO space because of this.
    - Lack of fresher recruitment in IT companies. This will have an adverse affect on demand for rental properties. Rental rates are going to drop and the gap between buy vs. rent ratio is going to widen.

    Sooner or later the real estate bubble is going to pop. most of the genuine end buyers are out of the markets as the market is just unaffordable and insensible to buy at these levels. when the investors get tired fooling each other and when RBI comes knocking down their doors with rising NPAs, finally some sense should prevail in this unreal real estate market.


    One more thing is, the more experienced you are in this field, there are less opportunities for you in the market. Carrer tends to become stagnant. People look for more stability in job.
    CommentQuote
  • Guys,

    I work in Bangalore (in one of the companies named above).

    I have been searching for a house in pune-pcmc for self use in future (may be 5 years down the line). I was searching 2BHK resale house/flat in PCMC/Akurdi worth 55L-60L (I have a huge cash). Last week I figured out few houses in this range.

    Later, after coming back here with mindset of getting deal done, above news came !!!

    Now, I dont care how much property price correction happens / bubble burst / slowdown /NaMo in power etc. None of this will help me in IT job market.

    I had already lost my job once in 2012 due to company closure. I could clearly see that its coming again. I spent atleast 30-35 hours or so on this blog. I had lived my life EMI Free for so many years. God forbid, if things go wrong, I want to be prepared. Hence I dropped my plan for house purchase.

    I dont know how much exposure IT people from Pune has got to the notion of 'being-laid-off'. But being in Bangalore, we can see closely other side of IT industry !

    I dont know how IT people make courage of getting so much loan-ed in such a stage of IT industry...
    CommentQuote
  • Originally Posted by innerpeace
    Guys,

    I work in Bangalore (in one of the companies named above).

    I have been searching for a house in pune-pcmc for self use in future (may be 5 years down the line). I was searching 2BHK resale house/flat in PCMC/Akurdi worth 55L-60L (I have a huge cash). Last week I figured out few houses in this range.

    Later, after coming back here with mindset of getting deal done, above news came !!!

    Now, I dont care how much property price correction happens / bubble burst / slowdown /NaMo in power etc. None of this will help me in IT job market.

    I had already lost my job once in 2012 due to company closure. I could clearly see that its coming again. I spent atleast 30-35 hours or so on this blog. I had lived my life EMI Free for so many years. God forbid, if things go wrong, I want to be prepared. Hence I dropped my plan for house purchase.

    I dont know how much exposure IT people from Pune has got to the notion of 'being-laid-off'. But being in Bangalore, we can see closely other side of IT industry !

    I dont know how IT people make courage of getting so much loan-ed in such a stage of IT industry...


    >> I dont know how much exposure IT people from Pune has got to the notion of 'being-laid-off'.

    I assure you it happens pretty frequently here in Pune.
    CommentQuote
  • Originally Posted by innerpeace
    Guys,

    I work in Bangalore (in one of the companies named above).

    I have been searching for a house in pune-pcmc for self use in future (may be 5 years down the line). I was searching 2BHK resale house/flat in PCMC/Akurdi worth 55L-60L (I have a huge cash). Last week I figured out few houses in this range.

    Later, after coming back here with mindset of getting deal done, above news came !!!

    Now, I dont care how much property price correction happens / bubble burst / slowdown /NaMo in power etc. None of this will help me in IT job market.

    I had already lost my job once in 2012 due to company closure. I could clearly see that its coming again. I spent atleast 30-35 hours or so on this blog. I had lived my life EMI Free for so many years. God forbid, if things go wrong, I want to be prepared. Hence I dropped my plan for house purchase.

    I dont know how much exposure IT people from Pune has got to the notion of 'being-laid-off'. But being in Bangalore, we can see closely other side of IT industry !

    I dont know how IT people make courage of getting so much loan-ed in such a stage of IT industry...


    My opinions ...

    1. Better safe than sorry

    2. RE is not going to run away. Return to it after your job scene is secure for a longer duration

    I lived in the IT business in the period 1985 - 2007 (quite formal job scene in Oct 2007 - what timing! :) For us leaving a job meant lining up 3-5 jobs in 2-3 weeks for a higher pay ... always.

    Of course one had to stay at the leading edge (before it became commoditised), but the passion for the business made it easy to do and the rewards were very good.

    Today I run a product company and try at every stage to automate product (Zero maintenance) so that I can minimise hiring to the maximum extent possible.

    While it sounds cruel, this is the only way to stay profitable in an environment where my customers who were willing to pay 2L 2 years ago are telling me anything beyond 30k is out (this, for a product that is at least 5 times better than 2 years ago! :o)

    I have seen many people running highly innovative businesses, who, after 10 years have nothing to show for their labor, except having paid salaries to a lot of people who think its their birthright to get 20% hike every year with no regard to exactly how much they have improved in the meanwhile.

    Its like ... either I pay salaries OR I eat! Not both, for small businesses and startups (who don't want to play the VC-funded, greater fool game).

    cheers
    CommentQuote
  • Originally Posted by wiseman
    My opinions ...

    1. Better safe than sorry

    2. RE is not going to run away. Return to it after your job scene is secure for a longer duration

    I lived in the IT business in the period 1985 - 2007 (quite formal job scene in Oct 2007 - what timing! :) For us leaving a job meant lining up 3-5 jobs in 2-3 weeks for a higher pay ... always.

    Of course one had to stay at the leading edge (before it became commoditised), but the passion for the business made it easy to do and the rewards were very good.

    Today I run a product company and try at every stage to automate product (Zero maintenance) so that I can minimise hiring to the maximum extent possible.

    While it sounds cruel, this is the only way to stay profitable in an environment where my customers who were willing to pay 2L 2 years ago are telling me anything beyond 30k is out (this, for a product that is at least 5 times better than 2 years ago! :o)

    I have seen many people running highly innovative businesses, who, after 10 years have nothing to show for their labor, except having paid salaries to a lot of people who think its their birthright to get 20% hike every year with no regard to exactly how much they have improved in the meanwhile.

    Its like ... either I pay salaries OR I eat! Not both, for small businesses and startups (who don't want to play the VC-funded, greater fool game).

    cheers


    That works for product development. For services delivery the more the people the more they service the clients. Till the time clients have the budget.

    Skill updation is very important. Even now .. if I don't get time to master a skill I make sure I have at least beginner level competence in that skill. For people who have good skills it is slightly safe. In fact I have seen more folks being shown the door because of politics than performance. Mostly thats how it works in india. Sad but true.
    CommentQuote
  • u only post negative news. what about this?
    Software services exports up 37 per cent at Rs 3.41 lakh crore in FY13: RBI - NDTVProfit.com


    Originally Posted by realacres
    The IT capital of India is in a state of shock as following the sacking of around 800 staffers from IBM's Bangalore office, there is also the possibility of large-scale sackings from Infosys, Intel, Dell and Cognizant.

    There has been no official confirmation from senior officials of IBM as a curtain of silence and gloom fell over the company.

    It is learnt that all employees who were sacked by IBM were asked not to speak to media. One of the IBM India staffers who was sacked told dna he would like to comply with the diktat because he would not like to be blacklisted by the IT industry at large. "Word spreads fast. So, I'd rather stay quiet. There are lots of opportunities out there in the IT industry. I'm confident I'll land a new job within 2-3 months."

    "You treated Indians like resource widgets. These people are human beings," read one angry posting by Solidarity4IBMIndia.

    "People broke down after seeing the inhuman treatment," read a post in the Alliance@IBM employees' union website.

    Even more worryingly, according to industry sources, Infosys is already working on a massive lay-off plan that is being implemented in its products, platforms and solutions (PPS) unit – said to be a key part of chief executive SD Shibulal's Infosys 3.0 strategy – which was set up in 2011. The idea behind this unit, media reports suggested, was to be able to get at least one-third of Infosys' revenues through intellectual property-based software products, platforms and solutions, by 2020.

    This initiative – headed by Sanjay Purohit and also has Samson David as COO – however, is understood to be bleeding big time and hence the company management is working on a plan to turn it around and make it profitable. The first part of the plan, which is usual in this sector, is cutting down on employee strength.

    Karthik Shekhar, general secretary, Unites Professionals, the 'only union for IT & ITES employees in India', said, "This (IBM job cuts) is extremely unjustified and sad. I don't have the official figures yet. But sacked employees are unlikely to take a stand against IBM, given the diktat not to speak to media. Doing so could get them blacklisted by Nasscom, harming their chances of being hired by other IT firms."

    According to an analyst from a top IT consulting firm, close to 2,500 people from various topnotch companies are likely to be shown the door from January to March. "With the focus completely on profitability, bringing down the employee base is being viewed as the key approach to start with. Surprisingly, 25-30% of the number includes good performers and the balance are reasonable performers.

    A source in Tata Group's IT company TCS, said that it's very typical of IT services companies to cut employee base especially when there is a project that's either completed or gone out of hand (for various reasons). "Companies either feel disinterested or see not much merit / returns on pursuing a particular type of services business projects as a result they will have a blanket lay-off irrespective of whether people being asked to leave include great/good performers or otherwise. And given that overall markets are not looking favourable, the Infosys possibility cannot be completely denied," said the source.

    A senior Infosys source told dna that the downsizing may not be to that extent since the PPS unit is a very lean team as it is. " Even if they have to ask people to leave they will be given the option to join Infosys limited." That does not seem likely now.

    Last month, Intel India president Kumud Srinivasan stated that the company was re-assigning roles from low-priority areas to high-priority areas. "We are getting to reduce our own head count, we generally see about 4% every year anyway. This is a bit of a stress over and above that," Srinivasan had said. She had even said that the company was looking at measures like voluntary retirement to achieve the target of an ideal headcount number. "We don't know what the impact on India will be. It is not going to be exceptional," she said while acknowledging that there would be a hiring freeze in the 2014 fiscal.

    All said, fear and apprehension has overtaken the otherwise gung-ho IT sector in Bangalore.

    Shock and dismay in IT sector | Latest News & Updates at DNAIndia.com
    CommentQuote
  • Want to keep your job? Rent, don't buy!

    Higher levels of home ownership lead to higher unemployment, new study finds - Nov. 7, 2013

    "If we look at extremely successful countries like Germany and Switzerland, we see that people aspire to home ownership near the end of their lives," said Oswald. "That is rational and efficient. But when people are young, you want them to be ."


    I am wondering what kind of stats can be pulled up regarding the indian upper-middle class on this. I mean if a person who has bought a house in Pune loses his job, will he start looking for work only in Pune or will the search be made nation-wide? If he searches only his pune, then he will have to wait till he gets the right opportunity or may have to take a job cut just to get a job. So in a way, he is under-utilizing himself and his skills thereby being prone to another job cut or the risk of being irrelevant in terms of skills.

    If he has to leave Pune to another location for a better job, then he will have to rent a place in the new place. The rent he gets from Pune is nowhere near the EMI which will mount each month. Instead of buying a house if that money was invested in mutual funds and stocks, the monthly dividends would keep the household running along with the savings.

    now if the builder mafia raises prices based on proposed development of india and proposed growth rates, why cant they cut prices based on layoffs which are very much real? this shows that the game is rigged!!!
    CommentQuote


  • that growth has already been factored in into the prices long ago.

    the prices now reflect that India will grow at 8% for the next 10 years. I think this year itself the rate is barely going to be 4.5%

    this is the crux of the problem. prices are not determined by past but by expectation of the future. thats what called as "factored in" in the stock markets or other assets.

    here's a funny take on this:

    Scott Adams Blog: Financial Markets Explained 12/15/2008

    In my capacity as cartoonist, I feel an obligation to simplify complicated discussions until two things happen simultaneously:

    1. Absurdity is achieved.
    2. The reader feels as if it all makes sense.

    My comic from Saturday illustrates that principle.



    According to Google Alerts that comic has been posted to more blogs than any comic I have ever created. It inspires me to more fully explain the theory of finance in this blog.

    Think of financial theory as a stool. The stool is supported by three legs, or truisms.
    History always repeats.
    Past performance is no indication of future returns.
    Asshats are trying to steal your money.
    These three truisms can explain any financial phenomenon. For example, if your financial advisor suggests that you invest in a market bubble that is about to burst, he will explain that the past is no indication of future results. Just because a Price/Earnings ratio of 45 has never been sustainable in the past doesn't mean it won't be perfectly safe in the future.

    And when the bubble bursts and you lose half of your money, your advisor will explain it's because history always repeats. In other words, he's an asshat trying to steal your money.

    This stool also explains the housing situation. Financial experts knew that making loans to hobos had never been a good idea in the past. On the other hand, past performance is no indication of future returns. Maybe this time would be different. Then history repeated and asshats stole your money. As a bonus, they even stole each other's money this time. You have to admire their thoroughness.

    One last thing you need to know: People who say it is a good time to invest are called bulls. The bulls are at the center of all financial problems.

    In summary, if you want to understand financial markets find a bull and look at his stool.
    CommentQuote
  • but but but..... are these websites lying then?

    43,000 new jobs from Ernst & Young, PwC, KPMG and Deloitte : India, News - India Today

    PSU banks to hire 50,000 employees this fiscal: P Chidambaram - Economic Times


    I am confused. I have been reading this thread for a long time and people/experts on this forum are saying that the bubble is going to burst for the past 5 yrs and now they are saying that people are now saying IT is in trouble.

    I also didnt invest in TCS for the last 5 yrs. The stock is up 400%. What should I do. Just keep on reading -ve news and hope someone will shower me with money?


    Originally Posted by ThodiSiZamin
    that growth has already been factored in into the prices long ago.

    the prices now reflect that India will grow at 8% for the next 10 years. I think this year itself the rate is barely going to be 4.5%

    this is the crux of the problem. prices are not determined by past but by expectation of the future. thats what called as "factored in" in the stock markets or other assets.

    here's a funny take on this:

    Scott Adams Blog: Financial Markets Explained 12/15/2008

    In my capacity as cartoonist, I feel an obligation to simplify complicated discussions until two things happen simultaneously:

    1. Absurdity is achieved.
    2. The reader feels as if it all makes sense.

    My comic from Saturday illustrates that principle.



    According to Google Alerts that comic has been posted to more blogs than any comic I have ever created. It inspires me to more fully explain the theory of finance in this blog.

    Think of financial theory as a stool. The stool is supported by three legs, or truisms.
    History always repeats.
    Past performance is no indication of future returns.
    Asshats are trying to steal your money.
    These three truisms can explain any financial phenomenon. For example, if your financial advisor suggests that you invest in a market bubble that is about to burst, he will explain that the past is no indication of future results. Just because a Price/Earnings ratio of 45 has never been sustainable in the past doesn't mean it won't be perfectly safe in the future.

    And when the bubble bursts and you lose half of your money, your advisor will explain it's because history always repeats. In other words, he's an asshat trying to steal your money.

    This stool also explains the housing situation. Financial experts knew that making loans to hobos had never been a good idea in the past. On the other hand, past performance is no indication of future returns. Maybe this time would be different. Then history repeated and asshats stole your money. As a bonus, they even stole each other's money this time. You have to admire their thoroughness.

    One last thing you need to know: People who say it is a good time to invest are called bulls. The bulls are at the center of all financial problems.

    In summary, if you want to understand financial markets find a bull and look at his stool.
    CommentQuote
  • Originally Posted by paaaap
    but but but..... are these websites lying then?

    43,000 new jobs from Ernst & Young, PwC, KPMG and Deloitte : India, News - India Today

    PSU banks to hire 50,000 employees this fiscal: P Chidambaram - Economic Times


    I am confused. I have been reading this thread for a long time and people/experts on this forum are saying that the bubble is going to burst for the past 5 yrs and now they are saying that people are now saying IT is in trouble.

    I also didnt invest in TCS for the last 5 yrs. The stock is up 400%. What should I do. Just keep on reading -ve news and hope someone will shower me with money?



    and even TCS is saying hiring in the next year will be strong.

    Tata Consultancy Services CEO: We are upbeat on hiring - The Times of India


    Hasnt IBM fired people who used to work in the hardware division and also cause IBM has suffered due to its exposure to the emerging markets. So can we apply the IBM case to all IT companies.

    When Satyam scandle broke out my friends told me that even Infosys accounts are fake and so I didnt buy Satyam shares when they crashed. Now look at their value.

    It smells fishy when people just go about posting -ve news without providing the complete picture.
    CommentQuote
  • All quite confusing

    Originally Posted by paaaap
    but but but..... are these websites lying then?

    43,000 new jobs from Ernst & Young, PwC, KPMG and Deloitte : India, News - India Today

    PSU banks to hire 50,000 employees this fiscal: P Chidambaram - Economic Times


    I am confused. I have been reading this thread for a long time and people/experts on this forum are saying that the bubble is going to burst for the past 5 yrs and now they are saying that people are now saying IT is in trouble.

    I also didnt invest in TCS for the last 5 yrs. The stock is up 400%. What should I do. Just keep on reading -ve news and hope someone will shower me with money?


    Paaaap,

    There are a number of conflicting new in the media constantly. This itself is a sign of churn and not a trending situation.

    Let us get some things straight ...

    Stock prices are generally driven by fundamentals. But within short periods of time (sometimes even a little longer) prices can be "manipulated" by various factors. For example, the recent fise in IT stock prices in general was as a result of ...

    - Too few other sectors doing well, resulting in excess domestic money flowing into IT stocks
    - tons of FII money coming in and further increasing the demand (and thus prices) of IT stocks

    If you look at the P/E ratios of IT stocks, they reflect the 90s level of revenue and earnings growth situation (multiples of 25 and more justify 30%+ growth annually in revenue and Net profits).

    But today growth rates are a much more sedate 12-15% (notice the clever NASSCOM which showed "stronger" IT growth in coming year by changing last year's 14% rate to 13-15% rate, which is essentially the same!!! :D)

    At these levels P/E ratios should be a much lower 12-15 times, which could mean a 50% reduction in prices from these levels, which could get worse if profits fall and prices go even lower the achieve the lower P/Es.

    This is exactly what happened to Infosys when it hit 2200 (and I posted that within 3 years it may rise to 3500+ giving a decent 25% CAGR, which, at that time looked very difficult to many :), But I was betting in the cash generation that these companies were doing).

    So, sentiment (especially in volatile times) can give outsized returns IF you have the courage to buy at what seems terribly low prices.

    To get the correct way to invest, get a grip on last 5 years earnings trend, whether company or sector is managing to keep margins up, what the Avg P/E is over the years and wait for significant bad sentiment to lower prices (reflecting lower P/E).

    If you can study charts to time it, even better, but buying anywhere from 2200 - 2500 was okay given Infy today at 3500, right? Unless there is evidence to indicate long term blow to the company through competition, regulation, management change for the worse, etc, you will reap the rewards of a prudent strategy.

    You say TCS gave a 400% return. I will point you out to Orient Paper, which has gone from 4.60 in August to 18 recently, giving just the same kind of returns in only a few months!!! :)

    Keep your head while others are losing it and you will always make big returns over the long term in the markets.

    cheers
    CommentQuote