I was just going through this headline in economictimes website "Stocks fall on US, China economic news" and I was wondering what is really happening in the world economy?

We see China posting slow growth (taunted to be the driver of world economy) USA still crawls, UK's debt mounting all the time and whatever our politicians say India is no better. Because I myself and my friends experience the difference of the present time and time we are flooded with offers in 2007. I can tell you one of my friend who has an experience of 5 years and working as a relationship manager is finding it very hard to even schedule a prospective interview for himself. And the hikes that are announced by most of the companies are only in paper's or in peanuts.

On the basis of current situation I'm actually wondering about two things about India.

1. The stock market keeps on rising - This increase is may be due to the fact that FII's are pouring in money. But china being a FII's darling has seen their stock market value coming down. But that does not seems to be the case with India. Is Indian stock market rising just because of FII's or Indian public is investing in stocks? Or Is India really immune?

2. Real Estate - I have heard and seen in most of Tamil Nadu that land prices have stagnated or have come down in a very few areas, but in most of the cities and towns the sellers are quoting those absurd prices with no takers, but still the sellers or hanging on to the price. Where it is all going to end? Will RE as whole (flats, land) survive this period or the imminent depression predicted by economists like Paul Krugman will sweep the world and India.

I would like to know your thoughts on it. I know there are people in this forum who say the RE is going to rise all the time and there people who say the RE will go down in short term. Let's see what we can get out of this thread?
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  • Originally Posted by bhuvang
    Well said, but just one question.

    Is it practically possible. Personally, i don't think so till our economic downturn reaches a catastrophic level. :bab (34):


    I am not saying that consumption should drop dead overnight. People should learn to consume less then what is being consumed now. Even a drop in consumption by 2-3% will send shiver down government, RBI and industries to drop interest rates, prices will come down and even taxes may be reduced.

    If we protest by consuming less we can expect something to our benefit, otherwise if people continue to consume like now interest rates, prices, taxes will remain high.
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  • Originally Posted by wiseman
    People, don't assume that one has all the answers! :D

    After all, this is happening for the first time in our lifetime and maybe in modern history!

    That there will be a recession, its nearly certain. Whether it will be global one doesn't know. Whether it will turn into a depression and a great depression is also a little in doubt.

    All of these continue to be on my radar simply because you can expect politicians to do their best in terms of decisions bad in economic terms.

    The FED is meeting today. They have a difficult task.

    Why is QE3 required at all? The only reason for this is to increase the bailouts by EU Govts of EU Sovereign Debt. But this will NOT go very well with Americans.

    Let us wait and watch.

    cheers


    The FED has done what they do the best, they have assured that the interest rate will be zero for the next 2 years. Now, I think there is again lots of foreign money will come into our market and all over the world. I think the inflation will shoot up again.

    Regards,
    Sridhar
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  • Originally Posted by sridharchennai
    The FED has done what they do the best, they have assured that the interest rate will be zero for the next 2 years. Now, I think there is again lots of foreign money will come into our market and all over the world. I think the inflation will shoot up again.

    Regards,
    Sridhar


    Well, even if a small part of this come to our stock markets, they should again reach to prev highs (i guess 20K should be feasible). Atleast those of us who are stuck with some MF or Stock investment (like me :-D) will get a chance to get rid and rather invest in Gold or FD.
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  • US Fed has done what many expected it to do....keep interest rates low at 0 - 0.25% atleast till mid -2013. Interest rates have been at such low range since mid 2008. Again the word atleast is significant, which means US Fed even has intentions to keep interest rates at 0% for a much longer time.

    There is nothing much other countries can do right now.....other then face inflation. But wait...China has risen the Chinese Yuan the most in 3 years today, Yuan actually jumped the most against the US dollar today. China is definately taking steps if not fast but atleast slowly to re-engineer and reduce dependency on exports to US. We can't expect results too soon and US will continue to rule this game for few more years....after that US will be a big loser, as hyper-inflation and riots (more fiercer then what happened in UK) will take it to destruction.
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  • Originally Posted by contra
    US Fed has done what many expected it to do....keep interest rates low at 0 - 0.25% atleast till mid -2013. Interest rates have been at such low range since mid 2008. Again the word atleast is significant, which means US Fed even has intentions to keep interest rates at 0% for a much longer time.

    There is nothing much other countries can do right now.....other then face inflation. But wait...China has risen the Chinese Yuan the most in 3 years today, Yuan actually jumped the most against the US dollar today. China is definately taking steps if not fast but atleast slowly to re-engineer and reduce dependency on exports to US. We can't expect results too soon and US will continue to rule this game for few more years....after that US will be a big loser, as hyper-inflation and riots (more fiercer then what happened in UK) will take it to destruction.


    I believe China could reduce export dependency on US/EU only to a small extent, beyond that it'll start hurting its own economy. Attached is an article i found today. It doesn't talk exclusively about Chinese exports, but does throw a light on why China can never drive the world economy the way US does.

    Here's Why China Can Never Escape Export Dependency
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  • Originally Posted by bhuvang
    I believe China could reduce export dependency on US/EU only to a small extent, beyond that it'll start hurting its own economy. Attached is an article i found today. It doesn't talk exclusively about Chinese exports, but does throw a light on why China can never drive the world economy the way US does.

    Here's Why China Can Never Escape Export Dependency


    Nobody said that China would re engineer itself immediately...in fact I had said that US will still rule this game and influence for years to come if the argument was read carefully. I am using the word game, because US is arrogant to keep its interest rates at 0-0.25% instead of being a responsible country since its currency is the reserve currency of the world. US is simply taking rest of the world for granted...thinking only about its own selfishly by inflating prices of everything and shifting the burden to rest of the world.


    However in the long term (nobody knows when...if somebody knows he should be a astrologer)....China would just be able to reduce its dependency on US...and increase trade with other emerging markets instead and of course China's own domestic market ( China is already the world's biggest market for Cars, Cement and Steel).

    So if preparing for long term investments in China, like buying some Chinese Yuan and keeping it safely could be good investments ...again not for today but for long term....when is a question which is difficult!!!.
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  • Originally Posted by contra
    I never said China would re engineer itself immediately...in fact had said that US will still rule this game and influence for years to come if my argument was read carefully. I am using the word game, because US is arrogant to keep its interest rates at 0-0.25% instead of being a responsible country since its currency is the reserve currency of the world. US is simply taking rest of the world for granted...thinking only about its own selfishly by inflating prices of everything and shifting the burden to rest of the world.


    However in the long term (nobody knows when...if somebody knows he should be a astrologer)....China would just be able to reduce its dependency on US...and increase trade with other emerging markets instead and of course China's own domestic market ( China is already the world's biggest market for Cars, Cement and Steel).

    So if preparing for long term investments in China, like buying some Chinese Yuan and keeping it safely could be good investments ...again not for today but for long term....when is a question which is difficult!!!.


    Well, i believe US has actually run out of options, so they are doing whatever they can to pump start the jammed economy. But since there currency USD is the universal currency of exchange of value and store, the more they release it to create demand the more it gets exported out to other nations as investment/FDI or whatever u call it. Since USD is the reserve currency used to trade internationally (esp oil), other nations have to forcefully keep USD in there reserve. And in the process, US's virus have spread everywhere in form of inflation. I don't think they would be doing it intentionally.

    Personal POV....:bab (38):
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  • Originally Posted by Economist


    Increasing wage (cost) due to Inflation does not mean loss of wage advantage If your currency value goes down.

    That is what happens in a high inflationary environment.

    Say Indian wage cost grows up by 20% - a fall in INR value by 15%
    The gross rise is 5%.
    let us say average annal inflation in developed nation is 4%, then the real wage rise is in India is than only 1%.

    For an overseas investors point of view it is a 1% rise not 20% therefore the wage advantage is till maintained.

    This is what always happens in India and it will continue.

    Coming to the next point : Timing the market.

    Timing the market is not possible and attempting that will always result in pain.

    My personal opinion:

    I dont expect or wish the market to shoot over the moon or crash.

    I am long term investor who does not try to time the market ( as I believe the market is above all of us and the unpredictability is the core of its characteristic).

    only people who want to cash there investment in short term need to worry about volatilities. If you don't want to/ need to sell in 2-3 years why worry where the market will be in 2 years.

    That doesn't mean you blindly overpay for some crap apartment in an area where there is chronic over supply with unaffordable loan - No substitute for due diligence and prudence.

    I am more interested in the fundamentals of the asset and location.

    I look for supply and demand,location and potential of the asset.

    I believe in India as a strong RE investment destination.

    I believe India's population (working age) will grow - they will be employed locally or overseas , there is so much under development india so there is plenty of room for growth and development.

    I believe Inflation coupled with real growth, supply constraints would ensure RE investors are on the right side of the economic divide on the long run (haves and the have-nots).


    We have been arguing our views over the last 4 years.

    Everyone knows my stand and Wisemans views.

    It is about time after 4 years, I am calling our Vetran members review our words.

    This is one of many hotly debated threads few years back - Page 10 was great.
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  • This is a really interesting thread. Your comments are very valid.
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  • Let us not superimpose our timelines on things we don't control

    Originally Posted by Economist
    We have been arguing our views over the last 4 years.

    Everyone knows my stand and Wisemans views.

    It is about time after 4 years, I am calling our Vetran members review our words.

    This is one of many hotly debated threads few years back - Page 10 was great.



    Economist,

    Going back to the page 10 thread you mentioned, I recall your mentioning how I would bring up "my" bear case citing such outlandish things like crash in Congo or Iceland.

    Fastforward to today, which is over an year later.

    What you thought was a completely irrelevant thing like the Debt of a tiny economy like Greece suddenly becomes the center-piece of a potential EU collapse. Something which is seen as so threatening that most of our big business leaders are running for cover stating that they see business slowing down dramatically.

    Since the time we argued, despite the enormous money pumped into the world's economy, we are looking at a very real chance of another Lehman moment - only, this time, instead of Lehman it could be entire countries like Greece or even Spain (which used to be a superpower a few centuries back!).

    So Economist, in my opinion, whether its 4 years or more (the timeline is based on how much money the Central Banks print to keep the devil at bay) the world is in MUCH WORSE shape than back then. And this time around, even the FED may find it much too big to print infinite amounts of money without facing the threat of massive devaluation due to loss of public confidence in paper/fiat money.

    I somehow believe that m bear case is going to come back with a bang. The bear was neither a fiction nor did ot go away. It was merely in hibernation and its just woken up, is hungry and angry!!! :)

    cheers
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  • US and Euro zones are predicting another recession in early 2013..not far from now. higher taxes is US, high unemployment in US, more foreclosures are sign of recession. obama is just enjoying the white house.

    as finance mini pranab says our economy is resilient. he does not care. there will be more hungry people on the street.

    and i still don't understand who are the people in real estate, buying these expensive flats.
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  • Real estate investment is purely sentiment based, I bought my first house for 16lacs in 2003, I was only earning Rs.10,000 per month, the bank refused to lend me as my salary was insufficient to service EMI. I finally convinced the bank to take my father's salary also into account in sanctioning loan.

    So I ended up paying 18,000 EMI when my salary was 10,000. I couldn't use my father's salary as it covered our rent and other expenses. Within next few months I managed to go onsite and slowly started to settle down my debts.

    Now what made me take such a big gamble?? It was confidence in Indian economy and my career growth prospects. I was sure my salary will increase leaps and bounds year after year.

    Now youngsters in IT sector earning 40k per month are whining apartments worth more than 40 lacs are unaffordable but on the other hand are confidently buying apartments upto 60lacs. I think Chennai real estate hasn't reached its peak.

    BTW, in 2003 IT sector was just beginning to rise up after devastating recession on 2001, which was much worser than 2008 recession as far as Indian IT sector is concerned. Infact, computeR science was no longer top favorite in Engineering colleges. Civil engineering seats were filling up faster and computer science seats were vacant even in top colleges. Most people believed IT had failed and had no future.
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  • It is same story here is Singapore, government is desperately trying to control property prices, apartments are getting ridiculously expensive, smaller in size and a huge oversupply is expected in next few years but property buyers are still bullish and new sales records are set every quarter.

    Analysts in Singapore attribute property boom to record low interest rate, but I don't believe so, especially after seeing situation in India. It is either because all QE printed dollars are dumped into Asia or because investors are scared of excessive dollar printing by federal reserve and want to peg their investment to something more finite like gold and property instead of keeping cash.

    There is no end in sight at the moment as federal reserve still believes US economy can be energized by printing more money.
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