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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  • Slowly you are getting some things right ...

    Response in blue ...

    Originally Posted by Economist
    Wise is an extremist, so is Nat.

    Wise wants the property market to crash so he will use any example to his argument (like decline in exports of Congo or volatility in share market in Iceland etc)

    These are completely new indicators that only you seem to be conversant with! :D Btw, Iceland stock market has been closed since June 2009 and volatility has since been ZERO! Before exhibiting your ignorance, you should check these things ...

    Nat wants the RE price to hit the moon (So strong is his conviction - he doesn't bother looking for supporting verbiage)

    THE TRUTH IS IN THE MIDDLE OF THE TWO EXTREMIST.

    The Losers will be :


      Any one believing Wisemans prophesy and holding a property purchase for 2-4 years awaiting a crash to pick up bargains.



        Any one believing Nat and buying a property (with debts) today to sell it in 2 -3 years time assuming to make 200% profit.

        Can we wait for the 2-4 years to decide? Why are you in such a hurry to confirm the coming RE boom before it happens? Do you have a vested interest or are you stuck with a high priced purchase? Glad to say that my RE purchases have always been at very affordable levels when most people were selling rather than buying.

        Even in today’s global village India is different – it has its own advantages & disadvantages.

        Historically both advantage and disadvantage of India has favored property owners (ie. disadvantages such as Inflation, uncontrolled population explosion, lack of decentralized town planning, Rural to Urban mass migration etc).

        India is not immune to crisis but the question is what will be the impact. One can run hundreds of economic models or simply refer to the biggest financial crisis India ever faced “1991 Indian Financial Crisis” Did the RE Market Crash? The answer is NO.

        Up until 1992-95 boom in RE, RE had never acted like the stock market with a BOOM! Therefore, where there is slow, normal growth, there can never be a crash. Since then RE has had one crash (95-98) and with this bigger boom in the 00s there should be a bigger crash coming - naturally. Indian RE has entered a typical boom-crash cycle and it will continue ...
        In 1990 there was no boom in RE. So why should there have been a crash? Besides it was the licence, shortage raj. Supply was FAR, FAR less than demand. Today, supply is FAR, FAR more than demand. Demand is weak. Builders are LOADED with DEBT. Ripe situation for a crash if builders are unable to rob investors with high-price IPOs!!! Two situations completely different and NOT comparable!

        The bottom line is “Don’t try to time the market” - it will result in pain, disappointment and lost opportunities.

        My experience has taught me diversification, cash flow and investment horizon is the key. You cannot and you should not time the market (making decision based on current market condition is not timing the market but making decisions based on predicting a future event is)

        Be aware of current market situation and look for affordable property that meets your needs in good location with potential and go for it.

        Can you show me some affordable property that also happens to be in certain areas like Pune, Chennai, Bangalore, Gurgaon, etc near my place of work?

        I agree! Do not time the market. Wait for price to come down to YOUR PERSONAL affordable levels (or buildup enough cash to put high down payment). Another acceptable way to time the market
        is to wait for the right time when prices are at your comfortable levels. Always worked for me ...


        The exponential population growth, Inflation, supply constraint and INR devaluation will ensure you and your family will thank you making that wise decision.


        Time in the market is what matters not timing the market.


        Only speculators, property traders and brokers need to bother about what Wise & Nat has to say.

        If you don’t indent to buy and sell 5-10 properties a year you don’t have to worry about extreme views.

        Remember REAL ESTATE IS NOT SHARE TRADEING & PROPERTY BUYERS ARE NOT DAY TRADERS.

        Economist, exactly why my advice is sound. Traders can afford to make mistake and buy at wrong price. They will sell tomorrow and correct the mistake. Long-term buyers (like me! :)) rather wait for the right price. After all, it never hurts to see your RE 1000 times its purchase price (full cash purchase) in 25 years time, right? Rather than buy high and see it not gain in real terms (after adjusting inflation AND interest) for 10-15 years from now? Which would you prefer. And who is the tarder and who, the longterm buyer!!!


        Wise will wait for his dooms crash for another 20 years.

        Not necessary. Next 5 years MAX will do for me to get the "affordable" levels you were talking about. And I will get it, I'm sure (after studying the growth rate of Congolese Pythons during monsoon time in Central Africa!)

        Nat will keep hoping his 1 crorer will become multiplies 100s of crores.


        In the meantime all the sensible people will keep buying, selling, upgrading and investing in properties.

        You mean people will keep on buying property at these insane inflated rates set to profit builders and see their value stagnate for the next few years and keep getting heart-attacks everytime their EMI goes up due to inflation and their salaries do not keep pace? Are you a builder or some kind of interested party?



        cheers

        cheers

        cheers

        cheers

        cheers

        cheers

        cheers

        cheers

        cheers
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  • Dollar is leading all currencies to zero ...




    Srinidhi,

    Check out the attached chart. Would you believe that the Dollar was 160 back in 1985 on the Dollar Index and its now 76?

    For the hundred years from 1813 to 1913, the dollar stayed within 20 cents of its original value.

    Between 1913 (when the FED was created to DEBASE the $ and permit politicians to wage war, etc) and today the dollar has lost around 96% of its value.

    The Dollar will eventually head to zero (of 1913 value) sometime in our lifetime.

    cheers
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  • Hello all....
    Could not manage to read the entire thread...managed to read a few.
    As posted housing prices have plunged in manya places but notvin chennai....

    India has a huge parallel economy....black market,benami....unless this parallel economy stops it would be difficult to see the prices falling much...
    Also chennaites are very conservative....atleast when compared to other metro'ites...
    Its a dream to own a house...and people at any cost want to own a house...may be this analogy might not be 100% correct.
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  • our mindset is to be blamed

    Originally Posted by madhan1977
    Hello all....
    Could not manage to read the entire thread...managed to read a few.
    As posted housing prices have plunged in manya places but notvin chennai....

    India has a huge parallel economy....black market,benami....unless this parallel economy stops it would be difficult to see the prices falling much...
    Also chennaites are very conservative....atleast when compared to other metro'ites...
    Its a dream to own a house...and people at any cost want to own a house...may be this analogy might not be 100% correct.




    Dear friend Madhan,

    You are absolutely right.There is enormous social sanction in our society
    for owning property(even if it is purchased with a big loan).
    The banks are only too happy to cash in on this weakness in us by offering loans to unsuspecting individuals thus trapping them into taking on huge debts.
    In fact the banks are to blame for the current scenario,they fuelled the boom .
    Now ,they are trying to ensnare people with dreams of owning a second home or holiday home etc.
    I think we need to change our mindset if we are to emerge wealthier in the bargain.......

    regards
    unlikely
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  • How about this scenario ...

    BSE Sensx had gone up as high as 20850. It appears that the next move would be to a level of 18500, even though mood was extremely bullish.

    Now it has weakened significantly to 19950 (a 900 point drop from the peak). I expect it to weaken further by another 1000-1400 points before doing the next climb.

    This would essentially wipe out all the gains made by FIIs since they started pumping in money. Now, losing 10s of thousands of Crores will not be palatable to FIIs. How will they react? Pumping even more $$$ into the market?

    Let us see if this happens in the near future.

    cheers
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  • wiseman,
    What I see is, FIIs do not lose money. They are quite good in investments and will do only medium to long term. They wont mind the initial drop. Ultimately its we, the individuals, suffer when FIIs pull out suddenly at the peak.
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  • Regarding the original question whether we are in deflation.My take is we sure are in a phase of slower growth.The excess liquidity infused as stimulus and drop in supply due to low productivity is causing rise in prices obscuring the reality of Indian Economy which is under as much pressure as any other economy.

    However in India, There will be increasing pressure on prices to stay with upward bias due to the diminishing purchasing power of rupee due to inflation and devaluation of currency, and by more rich people competing among themselves to buy the limited resources whilst starving the poor.Sadly, That is how our government policy is and I am not foreseeing any shift in immediate future.

    So current scenario - Production and growth wise it is Deflatory and prices are still Inflatory.

    Also, We have many times debated, why predict? Following are my thoughts and ramblings which may not be useful to everyone.Excuse my digression.I am just in mood to write today.

    There are many ways to look at things.I never overlook if someone claims to have a different point of view, there are always many aspects to things that we have to know and new new subtleties to learn.

    For instance, if someone tells me that "We live in a universe with more than 3 dimensions".I would initially laugh at them because I have grown up learning that "We have only 3 dimensions for space(Up-Down, Left-right, and forward-backward), and one dimension for time which is unidirectional" and I am convinced 100% that it is correct.

    But was that person wrong?When we delve into advanced science, Leading physicists who study "String Theory" and aim to create a "Grand Unification Theory" - i.e. One equation that explains all, vehemently believe we need more than 3 dimensions-actually as much as 11 dimesnsions to explain how matter and particle behave in our world.They dont stop there, they go further to say there are multiple universes like ours.It makes me ask?Well, now who is right and who is ignorant?I dont know and may never know during my lifetime.Actually does it even matter that I need to know?

    Such kind of duality/paradoxes exists everywhere around us.

    Predictions are generally based on the premise that history repeats itself and there are certain patterns to events in the world and are mostly cyclic in nature.

    People form opinions strongly based on how they interpret the events around them and base it on knowledge of happenings that they think and believe are dependable and factual.The understood trend is then extrapolated over a period of time to form a pattern that aids in giving an insight on what to expect in the future.

    In my experience, if done by extremely skilled people who are gifted to see things differently and have access to sources of crucial knowledge that normally other people dont, then the Predictions of events is mostly accurate directionaly.

    The huge problem of such predictions are that the factors that can hinder or alter the prediction is not known while making one.Its not really possible to put an expiry date or timeline to predictions.No one can be dead sure about the frequency and amplitude.Sometimes the event can occur later in future when we least expect thinking we have passed the phase.Sometimes the event would have occured, but it may be unnrecognizable because its impact would be miniscule and insignificant compared to what we expected.The uncertainity factor is always present.Life always doesnt fail to surprise us.

    While there are so many people who predict what can happen, there are not many who are forthcoming to predict what cannot happen and what can wrong.It requires a great deal of conviction and straight forwardness to do so.Irrespective of whether the prediction turned out to be true or false.I feel its very wrong to hold the person who predicts responsible for anything.Even if you insist them to explain, the same method they used to predict earlier will now also give valid reasons as to why it didnt work out in the past and what to expect in the future.The reasons can be change in planetory positions for astrology to Excessive stimulus and liquidity infusion for economy.

    Whether a prediction works for you or not.You are the best judge.Ultimately its one's own action and choice that fulfils a prophecy.

    I will like to quote my favourite dialogue from the Matrix Trilogy uttered by the Oracle

    "I told you before. No one can see beyond a choice they don't understand, and I mean no one."
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  • Originally Posted by nabishek


    While there are so many people who predict what can happen, there are not many who are forthcoming to predict what cannot happen and what can wrong.It requires a great deal of conviction and straight forwardness to do so.Irrespective of whether the prediction turned out to be true or false.I feel its very wrong to hold the person who predicts responsible for anything.

    Whether a prediction works for you or not.You are the best judge.Ultimately its one's own action and choice that fulfils a prophecy.
    "I told you before. No one can see beyond a choice they don't understand, and I mean no one."


    I think you should replace the word "prediction" & "Prophecies" to "Opinions" and "Educated Guess" which are welcomed by everybody.

    In my personal opinion no one can predict anything (Except the beaming obvious short term events) particularly when it comes to market.

    Most educated people do not indulge in prediction and prophecies even if there educated views are pointing to a particular result, They would relay their views and opinions with the words with words such as "Likely/Unlikely" "Potentially/ Possibly" - This does not mean that the person is not manly enough or gutless to predict, It means the person respects the uncertainty of the market and its fundamental nature.

    One simple fact:

    The real market movers (i.e The mass of buyers and sellers) are mostly people who do not posses such superior global economical knowledge and may not be deterred by or encouraged by global factors that you, me or wise points out. They are people who are driven by factors that affect them directly and now.

    Therefore far shot links and spinning of events like fall imports in Congo, Crash in Iceland stock market, fall in gas exports in Kazakhstan and hypothetical prophecies like USD crashing to zero value etc does not mean anything to the local market movers.

    You may ask what’s wrong with predictors and prophecy Sayers rambling on with there verbiage?

    The careless verbiage of such self proclaimed prophets wrongfully affects the lives of innocent investors/ Buyers/Sellers etc.

    Some innocent buyers are misguided by these prophets either:

    ·Induced to buy unaffordable properties with large debts and life savings in order to make huge quick profits (Only to find out later they have lost there money).

    or

    · Induced to avoid buying there desired, affordable and suitable property in order to save large sums when the phantom crash happens (only to find out that they are permanently out of the market by missing the opportunity and will never be able to buy again in that area and regret all their life)

    The doomsayers and boomsayers do destroy lives of some innocent buyers and sellers due to there imprudent and non diligent verbiage of prophecies.

    My request to those self declared Oracles/prophets; please respect the nature market and be diligent and provide prudent advice as it impacts some peoples lives.

    Abisheik please note:
    These comments are not direct at you as we all
    know you had been prudent and considerate in providing your views and you haven’t been dishing out callous predictions.

    The above are my personal views on market predictors in general
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  • Predictions, theories and real(i)ty..

    To startwith, there are people here selling their own ideas/ predictions whether out of vested interests or because its their pet theory and can go to any extreme to (use their imagination) to build up their case.
    But the truth, as economist says is in the middle.

    and their is a bit of luck factor as well. to give an example there was a sweepstakes for the football WC in my workplace in glasgow(where football is most popular sport) where the person with the lowest knowledge in football being me. and guess who won ?
    it was me

    Sometime reading some of the posts we almost forget its a RE forum. If we needed to know about FII and movement of commodities i'm sure we can get lots of articles & data from loads of professional people from online magazines etc. _ the key i feel is the link to realty and reality which is missed in some/most of the exhaustive posts.

    think of it - who makes money in real estate business in india ?- are they MBA holders who can string up lots of data from US financial position to China's GDP ...no its the people who are streetwise and most of them cannot tell the difference between debt and equity. the quite known successful Annai builders owner said once ...that when he went to buy land he used to have a yellow-bag(cant think of a better way of saying it..) and slightly dirty clothes and walk to the place ... and he would say the quoted price would be very different from if he used his car and went in his normal attire - the point is people who get their hands dirty (in more ways than one) are the ones who make money.

    regarding inflation/deflation - its a measurable quantity and can be backed-up be statistical data. The so-called predictors of RE can get away with it because its difficult to prove the movements of RE in chennai - So someone can be predicting 50% fall or 100% rise for the last 3 years and can talk their way out of it. ie. keep denying it went down or went up...

    in this forum when someone predicts deflation (but are clever enough not to give a timeline or say the actual predited figure)
    we can find out if they know what they are talking about (ie writing about) - judging by this sample i would be justified to conclude its half-baked knowledge and not anything more...
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  • I just came across this article. Very interesting about currency wars.

    The looming fake currency war

    Thanks,
    Sridhar
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  • Returning after an year or so

    I'm returning to this blog after an year.

    Wiseman who predicted a crash, down turn and what not starting 2010 seems to have extended his crash time line to 5 years!!!! In the meantime Indian stock market and property price in Chennai has gone up.

    Economist & co who kept saying truth is in the middle is coming out wise.

    Very interesting :D!
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  • Welcome back ...

    Originally Posted by blogger
    I'm returning to this blog after an year.

    Wiseman who predicted a crash, down turn and what not starting 2010 seems to have extended his crash time line to 5 years!!!! In the meantime Indian stock market and property price in Chennai has gone up.

    Economist & co who kept saying truth is in the middle is coming out wise.

    Very interesting :D!



    Welcome back Blogger.

    Read it from the start. The timeframe has always been 2012-14 (or longer, if the Govts and Central Banks of the West keep prolonging and worsening the situation with continuing money printing and currency debasement with successive "Quantitative Easing" programs.

    Please backcheck my posts on any crash timetables I have given less than 2012, if you have the time. And let me know.

    Btw, the timeframe has only shifted from second half of 2010 to early 2011 which is excusable given the difficult task of precise timing of such a huge and complex thing as the world's economy, coupled with the added confusion of meddling of it's working by various Western Central Banks.

    Since the time you went away (Rip Van Winkle style), things have gotten worse in reality while the Govt and media have made it look better with so-called recovery. When the Volvano is boiling and letting off lava and ash, its very dangerous to cover it with a lid and make it look like the problem has gone away. The pressure only builds up faster and higher till, one day it blows the lid away - and the neighborhood as well!:o

    An year back the problems were not so severe and global in scope. The biggest change has been the switch from Private and Corporate Debt crisis to Sovereign Debt Crisis. When Banks and Corporates started going insolvent due to too much debt, Governments (wrongly) came to their rescue with $Trillions (instead of letting the weak die). Now this only made it a bigger issue now with the same Govts going into too much debt. Who will rescue them?! And do you know the effect of Govts going bust? The riots in Greece and France will look like a picnic in comparison. Public backlash is just starting.

    The second crisis is the coming Food Crisis. With increasingly wild weather, food worldwide is getting scarce and prices are already up hugely (30% - 50% or more) this year itself for staples like wheat, corn, etc). In an already weak fiscal position (again too much debt), its going to be hard for technically bankrupt Govts to keep subsidising rising prices. Janta will revolt one of these days and you will have bread strikes reminiscent of the French Revolution (already started in Paris for some other reason).

    The Pension Crisis - more about this later.

    As you can see, many of these will definitely have serious ramifications even in India despite our best efforts to keep chanting "ALL IZ WELL!" and hoping things will correct themselves automatically and we can all get back to the wildly increasing salaries and wild spending forever! :)

    A simple example that all can easily understand. It is widely accepted that, despite the $ being the reserve currency of the world, the way the US is printing it up, its bound to keep declining in relative value. From a Dollar Index (relative) value of 160 back in 1985 (its peak) it has declined so far to around 77 today. Expectation is, it will (after swinging around for a while), eventually decline to anywhere from 60 to even 40. This means that, assuming Rupee remains as strong as it is today (high hopes), we will go down to around 35 to the $ or as low as 25 to the $. Have you any idea what it will do to our Oil import bill and our export profits? When $ came down recently from 48 to 44, saw how exporters howled? What will happen when it declines to 35? Think about it. salaries (40-50% of total expenses as we are still coolie-style companies) will take significant hits. Couple this with strong inflation in essentials like food and fuel and pretty soon, EMI paying ability will start taking big hits. Where do you think RE prices will go then?

    And some serious guys are starting to talk about the US commencing on its Hyperinflationary journey sometime between mid-2011 to early 2012. MAin effect of this would be the destruction of the Dollar. A side effect would be the rapid multiplication of value of g.old in dollars. Will create a fairly disruptive situation in world currency markets which will impact trade significantly. Though no one expects it of US$, let us see the effects of hyperinflation of a currency due to its destruction by too much printing (as happened in Germany 1921-23 and Zimbabwe 2001-09) . See attached charts ...

    Simple and direct effect of any of these going off the deep end will be the immediate pullout of all that excess liquidity from Emerging markets. Remember when Lehman collapsed and a few billion (10 if I remember right) were pullled out of our markets in a jiffy Sensx went all the way down to 8000 levels. Last 3 months alone FIIs have pumped in around $25 Billion. Before than much more. Have any idea where the market will go if around $30 Billion is pulled out in a renewed crisis? And this will also effect RE market as a lot of this money is propping up that market as well.

    Let us not kid ourselves that we have suddenly become a strong and prosperous country just because others have started collapsing and we look relatively better off. Our Govt is still spending way too much and going deeper into deficits and we are in the same catch-22 situation of "if Govt does not spend economy slows down and if it spends, deficits and sovereign debt goes up. And last 2 years, much of the growth has been due to Govt spending, not Private Sector. We too are sinking slowly. But since others are sinking faster, we look like we are rising! :)

    Lets keep fingers crossed, not jump wildly in jubilation too prematurely. Until these Crises are well and truly past us for keeps. Which should take around the timeframe I was talking about (or longer).

    But lets keep the discussion on with variety of views :)

    cheers
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  • Originally Posted by blogger
    I'm returning to this blog after an year.

    Wiseman who predicted a crash, down turn and what not starting 2010 seems to have extended his crash time line to 5 years!!!! In the meantime Indian stock market and property price in Chennai has gone up.

    Economist & co who kept saying truth is in the middle is coming out wise.

    Very interesting :D!


    My guess is around last quarter of 2011 to 2012 will be the triggering point. Also waiting for the 2G Scam exposure and the TN Elections.

    After a thorough round up with Chennai RE, I feel most of the Apartments are booked by the so called Investors and 80% of the project have completion date after late 2011 to 2012-13, during which we will have too much supply of vacant apartments and things will stagnate, unless the salaries rise by more than 100% and the interest rates are down to 7-8%.
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  • FDI Flows in India

    http://dipp.nic.in/fdi_statistics/india_FDI_August2010.pdf

    check out II. FINANCIAL YEAR-WISE FDI INFLOWS DATA: (on page 4)

    It's the FDI which is being misquoted for 9% growth in India since 2005.
    It is not the real growth of India.

    50% of FDI is coming from Mauritius which is a tax haven and most of the money flowing from Mauritius is Black/Illegal/Mafia's Money.

    If India really has an Intrinsic growth, then INR should have been revalued to Rs 20 - Rs 25 to 1 USD, which got devalued during 1991 Indian Economic Crisis and had free fall from Rs 17 to 1 USD.

    Whatever the economic growth we are seeing is momentary driven by external factors and people are becoming insane due to easy money access.
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