Tuesday, June 16, 2009

36 South Starts Hyperinflation Bet After Black Swan

Bloomberg reporting. I think this effect will be on India too as the Indian government begins a spending spree awarding contracts to Indian and foreign firms. Already there are indications of the F-16/F-18 deal with Raytheon and more will follow. The governments will try their best to spend themselves out of the recessionary spiral. More money will be printed and overall everyone will think they have more money, only that that money will buy less. The sixth pay commission is another example of spending. Instead of reiging in inflation, the government is printing more money which will make it less valuable. Elections cannot be won if people have less money which buy more things, but when people have more money which buy less things. In the latter case the government is seen as helping the citizens, and blaming the foreign governments including OPEC as the villians.
With reference to Indian housing I think this spells bad news. Prices drops will be stalled as money enters the system looking for value. Today I got an offer by ICICI bank which mentioned about a Chembur project for 5300 per sq/ft. Not sure what is the exact location previously these locations quoted 8k and above. Just shows that new projects are priced lower then existing ones. The floor is being set so it is time to look for deals. I'm officially abandoning my bearish position on projects which accept full white money. The theory being that banks in today's economy will not lend money if they think the house will lose value or the builder and borrower is not credit worthy. So projects accepting full white have to price themselves to perfection, else they will see no traction with the buyers. This is a time to hunt for value, if you have the down-payment, you can demand your price.
By Netty Ismail

June 16 (Bloomberg) -- 36 South Investment Managers Ltd., whose Black Swan Fund gained 234 percent in 2008, is raising money for a new hedge fund, betting that government efforts to pump money into economies could result in hyperinflation.

The Excelsior Fund targets returns that will be five times the average annual rate of inflation of the Group of Five economies -- France, Germany, Japan, the U.K. and the U.S. -- should the rate exceed 5 percent, Jerry Haworth, co-founder of the firm, said yesterday. Raising $100 million for the fund would be a “good” amount, he said.

“There is a sharply increased risk of greater than 5 percent inflation starting from now,” Haworth said in a telephone interview from London. “We are in the lag period between when the seeds of inflation are sown and when their off- spring, that is higher prices, are evident for all to see.”

U.S. President Barack Obama is selling record amounts of debt to try to end the steepest U.S. recession in 50 years, while Japanese Prime Minister Taro Aso has unveiled three stimulus packages worth 25 trillion yen ($261 billion) since taking office in September. Governments around the world selling record amounts of debt may devalue currencies against assets and spark inflation.

Most investors are underestimating the risk of inflation, Haworth said. Consumer prices in the U.S., the world’s largest economy, are set to rise 1.7 percent next year, following a 0.6 percent decline this year, according to the median of 70 economists surveyed by Bloomberg.

Inflation Risk

“There is certainly talk about inflation but people might think of inflation at 5 percent or 6 percent,” Zimbabwean-born Haworth said. “We’re talking 5, 10, 15, 20 percent or more.”

Investor Marc Faber said on May 27 he was “100 percent sure” that U.S. prices may increase at rates “close to” Zimbabwe’s gains, and the U.S. economy will enter “hyperinflation” because the Federal Reserve will be reluctant to raise interest rates. Zimbabwe’s inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.

Universa Investments LP, the hedge-fund firm advised by “Black Swan” author Nassim Taleb, is also adding a strategy betting that stimulus efforts won’t prevent deflation or could result in hyperinflation.

Inflation will likely be “very low” through 2010, said Alvin Liew, an economist at Standard Chartered Plc in Singapore. There will only be “a risk of very high inflation” starting in 2011 if governments fail to rein in “those excesses that they did to stimulate the economy in the near future,” he said.

“For now, I will be more concerned about how sustainable the growth recovery path is,” Liew said. “When we move into the later part of 2010, investors should pay more attention to inflation.”

Options

36 South’s Excelsior Fund will buy long-dated options it considers cheap and that “stand a good chance of outperforming in an inflationary environment,” Haworth said. Options are contracts to buy or sell a security by a certain date at a specific price.

The fund will wager on an increase in commodity and equity prices, bond yields and increased currency volatility.

“It’s a very high-risk, high-return fund,” said Haworth, who has been trading derivatives for more than 20 years as the former head of equity derivatives at Johannesburg-based Investec Ltd., and co-founder of Peregrine Holdings Ltd., a South African money manager and stockbroker.

The firm will be marketing the fund in the next three months.

36 South has closed its Black Swan Fund, which bet on risk- aversion events, and returned the money to investors after profiting from last year’s global markets rout.

Returns on the inflation fund “could be even higher than the Black Swan Fund though the likelihood is smaller as options are more expensive than they were when the Black Swan positions were bought,” Haworth said.

53 comments:

Anonymous said...

Hi
This is the person who is looking for home in chembur.
Is 5300 rate for yet to construct bldg or fully constructed??
any location details?
your contact details?or shsll I give my mail id?
Seems interesting

Bindas Bhai said...

Yes Unitech is offering at 5300 this is on Eastern express highway opposite the crematorium. Work had not yet started.

Chembur diamond garden is currently quoting at 10K, we may get some reduction based on the builders need.

Vik, as advised by you I will henceforth login and post, there are lot of fake Bindas Bhais around including Bhen who wants to be Bhai.

Minimum 50% increase in two years for Mumbai.

Bindas Bhai

Anonymous said...

BB, can you also tell what is right price for acropolis phase 1 and 2? is he taking full white as well ? what is maintenance charge.

Anonymous said...

opposite the crematorium, as in Navjeevan society side or right opposite the crem? then this price is about right for the location.

Anonymous said...

Anon:11:41

Acropolis I, the builder is asking for 11,000(will settel at 10800) and for II he is asking for 7,200 and will settel at 7k.

Society charges is Rs.6 on Agreement area for Acropolis I. Sorry I dont know about Phase II.

All the best.

Minimum 50% in two years for Mumbai.

Bindas Bhai

Bindas Bhai said...

Anon: 12.14

I am talking about the crematorium near postal colony.

Bindas Bhai

Anonymous said...

Society charges is Rs.6 , and proerty charges extra ?

Bindas Bhai said...

All put together, sorry

Anonymous said...

if you a re genuine buyer just negotiate well, phase 1 agents are selling for as low as 9k, 11k is only the inflated price.

Vik said...

9k or 11k is still expensive. Im not sure how many loans will be sanctioned at this price

Anonymous said...

defintely 9k is still way too high, just pointing out to show that these are super inflated rates.
atleast 20% more discount is needed.

shayna said...

Rs5300/sft to kill yourself slowly by RCF, or if luck has it and one of the boilers go whaaam relief from this pain of INFLATION/MORTGAGE/INTEREST RATE will be instant.

By the way you can see RCF from ACROPOLIS too, the only saving grace with ref to living opp the crematorium is that ACROPOLIS and the CREMATORIUM recieve the same levels of SULPHUR GAS. There is a booster on top of the chimneys at RCF. 70% Of the gas gets boosted up to 1mile high and then about 30-40% settles at deonar/manhkhurd ( acropolis) the rest 30% leaks down onto collectors colony and chembur camp.

In that sense Rs5300/sft is a bargain................Bind Arse Bye.

Anonymous said...

all of mumbai is just too polluted now, and getting worse.
delhi is in fact much better than it used to be 5 years ago since they changed all buses to cng and also have a lot of tree plantation.

Anonymous said...

shayna that post was amazingly creative!!!

Actually, our "Bhai" needs a Bind Ass! Because all his posts are mostly diarrhea :))

Anonymous said...

Near term OR Long Way Inflation

While considering any financial advice OR forecast, time is the foremost consideration. Yes, return = f(rate, time) this is the basis of time value of money & base of all investment strategies. The crooked analysts exploit the market by providing the information on incorrect time to make profit. Profit is nothing but a difference between well informed & ill informed investors. Based on personal experience of couple of people, stock trading based on analyst advice on MoneyControl always incurred losses. The analyses were correct but the timing was incorrect.

A Long Way to Inflation

“I’m not talking about what will happen in the next 6 months; I’m talking about what will happen over the next 5 years. “Green shoots” – however green they may be – do not presage an imminent end to deflationary wage pressure. And they certainly don’t presage the beginning of inflationary wage pressure. Consider everything that has to happen before the wage pressure reverses and becomes inflationary”.

http://blog.andyharless.com/2009/06/
long-way-to-inflation.html

CONSUMER PRICE INDEX: MAY 2009

http://www.bls.gov/news.release/pdf/cpi.pdf

A Day in the Life of “Mr. and Mrs. Median”

“What I think will become painfully obvious is that housing remains largely overpriced … people remain tremendously unprepared for personal hardships … and the road to substantial economic recovery will likely be long and arduous”.

http://www.moneyandmarkets.com/a-day-in-the-life-
of-%e2%80%9cmr-and-mrs-median%e2%80%9d-2-34222

So guys let it fall then only pick up, minimum 50% price cut is guarantee.

Vulture.

Anonymous said...

SHAYNA---that was realy creative on bindas bhai-well you talk sense he talks nonsense

Bharat said...

http://economictimes.indiatimes.com/Indian-market-rally-liquidity-driven-Roubini/articleshow/4669166.cms

I did say this before Nouriel ;) and that too right here in my earlier posts...

But its fairly obvious that the Indian market was over reacting and this was a liquidity driven/FII driven rally..the rug is about to be yanked from under the feet of Indian Investors.

Anonymous said...

Sensex is going back to 7K levels.
The corporate world is now a bunch of jokers.

Bindas Bhai said...

Guys it is very easy to get personal and get back at each other. We must not forget the fact, we have come in this forum to understand the current RE market and vaguely guess how the RE could move in future. I am posting my views if someone does not agree with me pls. don’t get personal.

I have seen comments coming from guys but now such harsh personal comments especially from an educated lady is not suitable for this forum. Sitting behind the computer and typing personal comments is very easy but we all know that we are not here to settle personal scores here.
I am not getting personal in this post but as a responsible member we must avoid selfish mis-representation to this forum.

Now pls. analyse this, sorry trust me i am not getting personal but this is what we need to avoid.

Shayna has commented the following in the above post about Chembur, could be true but pls. read her earlier posting about 3 weeks back. I have also posted the same.

The point i am driving is that we must put our personal grudges aside and look into actually what is happening on the ground.

Bindas Bhai said...

shayna said...
Rs5300/sft to kill yourself slowly by RCF, or if luck has it and one of the boilers go whaaam relief from this pain of INFLATION/MORTGAGE/INTEREST RATE will be instant.

By the way you can see RCF from ACROPOLIS too, the only saving grace with ref to living opp the crematorium is that ACROPOLIS and the CREMATORIUM recieve the same levels of SULPHUR GAS. There is a booster on top of the chimneys at RCF. 70% Of the gas gets boosted up to 1mile high and then about 30-40% settles at deonar/manhkhurd ( acropolis) the rest 30% leaks down onto collectors colony and chembur camp.

In that sense Rs5300/sft is a bargain................Bind Arse Bye.

9:22 AM

Comments posted lee then three weeks back.

Bharat Said;
But what say you? Vulture, Shailesh, Vik, Shayna, my good friend Observer (if he is still around) and others?,Firstly by renting you are paying other peoples mortgage, having said that the there are many variables to this equation.

Good you asked this Q as i've been contemplating this for the last 2yrs now.

In my view its a moving scenario involving parameters like House prices, Rents, stock markets, wages/jobs, interest rate etc.

To put it simply, If you have a sound qualifications and career with your wage increasing at the rate of Inflation +2%, ideally i would rent based on the foll

* Rent cost being not more than 10-15% of take home salary.

*Rental contract running at atleast 3yrs to expiry, i.e. Renew a 5yr contract once every 3yrs. This gives you adequate time to relocate if reqd.

*Spread your savings between diff investment vehicles for a rainy day and retirement. Stocks are undoubtedly the best however require a level of knowledge.

Having said that i wouldn't mind owning a house if the monthly outgoing on the mortgage is less than 20% of my wage, like it is now with my present home here in London. I purchased my house in 2000 at the start of the property ownership stampede, presently i am on a Interest only mortgage which has come down from 10% of my present wage to 7% of my wage now. The house has a equity of 50% original purchase price, i have a stocks ISA (tax free) to repay the pricipal amount and this is valued at 20% of the property hence if i had to sell my property tomorrow i would be pocketing 70% of the original price paid. The interest payments are less than the current rental cost of this house however i have to add i have spent an amount equal to 2yrs interest payments on home improvements. Presently i am not very happy with this house due to the family growing up (added 2 girls since we moved in) and due to the market being so volatile i find myself stuck in here. Had i been on rent i could have packed my bags and walked out.

Will i be doing the same in INDIA ? where i intend to relocate soon maybe by sept'09. Well my plans are to rent it where ever i settle (initial its going to be NIBM -Pune) and working out the rental vs buy option its still heavily in favour of renting however knowing the Indian laws i am a bit sceptical for fear of landlords muscling you out. But atleast for the 1st year its going to be renting. I have invested in land in Coimbatore which at its present value will fetch me a descent 3 bed in Chembur however i am eyeing a 4 bed final home and would like to see the market deflate (so would the price of my land) to make it viable to purchase, mainly as investment for the girls future.

In short, prefer renting at <15% salary. Obviously at a place of my liking can't compromise on that, if rental not avail or cost to much than outright purchase.

5:44 PM

Minimum 50% increase in two years for Mumbai.

Bindas Bhai

Bindas Bhai said...

Sorry I missed the first line. I have also posted the link
shayna said...
Bharat Said;
But what say you? Vulture, Shailesh, Vik, Shayna, my good friend Observer (if he is still around) and others?,Firstly by renting you are paying other peoples mortgage, having said that the there are many variables to this equation.

https://www.blogger.com/comment.g?blogID=19740856&postID=202208907456124720

Good you asked this Q as i've been contemplating this for the last 2yrs now.

In my view its a moving scenario involving parameters like House prices, Rents, stock markets, wages/jobs, interest rate etc.

To put it simply, If you have a sound qualifications and career with your wage increasing at the rate of Inflation +2%, ideally i would rent based on the foll

* Rent cost being not more than 10-15% of take home salary.

*Rental contract running at atleast 3yrs to expiry, i.e. Renew a 5yr contract once every 3yrs. This gives you adequate time to relocate if reqd.

*Spread your savings between diff investment vehicles for a rainy day and retirement. Stocks are undoubtedly the best however require a level of knowledge.

Having said that i wouldn't mind owning a house if the monthly outgoing on the mortgage is less than 20% of my wage, like it is now with my present home here in London. I purchased my house in 2000 at the start of the property ownership stampede, presently i am on a Interest only mortgage which has come down from 10% of my present wage to 7% of my wage now. The house has a equity of 50% original purchase price, i have a stocks ISA (tax free) to repay the pricipal amount and this is valued at 20% of the property hence if i had to sell my property tomorrow i would be pocketing 70% of the original price paid. The interest payments are less than the current rental cost of this house however i have to add i have spent an amount equal to 2yrs interest payments on home improvements. Presently i am not very happy with this house due to the family growing up (added 2 girls since we moved in) and due to the market being so volatile i find myself stuck in here. Had i been on rent i could have packed my bags and walked out.

Will i be doing the same in INDIA ? where i intend to relocate soon maybe by sept'09. Well my plans are to rent it where ever i settle (initial its going to be NIBM -Pune) and working out the rental vs buy option its still heavily in favour of renting however knowing the Indian laws i am a bit sceptical for fear of landlords muscling you out. But atleast for the 1st year its going to be renting. I have invested in land in Coimbatore which at its present value will fetch me a descent 3 bed in Chembur however i am eyeing a 4 bed final home and would like to see the market deflate (so would the price of my land) to make it viable to purchase, mainly as investment for the girls future.

In short, prefer renting at <15% salary. Obviously at a place of my liking can't compromise on that, if rental not avail or cost to much than outright purchase.

5:44 PM


Vik said...
Abeer, please post your email id in the thread. I will add you. Im looking for invididuals to cover the major cities. Nothing like having feet on the ground. yesterday I met some people who were discussing properties and everyone is confused on the trend. some say it will go up, some say down. again I feel unless you have the cash to endure the pain in the downturn, it is not worth going in for highly prized properties.
Builders always point to somebody else who will buy, however if that somebody else had money, that property would've gone already. Wasn't this the case 2-3 years ago. If they drop prices to those levels, people will come back.
Everyone needs housing, however how many can afford the super-built loaded rates.

6:38 PM

Bindas Bhai said...

Anonymous said...
if you a re genuine buyer just negotiate well, phase 1 agents are selling for as low as 9k, 11k is only the inflated price.

5:55 AM

Yes you are right there are some brokers who were offering at 9k but not anymore. Even if you get at 9k the builder is not giving NOC unless we pay 1k as transfer charges. No banks will give loan without the builders NOC.

The price which I mentioned above was what the builders are offering at.

Minimum 50% in two years for Mumbai.

Bindas Bhai

Anonymous said...

BB,

Have you heard of Bholenath Developers? I was offered 9k for Ghatala, they are comming with 16 storey towers.

Work has just started, yet to do the piling.

Shriniwas K said...

Hey Stop personal attacks and fighting. I just talked to HDFC bank and they are willing to give loans to NRIs but only about 60% ish of the home value not exceeding 30-32 lakh. If there are row houses in Pune for around 55-60 lakh, then I am game. Does anyone know of good row house proj in Aundh annexe in that range ? I am up for 12-15 lakh down and rest on possession...

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

I have heard of Bholenath developers, heard their construction is good, but 9k is too high for Ghatla that too for new launch. They were selling some near St.Anthonys school last year for about 7k, survey more, even runwal is selling for 7k full cheque around there.

Anonymous said...

sriniwas, I had seen some ads for old row houses near hotel rajwada for around 65L, omega paradise wakad had some resales fr around the same. there are some in park street wakad but they are too high priced for that area. you must make the rounds to get the real picture.

Anonymous said...

9k for Ghatala is on the higher side. You mentioned it is 16 floor, which means he will be building atleast 50 to 60 flats.

Now selling 60 flats will not be easy for this developer especially when you have Raheja selling at 7k for Phase II.

I think max you should pay is 7k or below.Kindly ensure to pay only as per progress of the project.

Builder is reasonably sound.

All the best

Regards,

Bindas Bhai
Minimum 50% increase in two years for Mumbai.

Bindas Bhai

Bindas Bhai said...

9k for Ghatala is on the higher side. You mentioned it is 16 floor, which means he will be building atleast 50 to 60 flats.

Now selling 60 flats will not be easy for this developer especially when you have Raheja selling at 7k for Phase II.

I think max you should pay is 7k or below.Kindly ensure to pay only as per progress of the project.

Builder is reasonably sound.

All the best

Regards,

Bindas Bhai

Minimum 50% increase in two years for Mumbai.

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

Vik,
Please delete most/all comments from BB or related to his attitude from others. This forum is not about what BB thinks.

We're trying to solve a major crisis at hand here.

Shubh Chintak

Anonymous said...

I would also request Vik to moderate comments and not approve the ones that are simply attaching each other , adding no value.

Anonymous said...
This comment has been removed by a blog administrator.
Vandana Mohan said...

Vik,

I think this forum is really getting abusive.

Kindly delete the posting if there are any personal comments. Just because people dont like contra view does not mean they have the right to abuse.

Bindas Bhai please keep posting your views and we also need people like you in this forum.

Would request you not to respond to some of the jerks over here and spoil your reputation. These guys are just trying to provoke you.

Vandana

Vik said...

Ok I've deleted some offensive posts. BB stop posting your tag line about the price hike of 50%. We have seen it many times and know it. None of us are posting a 50% drop in 3 months of anything which is not logical

Anonymous said...

Vik,

Sometime back you explained about the inflation from 70's till 2000.

To be honest i did not believe.. See the newslink... So far we got better returns (Not relative) in property because of inflation?

http://ibnlive.in.com/news/inflation-drops-to-negative-for-the-first-time-since-1977/95132-7.html

How can we expect that now?

shayna said...

This is another article in support of the china theory as the ultimate reason for the engineered credit crunch. Its from FT.COM.

View of the Day: China bulls will be let down
By Albert Edwards

Published: June 17 2009 15:09 | Last updated: June 17 2009 15:09

The wholehearted belief in China’s economic recovery could turn out to be the biggest disappointment yet for investors, warns Albert Edwards, global strategist at Société Générale.

“The ongoing enthusiasm for all things China reminds me of the way investors were almost totally blind to the fact the US growth miracle was built on sand,” he says.

“We saw this same investor mania 13 years ago with the Asian Bubble, which the consensus thought was a growth miracle.”

At the heart of Mr Edwards’ scepticism lies doubts about the accuracy of official data releases.

“The Chinese data is derided by economic commentators,” he notes. “Many have highlighted that GDP growth seems inconsistent with other data, such as electricity output. Yet few dare to point out that the emperors’ clothes might be absent – and when they do, they are met with robust official rebuttals.”

“That is not to say that the fiscal stimulus has not had a beneficial effect on Chinese activity this year. What I question is the quaint notion that the Chinese economy can grow at a respectable rate when the rest of the world is in a deep recession.

“I believe the bullish group-think on China is just as vulnerable to massive disappointment as any other extreme of bubble nonsense I have seen over the last two decades.

“The fall to earth will be equally as shocking.”

Anonymous said...

Inflation drops to negative, at -1.61% for week ended June 6

“Subzero inflation has finally come to India with inflation dropping by 1.6% in first week of June to ten months after inflation peaked at 12.9% in early August. Annual inflation was at 0.13% in the week before. India's negative inflation patch - negative inflation is expected to be short- would essentially be due to a high base effect and supply side issues and is temporary in nature. The retail inflation as measured by consumer price indices is still hovering around 8%”.

http://economictimes.indiatimes.com/Indicators/
Inflation-drops-to-negative-at--161-for-week-ended
-June-6/articleshow/4670384.cms

Bindas Bhai said...

Vik,
I will remove my tag line. Vik i think this blog must reflect the ground realities of what is happening in RE.

How do we go about improving the content in this blog?

Tell me if I can be of any help.

Bindas Bhai

Anonymous said...

BB, can you tell what is rate around chembur roads like 11th,13th,15th.
Also, do you know current rate around andheri east new project ?

Anonymous said...

Dear people,

The global economy is on a structural decline, which will see its lifetime for another 5-6 years. We still have a long way to go and we are likely to see huge layoffs, with very less oppurtunities seen lying around. If anyone thinks we have seen the worst,the only person you are fooling would be yourself.
With huge inflation, you will not get any higher wages from employers citing less business (for those who are lucky to have a job). your wages will remain the same but the high inflation will eat into your disposable income.And contrary to what Vik thinks the floor will not be set now.Even if the floor is set, the prices will lie dormant for the next three years at least,where the real value will be eaten away by inflation. So the choice will be that the chembur project will cost the same price(5300) three to four years from now.So after taking into account the inflation,the real prices will be like 50% down.(after 3-4 years of 10% inflation).

So keep tight and just watch the horror unfold before you.

S G Allen.

Bindas Bhai said...

11th and 13th Road before the election results was hovering around 8500 types now the builders are acting tough and asking somewhere between 9500 to 10,000.

I am sure if we sit with money they will negotiate. 15th Raod you should pay atleast 1k less.

I am not in touch with Andheri rates.

All the best.

GK said...

Vik,
Another suggestion to make this blog more level headed, is to, change the title of this blog. Usage of word "bubble" in title makes the whole thing kind of one sided, to wards bears.

A title like "India housing" or "Indian Real Estate" will be more appropriate.

Vik said...

Actually the bubble is still intactin many area and original intent was to emphasize that point. If prices are not dropping they are being accounted for in inflation. If tomorrow my salary is 10L as opposed to 7L today, I an afford properties worth 50L as opposed to 35L. If builders dont raise or drop their 50L property tag, they get the same value, though few years later. My view on housing has changed since prices have dropped and loans are hard to come by. So if someone is funding a loan the price has to be approximately in the 10% range of what can be supported in that area

Any suggestions to improve the quality are welcome.

Bharat said...

The whole concept of basing inflation on WPI basis as opposed to CPI is funny...the idea of inflation indices is for people to understand the impact of Indian Govt. Monetary policy on the indian retail consumer..plus its interesting to see the composition of the WPI and its weightage.

-ve WPI is a huge joke and one presumes this will lead to money printing of mega proportions. Leading to inflation and reduction in wealth of the Indian Citizen...at this rate even if housing grows 50% in 3 years its going to be -ve compared to the inflation growth. Also one anticipate that recession impact plus markets sliding downwards over the coming quarters will have a depressing impact on RE.

About the Black Swan fund which no one seems to be commenting about here. Taleb is an excellent mathematician and has an excellent track record for placing bets on black swan events...if his fund is betting on inflation and its probably a conservative bet then we might be facing hyperinflation scenarios!!! :(

Lastly, if there is a vote out there, I think the title of Indian Property Bubble is extremely apt.

Anonymous said...

Long time reader, but first time posting. Disappointed by your recent bulliness and inflation expectation.

Inflation will not happen because there is too much spare capacity in every sector. Also there is no sector of economy which is willing to leverage up in deflationary spiral where equity is getting wiped out.

Tell me next growth area and which sector needs and able to get credit expansion.

Only way to get inflation is currency race to bottom. This is very demaging to indian consumer and will not result in any property boom (high interest rates, lower real disposable income after staple purchases).

Vikas

Anonymous said...

Vik,

The buyer who bought flats and waiting for handover are in big mess... We already have enough supply for next 10 years

Are you kidding by saying prices may go up?

There are number of sites to put positive news... If people like Bindaas bhai wants to read news he can read all the positive news out there (papers such as economic times and all stupid magazines)... This is the one of the sites with realistic perspective..

If you are going to change the name i would like to take over..

All the builders are cheating the naive middle class people...

We need to have some mouth piece for educating the normal citizens... I am planning to start my own blog...

Venkat
Affected Genuine Buyer taking legal action against the builder

Anonymous said...

Asset price inflation OR Commodities inflation?

We can’t define the inflation just based on basket of goods. If we will include housing in the basket, index number would have tripled in 4 years. Very important is we are looking at housing which is an asset class so CPI & WPI are not applicable here. Asset price inflation happens due to growth in Credit. The housing is falling in US due to sub prime credit crisis. Credit is nothing but leveraging. For an example if I have only 2Lakh in pocket & some one is ready to give me 200% leverage, I am ready to bet for 2Crore RE, cause my incentive from upside will be much larger, so I am ready to loose 2Lakh if my bets goes wrong.

Now let’s see the fact about today’s credit market. Shriniwas has already confirmed that today Banks are not ready to give loan more than 60% OR 32Lakh. The same HDFC bank had sanctioned me a loan of 20Lakh in 2005 (10% down payment officially but builder adjusted it in parking price so it came out to be only 1Lakh i.e. 5%).

Now see what’s happening in businesses. RE companies were most leveraged which failed as bets went wrong in 2008.Whereas the same companies outperformed in 2007. To reduce the debt RE companies are now selling assets in either QIP or fire sale.

What were the sources of credit growth in last 5 years?

In India credits were supplied by local market as well as global market, recall the ECB (external commercial borrowing) stories. Another significant factor was opening up the financial sector by Congress govt., which allowed lot of wall st. firms to fund credit to Indian businesses. Now the global credit market is in bad shape, which forced the Indian companies to follow QIP way.

Now if any one know a source to finance 1 Cr(1000 * 10K) house please let me know. Also I am very keen to know today which professions are printing loads of money to support this kind of assets (no BS about extreme cases).

Agreed, liquidity is flowing in market but in falling employment & deflating wages no one is ready to provide credit to incur losses.

Commodities inflation & it’s relationship with wages & money supply is a separate discussion.

So guys let it fall then only pick up, minimum 50% price cut is guarantee.

Vulture.

Anonymous said...

India's fiscal position suggests caution: Moody’s

“Indian equities have rallied sharply in the last three months despite continuing risks to both the global economy and India's outlook. Investors took solace in India's relatively mild downturn and chances for faster recovery. However, Moody’s Economy.com warns that the country’s fiscal position suggests caution, as the government is not in a position to offer sustained support to a weak economy”.

http://economictimes.indiatimes.com/Market-Analysis/
Indias-fiscal-position-suggests-caution-Moodys/
articleshow/4670085.cms

Anonymous said...

Someone said recently

"There will be inflation in things we need and deflation in things we want".

This might be the most famouse statement to be remember in post crises period.

In my opinion home ownership comes under "wants" and not need (renting satisfies need)

shayna said...

On the topic of content and quality of this blog incl the title, my take is that it is best the way it is i.e. It is a reflection of Indian society with its vested interests and dumb heads alongside the wannabe intellectuals (myself).

I found this site purely thru a search for articles on INDIAHOUSINGBUBBLE, i rest my case.

On the topic of how the credit crunch evolved and where it is headed. Barack has been on record blaming it on Reagan admin as has been widely discussed here in U.K. where they also incl Lady Thacther as one of the villians of this act. And if you see how the world geo-politics evolved/changed post these to admin/era you will realise their (Reagan/Thacther) reasons for following this act of credit expansion thru CDO and other debt based securities.

The Soviet union alongwith the German wall collapsed, apartheid ended and China opened its markets and economy to the world.

This leads us to the Q when will it end, as i understand the pain being encountered by the western economies are not without reason, the reason to me is the attempt to end the domination of CHINA. With the breakup of soviet union and possible the end of CHINA the anglo-saxon world will see huge reduction in its defence budgets, which is imperative to maintain a benefit state. Due to emerging markets these economies are loosing huge revenue streams from manf/business by way of taxes.

The reductions gained from defense spending will see it being directed towards more imp health and social services network. With a slowing down of the world wide economies these advanced nations can take a lead in new technologies and related industries.

Where does all this place INDIAN economy and its housing. My take on that is India has always been a credit based society, housewife across India have some form of micro financing either based on a kitty party or village level micro credit. Mumbai is known for its HUNDI financed businesses. I remember my friend buying ODEON theatre in Ghatkopar at 6%/month flat interest. He had worked out after interest and capital payment he would still break a small profit which was equivalent to the cost of running his families fleet of 4 cars and 2 drivers, simple economics. And to his benefit when the property market boomed he sold the place for a neat profit.

House like gold to the avg Indian is of great importance till date however as the economy matures its people will see reason to enjoy life at the moment rather than lead a life of slaving in hope of saving for the future. The allure for all things fancy will wane Indians will be seen to be enjoying more and living a healthier life.

A lot of what happens in this country is connected to politics because that segment as a institution is still very strong and is the oldest because of the freedom struggle. The paradigm shift in INDIAN politics thanks to Rahul, MM, Priyanka and Soniya has shown the naked ambitions of others against the simplestic and honest approach of this lot.

Their behaviour if allowed to grow unhindered will see a calming effect on this country, that has been lately enamoured by the likes of Ambanis.

I have a strong faith that things can only get better in our beautiful country.

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