Tuesday, June 01, 2010

Decoupling, local demand driven economy, green shoots

Here we have the Sensex down another 300 points and it gets blamed on the Euro Zone problems.
Indian stock market brokers have taken the Indian investor for a long ride and articles like this in the Economic Times only vindicate my position that the media in India is very biased and will not report the full truth. They will hype up the good news and play down the bad stories.

There is no independent reporting anymore and everyone including the TV channels are biased. The media knows that if the market sentiment is not propped up, they will lose viewers/readers and hence their sources of advertising revenue.

Investors have to tread very treacherous waters in India so they better be very skeptical of these bozo's in the media.

Every article is written with the intent of enticing investors into the market. This is the Ekam-Sat (Ultimate Truth) of Indian markets. Be very careful with your hard earned money and if you have to invest go with diversified low cost mutual funds with minimal expense ratios. I hate to see people lose sleep and their life's savings and hand them over to these sharks

Economic times reports

MUMBAI: The Indian markets fell on Tuesday, halting its four-day rally as concerns about the European economies turned investors jittery again. During the day, the BSE sensex fell 373 points, or 2.2%, to close at 16,572 while on the NSE, nifty closed at 4,970, down 116 points or 2.3%.

The day's selling was again led by foreign funds while buying by domestic funds cushioned the fall to some extent. BSE data showed FIIs were net sellers at Rs 527 crore while DIIs were net buyers at Rs 211 crore. Dealers said other than global concerns, speculation that the RBI could soon hike interest rates to stem inflation also prompted Dalal Street investors to book profit. The day's slide left investors poorer by Rs 90,000 crore with BSE's market capitalisation now at Rs 59.7 lakh crore.

During the day, most global markets also ended in the red as euro slipped to a four-year low level against the US dollar. Reports on slow growth of Chinese manufacturing sector, and its after effects on the eurozone and the global economy in general, also made the investors jittery.

In the the Asian region, Shanghai fell by nearly 1%, while Nikkei in Japan was down 0.6% and Hang Seng in Hong-Kong closed 0.4% off. In Europe, FTSE in London recovered much of its earlier losses and ended 0.6% down, while in Germany, DAX ended marginally higher and CAC in France ended marginally lower. In early trade, Dow Jones was flat, having recovered most of its earlier losses of nearly 1%.


Anonymous said...

By Geoff Dyer in Beijing
Published: May 31 2010 20:08 | Last updated: May 31 2010 20:08

The problems in China’s housing market are more severe than those in the US before the financial crisis because they combine a potential bubble with the risk of social discontent, according to an adviser to the Chinese central bank.

Li Daokui, a professor at Tsinghua University and a member of the Chinese central bank’s monetary policy committee, said recent government measures to cool the property market needed to be part of a long-term push to bring high housing prices under control.

He added that there were still signs that the economy was overheating and recommended modest increases in interest rates and the level of the currency.

“The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis,” he said in an interview. “It is more than [just] a bubble problem.”

When things about India also come to light, Indians may not be ready for the rude awakening and aftermath shocks.

Anonymous said...

Same can be said for Canada, Australia, New Zealand, India the UK, etc.

Round Two of the Global Housing Bubble popping is coming up…

And everyone says "it is different here". Our country is prosperous and has no bubble.

A lot of money is going to be destroyed in the next few years.

Anonymous said...

The bad thing is that all these Govts. will start printing a lot of money. Which will result in massive inflation and devaluation of their currencies big time.

It is surprising that India has good brains who are running the country and still they are calling the speculative activity as economic activity. The Sensex and RE casino are not the real economy created by low interest rates and borrowed money.

Anonymous said...

Year to Date Stock Indexes:
ALl or down by given percentages:
Shanghai: 22%
Hang Seng: 11%
Brazil: 10%

India is only down 5% year to date.

Either this Sensex casino is in full swing and optimism is high among Indians ignorant of the looming world crisis or it will
adjust soon by going down by few thousand points.

Rajesh Tiwari said...

To anonymous people who post bullshit crap:

Please do not pollute this blog by posting news coming out of your mentally retarded brains. We aren't interested in China, Canada, Australia, New Zealand.

We are discussing about the housing problems in India. Your sick brains are drawing parallel between a street riot and WW II.

Thank you Bhais

Anonymous said...

Anon above:
That's the the whole problem that everyone thinks they are different. People like you are thinking in all countries that there is no bubble in their countries.

Time will tell. As one Anon above said: "And everyone says "it is different here". Our country is prosperous and has no bubble."

Anonymous said...

Anon @3:37

Do you know whatis India's Debt to GDP ratio? Google it. You'll find that India is in a worse condition than China, Aus, NZ etc.

Arun said...

As Mr. Tiwari said, I suggest that we should stick to our domestic situation rather than discussing international economics. Our problem is more related to black money/corruption and an impotent government. I don't know about china, but Aus and NZ are developed economies. No one stares or live in shacks/tents like our people and even if their debt is high, they just to have to cut down on super luxury goods that will solve their problem. Our situation is different. Most people live $2 a day where has a flat in s slum costs $250,000.
I wish that Indira Gandhi was alve today

Anonymous said...

If most of the country lives on $2 a day, this bubble will turn out to be more nastier than thought.

Arun said...

@Anonymous 8 49

What makes you think/conclude that there is a bubble. I'm not so sure. People are buying properties with cash money. Those who are seeking loans are a mere 1%. Those who invest are long term investors who are not bothered by the turmoils in the financial market.
India signs a defense deal of $1 billion, $300 million goes into the pockets of select few. This is black money generation example. BBillions black money is generated and part of this goes into real estate.

Anonymous said...

Anon above:

If you don't think there is a bubble,then keep buying RE. I think there is a massive bubble and I'll wait, maybe for 4-5 years. It is cheaper for me to rent.

Anonymous said...

Bubble Bubble go away
Come again another day
Little Ramu wants to buy a place

Anonymous said...

Little Ramu-
You are in hard luck as this bubble will not go away easily. This time it is a big GOI undertaking to make sure RE prices do not drop as they are the major contributors to GDP. They will do whatever it takes to keep it propped up.

But for how long? The reality of absurd RE prices would be revealed in the coming years. Ramu, you can't buy soon but eventually. Upar wala sab dekhta hai.

Anonymous said...


Its ok..the more time the balloon is inflated..the bigger the implosion. Will wait patiently for the day when prices absolutely nose dive for a 10 out of 10 score..

Anonymous said...

Regarding the bubble hypothesis, I have few questions. Appreciate if someone could enlighten me

1. Why would prices come down when people are willing to buy. People with black money have to park their money somewhere.

2. Very few buyers use bank loans to buy a place. So, the interest rate and banks have little influence on prices and a economic slowdown or turmoil will have no effect on thriving black economy and therefore unlikely to effect real estate.

3. Builders statistics indicate that for every apartment they construct, there are 10 buyers willing to pay the asking price.

3. Assuming the economy nose dives, what difference is that going to make to people who have invested their black money in real estate. This is similar to people who keep money in swiss banks and pay a hefty fee for just having their account with them. In course of time, the account value dwindles but this is acceptable to them as their money is secure.

These are some of the things I've been pondering about.

Anonymous said...

Anon above:

One thing you have to understand is that a lot of black money has been created due to the RE bubble and not the other way.

Once prices go down, that black money component will evaporate.

Moreover, there are many people who take loans. All the working class honest people have loans from the banks in India. Bankers are not sitting idle, they have been providing loans.

As regards to builders making statements, do not believe them.

When the sentiment turns negative, investors would start dumping their properties for sale thereby increasing the inventories. This will cause RE prices to go down. More supply and less demand.

You have to understand that the demand is "speculative demand and is not organic". Once prices fall more, more people will bring their houses for sale and it will become a self fulfilling prophecy. Then there will be 3-4 years of declines and prices falling by 50-60%.

Don't believe it, wait and watch.
Still don't belive it, buy RE and get screwed.

Anonymous said...

Real Estate - Bangalore
Bangalore, June 3 (IANS) Over 40 memorandum of understandings for an investment of nearly Rs.3 lakh crore (Rs.3 trillion) in Karnataka were signed on the first day of the two-day Global Investors Meet (GIM) here Thursday.

Overnight, the prices of real estate have jumped by 30% in bangalore city and 20% in Mysore.

Anonymous said...

press releases cause a 30% jump. You must be joking. How about another 2-3 more press releases to make it jump 100%

rajni sharma said...
This comment has been removed by the author.