Extension for Subbarao????

some news about extension!!!!
http://www.firstpost.com/economy/no-job-extension-offer-yet-says-rbi-chief-subbarao-972127.html

It is better to go Mr.Subbarao. If you cannot withstand government pressure what is the point in getting extension and staying in the hot seat  only to see the economy collapsing day by day?

If the collapse comes after few months atleast you can say ' it was ok until I was there..now they are not able to save it' . So what say?

Open letter to Chidambaram & Dr.Subbarao - Part 1

Respected Sirs,

This letter is addressed to you because you have the authority to take decisions on many issues of serious nature facing our country. We all know our economy is in deeper troubles than what we are seeing in the media. 

• We are dependent on FII money (money comes in to share market for trading - I do not want to tell this is investment) to pay our daily bills. 
• Our industrial output is in -negatve zone for the past few months
• The car sales (leading indicator for money flow) is in -ve zone for the past few months
• Regarding current account deficit the lesser said is better. Good economists say the situation is similar to 1991(Good economists not like Ahluwalia type)
• The inflation is in double digit - I consider CPI as the true indicator and anybody who talkes about WPI is a cheat in my opinion as WPI is not considering common man like CPI. I do not have slightest of respect to a man who disagrees with this view. I hope you agree
• We are desperately raising tax bills to companies like shell and nokia and thus scaring away the investors from abroad on one hand and on other hand we are talking about FDI.
• Banks are bleeding and at this rate our banks will run out of capital in 2 years time.  The novel methodology of CDR nowhere in the world is eating our banking system and the PSU chief just to save their skin are endlessly postponing the loan collection which the basic of banking.
•  Last heard bankers realise that kingfisher is gone  case. Atleast this will be eye opener for them.king fisher also was a case of CDR, conversion to dept to equity, etc
• The findings about jobless growth witnessed in the country in nothing but a shame to the decision makers.
• The habit of shooting the messenger ( CSO) will not help. It looks very childish.
• The gold bill shows our monetary policy fails terribly.

I can write 100 more issues like this where we are terribly going wrong. But in spite of all this, we are busy cutting interest rates which is opposite to common wisdom. I just do not understand the logic behind this step.

Do you think Zimbabwe like situation will never come to India?  Are we such a blessed country?

Don't you see a possibility of a civil war in our country if couple of things goes against us. It can be some natural events like a prolonged monsoon failure.

My solution

Dr.Subbarao,

When I say our monetary policy failed, you think I refer to the 'high interest rate policy' as shouted by media and corporates. No. My view is that we haven't raised the interest rates enough to make the policy effective. From the moment you started raising the interest rates back, the corporate mafia ( I do not want to refer them as lobby) raised hue and cry and you are not allowed to raise rates freely. You raised rates at 0.25 percent per quarter and the system happily accepted and digested and it did not provide the expected cooling effect to the overheated economy.

In the process you have done a terrible injustice to the real savers of the economy and now you are paying the price in high import bill for gold and very low savings rates in GDP. Remember we scuttled all the global economic crisis only because we were savings based economy.

We convinced ourselves by attributing different reasons for high inflation on which some are laughable and inhuman.

When we talk about supply side constraints continuously that is laughable. Because we had those 'supply side' constraints even when our inflation was at 3-5% also.

When we talk about 'rural folks eating more' that is cruel because of obvious reasons.

When reserve bank talks about the speculation in gold, I really wonder what is the RBI's view on speculation on land?

My Budget wishlist 2012

Mr. P. Chidambaram is going to present budget this year and I see the following announcements

1.  Diesel prices will be raised by 20 Rs per Litre and the all the money collected will be given to the struggling car makers who are living in below poverty line.

2.  Tax concession for housing loan will be increased to enable more sales in housing market so that the poorest of the poor such as housing brokers and the builders to eat at least square meal per day.

3.  Interest rates such as Repo rate will be reduced by 5% and the CRR will be abolished in order to bring out the money deposited wastely in banks by the super rich people of India. The poor corporates who are dying without money will be benefitted.

4. Steps will be taken to increase the real estate prices  to another 50% so that the common lazy man of India will work hard to earn more money to realise his dream of having own house. This decision is taken in the best interests of common man so that he works hard.

5. A task force will be set up to find  the other natural resources unsold in the country so that the next budget deficit can be funded.

               (to be continued)

So what can RBI do?

It seems RBI is caught between the devil and the deep sea.

The Financial Stability Report paints a gloomy picture on Indian economy and not without reasons. The most serious of them is the news about the house hold savings stumbled to mere 7.8% last year from almost 13% couple of years ago. This is scary by any standards for any central bank.The very reason India withered away many financial sunamies are only to the high savings rate. In the mad rush to show 9% growth we turned into a consumption economy and traded our benefit of savings economy and thus exposing ourselves to financial crisis.

The banks are not at all in good shape and adding the restructured loans to the bad loans the total bad loans growth is at alarming pace as per RBI's own standards. RBI very will know of the fact that a quarter or half point cut in Repo cannot save the banks.  Any rate reduction from RBI will first be absorbed by the banks before they pass into the consumers and corporates. Most of our corporates forgot to do the business with reasonable margins, so I dont think they will be benefited with these token rate cuts.Now what can happen:

Scenario 1:

The RBI due to their own (overtalking) will be forced to cut interest rates in January 30, and thus putting country into deep financial mess. Remember any rate cut will be used by corporate and realty mafia to induce common people to consume more without any reason and thus avoid any meaningful correction to the overheated economy. So atmost this can be used to postpone the crash for few months. The inflation will not be contained given the fact that the Rupee is fast losing its value.

    **overtalking:  The RBI should have merely said that rate cuts will come once the inflation contains within the comfort levels. Instead of that, RBI has given a hard date thus cave in the pressures of blood sucking corporate mafia and to election minded finance minister
                               

                                                 to be continued

Last flourish

The positive momentum is gonna to go away within few weeks/months.

Whatever said and done, domestic mutual funds withdraw 45k - 50k from Indian stock markets and it is only the FII who are investing. Chidambaram historically believes to measure the economy's growth using nifty levels. So he must be happy.

Yes, we are tired of predicting as the government machinery is fully supporting the unethical business practices, real estate bubble  etc etc. But there is a limit to everything. Whatever you can control within your control you can manage, but India has reached a point where we can no longer stage manage certain things.

1. Real Estate price is not international. It is within India you can manage. You don't want to regulate. You don't want to prick the bubble. Let it be. We will come to this later.

2. Gold price is international. You cannot control. Now shamelessly Government is asking people to stop buying gold and note here it is the only instrument which withstands the government fueled inflation assault. Not only government is asking, even they put pressure on RBI officials to ask people not to buy gold.  Poor RBI fellows!. They forget basic economics and dance to the tune of government.

3. Rupee conversion rate. If huge money is stuck and hoarded in real estate. Every company is investing in real estate where is the real money to do real business? Now, a stage will come where everybody will think it is better to buy some flats and need not do any other business. This has come already. I saw in a kirana shop in addition to prices of dal and oil they have put prices of houses also ! ROFL!. Coming back to the point, the Rupee value nosedived to 55 now. This inspite of artifical euphoria about the 'so called reforms' act of selling money making business to foreigners.

4. The export sector will get a beating only due to inflation effects mark by words. Rupee can easily touch 60 and above. Whatever election games played by Government they cannot control gold price, Currency etc. That will cause doom to this comedy.

5. Reserve bank may cut rates. And I am wondering if the government and RBI is making unnecessary noises about cutting rates ( cheap money) how the hell the inflation will come down? Do we all forgot basic economics?

6. I wonder now every business leader and stock market operator is predicting that the economy is bottoming out. What is the evidence Mr?  It is going down and it is gonna to accelerate  See the IT companies. They have managed their balance sheets for couple of quarters  now they cannot continue that. Some skeletons will tumble out soon. Other industries will follow.

7. If govt stop playing in interest rates, banks also will face the music. There will be times where government will be made to stop playing in interest rates and the time is very near due to Rupee conversion and all.

Conclusion
********

If US recovers, FII will pull out the money and run out of sinking ship India that will cause a massive crash in indian stock markets.

Wave counts also indicates the top is very near.

What a joke !!!!

It turns out Mr.Subbarao and others in RBI are not that clever as we think.

Yesterday they sent a circular to banks not to lend to gold and the reason given was is that it seems that gold is used for speculative purposes. One could not control laughing hearing this comedy statement.

If RBI is really interested in controlling speculative money, it should bark elsewhere. Yes. you got it right. Real estate is the speculation which causes our economy to nosedive. RBI did not have the courage to take on the mighty.

RBI is probably worrying about the effect it would have on state run banks and others. But the truth is truth. We have to stand by that.

Mr.Subbarao , the open norm in any real estate investment is 30% of black money and further due to our 'so called monetary loose tightening; already real interest rates are in negative. Instead of globally controlled gold rates why not you try to control the speculation in real estate? My mango mind says that is easy and that is really needed.

Desperate times needs desperate measures

http://economictimes.indiatimes.com/markets/real-estate/news-/builders-find-ways-to-stay-afloat-hold-on-to-property-rates/articleshow/11680915.cms

Read the above link. The RE mafia is luring cash rich investors and thus staying afloat weathering the slump in the sales. Behind the lines, we need to understand that  they are expecting end users (like you and me) to blink first and fall into their trap. They are holding steady and slightly having upper hand at this moment. The forces working in their favour are

1. Indian Government and their corrupt politicians
2. RBI ( It is trapped into it unknowingly or knowingly)
3. People who already invested in RE ( They are sentiment creators)
4. Share Market ( Sentiment Creator)

But even the mighty federal reserve could not stop the slump in their real estate. We need to wait and watch when the law of natural correction sets in. So far the indications are negative. The indications in our favour is

1. Food Inflation which nosedives showing signs of going up ( ask the vegetable vendor)
2. Many banks started showing negative returns this quarter ( read financial results)
3. Equity markets are at resistance zone
4. News flow from Europe dried down
5. Indian fiscal deficit is at record heights and babus cannot look other side. This budget would be a great disappointment.

Crash is near. Hold on . sit tight.

Investors Selling has begin - Start Music

The much awaited Real Estate Correction has begun in India.

For the past few months I was waiting for this moment when the main stream media talks about the Real Estate correction. This has started. Economic Times has started with this article.
http://economictimes.indiatimes.com/markets/real-estate/realty-trends/jittery-investors-selling-flats-below-market-rate/articleshow/11275674.cms

Please go through it. It says Investors started selling flats much below the price builders quote.(make no mistake, still the investor is making profit). Now this early birds are smart I would say. Because soon the so-called investors would have to sell much below their purchase price.

Start Music.

The Party Begins.

Real Estate Bubble, Real Estate Correction, Real Estate Fraud, India

Something about my favourite punching bag - 4

http://www.livemint.com/2011/11/30231509/Is-price-correction-inevitable.html

Here is an interesting article about the fight to survival by RE sharks. It would be criminal to tell that they are fighting for survival. They are fighting to cling to to their exorbitant profit levels which hopefully won't last.

The article dwells deep into their strategies, options etc







real estate india, real estate correction, real estate bubble, real estate fraud

Something about my favourite punching bag - 2

If you think still Real Estate is a good bet please read this...


http://www.bloomberg.com/news/2011-12-19/sanya-home-bubble-pops-as-property-curbs-deflate-prices-in-china-s-hawaii.html




If you want some India specific news then please read this...


http://www.moneycontrol.com/news/business/india-realty-likely-to-seeto-365-bn-pe-exits2012_636775.html#toptag

A real estate correction in India is round the corner because of the real estate bubble.

Are we traitors?

There is an interesting article in the blog link given below.

They think they have a point when they say we are cheering the fall of our own economy. This is the common allegation we face when we talk/expect about the real estate crash. I would like to give point by point reply to their allegation.

1. By accusing this, they indirectly supports the real estate mafia which is wholly responsible for irrational price rise for housing.

2. Many of them, did not seems to know the basic cycles of economy that growth is cyclical. They only want economy to grow up without any correction. It is no wonder many of them only seen the boom. For somebody who started earning from 2000-2001 would not have seen a proper cycle.

3. Many of them who themselves bought real estate at exorbitant rates and now fearing for lose of wealth. If they bought for housing purpose, anyway they need not worry because in long term the asset will find its own value. If they had leveraged to see quick bucks, then SORRY. It depends on their holding power.

4. We are shouting for a correction, because we want to avoid a hard landing. They dont know the meaning of hard landing and soft landing. Probably they should ask a ordinary US citizen about what happened in US in 2008. US can afford and India cannot.

5. It is not that we want to buy apartments after see the crash. Whether we buy or not, we want our jobs to be safe and unaffected due to this mad rush for property.

6. We are merely saying like any other business, why not Real Estate guys also earn 10-20% profit. Anybody who supports them have any idea about their margin?

I am happy to reply any particular question you have in mind.

Real estate bubble will lead to Real estate correction. NOBODY CAN STOP THE NATURE'S LAW.

I knew this would happen - time to rejoice

http://www.dnaindia.com/mumbai/report_mumbai-developers-run-for-cover-cut-property-prices_1624999

It seems somebody is screwed up in Mumbai.  Time to celebrate.

I sincerely hope it spreads like a wild fire in India.

Home Sales Fallin...

The much awaited happy news started to flow in....

http://www.business-standard.com/india/news/home-sales-drop-across-cities/458239/

We get what we deserve - Part 4 Final (Media and Greedy Investors)

In this series, I would like to write about the media's role in fanning the real estate bubble.

Easily the cheapest and silly media group of India is 'Times Group'. The have the most foolish people you ever see in their editorials and the guy (Arnab Goswami, who shouts 24*7  like a rat which lost its tail) in their channel is the best example for their standards.

Ever heard of media group owning real estate company?. That is times group for you.

And it is not rocket science to understand that you will only see positive news about the sector in their newspaper and unfortunately this is largest read newspaper in India. The less said the better about the media in India.  I remember one regional language author equates these media guys to pimps.

Investors also not helping to find the Real Estate Sector but I would not talk about them now and many of them are innocents and many got into this because of peer pressure. I remember few of my colleagues who got into housing loans 4 years back are still paying only the Interest and not even a fraction of principal amount has been paid due to raising interest rates.

I conclude this series and I would like to update my thoughts continuously about RE in this blog.

We get what we deserve - Part 3 (corporate bullying on RBI)

So far in India no meaningful debate started about the ill side effects of this real estate bubble. In this article we discuss about the role of corporates.


Personally, I don't think our corporates (barring a very few, may be handful) are as intelligent as we think. Everytime when RBI comes up with Interest rate hike one Mr. Deepak Parekh would come on TV and talk bullshit. Basically guys like him does not want RBI to raise rates. Because they think that will reduce their company profits and consequently it would have an effect on their take home salary. How selfish?


K.V Kamath is another guy who resents every time interest rate is raised. These guys fortunately  headed their respective organisations during boom period and only because of that considered as intelligents. How pathetic? Basic common sense says that growth should be organic and reasonable. To control inflation we need to compromise on growth. These men would not agree to this fact and the only reason that comes to my mind is selfishness.

Now RBI Governor is facing the music. Eventhough they knew the real reason they are unable to raise their voices against their bosses and they cannot withstand the pressure brought by the corporate mafia. Corporates talk about the ineffectiveness of RBI's policy on interest rates. Bull Shit. Why not corporates bat for regulation in Real Estate sector in the same way they are shouting for retail FDI?

We all know how the corporates are fudging their books in India. Satyam computer is best example. Even now, I have my doubts about ICICI bank's books. During 2008 slump it was rumoured that ICICI bank lost a lot in toxic sub prime assets ( Under K.V.Kamath). Nobody knows what is there in their books.

They are crying now that interest rate hike is affecting liquidity. But how come they are still showing 30% more profit every quarter than the previous quarter ? If that is true why crying?

In my view, RBI should stop listening to these mafia and go ahead with their rate hiking spree to control the inflation. If the liquidity is sucked out, automatically the money from RE sector will come out and common man can live happily.

These corporate mafia are rumour mongoring now by saying that the interest rate cycle has peaked out. They show the IIP data and GDP data to substantiate their claim. But in my opinion only inflation should be considered for any rate decisions. I remember during 1998-2000 we had higher interest rate than the prevailing interest rates.

We get what we deserve - Part 2 (Real Estate Bubble and Interest Rate)

When I say Indian government fanned, patronised and encouraged the bubble in Real Estate sector in India I mean it.

The intention of the government may be good that they want everybody to have own home, comfort living etc. So exactly for this reason, they encouraged everybody to go for housing loan and pressed banks to give housing loans. Government is also giving tax sops for those who service housing loans. Sounds good until this point. But what the governments forgot to do is some sort of regulation in this sector. Due to this reason, the rates climbed up hugely and the greedy builders/developers lobby made a killing and still trying to do that by looking bakras in Aam Aadmi log.

As written in previous article, government has successfully avoided problems during last down trend by giving sops to builders/developers. Even then that down trend gave much needed reality check to large builders. But still they managed quite efficiently and even now they maintain there is nothing wrong in real estate in India and they claim prices are going to go up only for ever.

Many of us forgot the fact that, interest rates are high now and there is no reason why it cannot continue to stay at this level for quite a period? Inflation is not relenting. Government is shamelessly waiting for the base effect to take over to show some moderation in inflation instead of seeing the real reason.

RBI has raised rate for 13 times without any meaningful outcome. RBI has to be candid in their observation. They should have come out openly and said that they wanted to drain out the liquidity in the market to bring down the inflation. Instead of that, they said they wanted to keep the growth and at the same time they also wanted to control the inflation. I wonder whether they forgot their lessons learned in degree classes:)

The system has learnt to live with their 0.25 percent REPO/REVERSE REPO increase and it has not done anything to the liquidity and the bubble continues to grow. Had they rised interest rates at the rate of 0.5% for three consecutive months that would have been a stern message and that would have give us a much needed relief in the inflation front.

However, now it seems RBI has woken up and trying to tighten the screws after seeing the slump. Still I think Bankers lack the backbone to tell their political bosses the truth. The truth is that Real Estate has to soften if you want inflation has to soften.

( In the next article, we will see Corporate Broker's influence)