Key Markets coming out of recession

Good to hear that major markets like U.S.A, France and Germany is showing some positive GDP. All these countries have been showing a major improvement in key economic parameters like Job loss, Mortgage, Housing market, Retail industry which is creating a lot of positive optimism among investors. This is very much relevant by the bullish trends in the U.S stock market in the last couple of weeks.

Trend during IPO's

One trend which I had noticed is that every time there is a major IPO announced I have seen that the market had gone down. Most of the retailers and even some investment institutions sell for liquidity thus creating a bearish trend in the market.

So considering this trend I feel it makes more sense to invest in performing shares which will be available at a more subsidized rates than going through the hassle of applying for IPO's. Both my previous experience with IPO with Reliance Power and recent NHSPC was disappointing. Both were oversubscribed by 15-20 times and so we get just a percentage of what we have applied for.

The application process involves bidding and paying in advance. So if the IPO is over subscribed we get just percentage of what we have applied and the money which we had paid as advance will be idle till they refund which can take any where between 4-6 weeks.

So considering this I feel it is better to utilize the money for buying other key stocks as they will be available at lower rated because of the bearish trends during IPO’s.

What is Reverse mortgage?

Reverse mortgage is a new product or concept in India although it is quite popular in the western countries.

So what is this reverse mortgage. Courtesy to wikipedia this is the best explanation

A reverse mortgage (or lifetime mortgage) is a loan available to seniors, and is used to release the home equity in the property as one lump sum or multiple payments. The homeowner's obligation to repay the loan is deferred until the owner dies, the home is sold, or the owner leaves (e.g., into aged care).

In a conventional mortgage the homeowner makes a monthly amortized payment to the lender; after each payment the equity increases within his or her property, and typically after the end of the term (e.g., 30 years) the mortgage has been paid in full and the property is released from the lender. In a reverse mortgage, the home owner makes no payments and all interest is added to the lien on the property. If the owner receives monthly payments, or a bulk payment of the available equity percentage for their age, then the debt on the property increases each month.

http://en.wikipedia.org/wiki/Reverse_mortgage

Nanden Nalkeni to head National ID Card Project

India needs more such visionaries and leaders to take up such projects which can impact our country in a big way. I am sure he is going to face a big cultural change moving from Infosys where the work culture is highly professional and dynamic to the more laid back and bureaucratic government sector. Wish him all success.

Updates

Its quite some time since I have put in a post. Had been busy with various things in life. But as always I had been keeping up to date with the market and real estate market in India.

India just got a new budget and as expected lot of emphasize on infrastructure and fulfillment of the rural population. These two factors are key for the next phase of growth with the world still limping with the worst ever recession in decades.

Is it a good time to Invest in Real Estate or in your first Home?

Real estate in India is going through troubled times where most of the major players
are facing a major liquidity issue. This added with the buyers staying away from buying homes have really impacted the demand. Most of the major markets in India have already seen 15-20% correction. So is this the right time for genuine first time buyers who are looking for a home. Well looking at the current scenario it looks like there will be another 10-15% of price correction at least that's what every one thinks including me. So I think people should wait, may be for another 6-8 months before they take this major decision. This is my reason of justification. With too many unsold units in the market the sellers will obviously start getting desperate to sell out even if it means no profit margins and this will force them to further reduce the price. This can trigger a competition among builders to sell their inventory. This scenario can further reduce the price.

So all those buyers, be patient and wait for some more time, and am sure you will get a great deal.

My Friday post on stock market

Want to justify my previous post, last weeks bullish market was temporary and if you see world over the market had been bearish and as of today the american market also been down about 250 points. With more negative news like the automobile sector and with the quarter results coming by I think we can expect more down turns

Is the economy bouncing back?

Both in U.S.A and India the stock markets had been witnessing a surge this week. Is this a sign of economy falling back in track? Well I don't think so this is purely an impact created due to the various stimulus packages which is creating a positive sign for all the U.S banks. This will be temporary and am sure that the morale will turn bearish with more economy statistics like job loss, new jobs created, home sales figures comes out for the month. I am sure there will be more job cuts and companies will face growth challenges for atleast another 3-4 quarters. Especially in U.S I still don't understand how the green initiation is going to fuel the next growth.

Citibank Stocks

I remember a headline in CNN Money that Citi Bank stocks have fallen below 1$ for the first time in near future. They were trading for 92-97 cents which was highly undervalued for a company like Citi Bank. So if some one with loads of money and who is ready to take some risk and invested on this stock, he would have tripled his investment as the stocks have gone up almost 3 times after that fateful week.

So if you are an opportunist and ready to take some calculated risks you can make loads of money in the stock world.

Health & Education in U.S.A

Reading through different articles one thing is for sure, U.S.A is facing a collapse in its health and education policy. If we see the current scenario both health and education is getting so costly no common person can afford it. Both health and education is one of the key drivers for building an efficient and productive new generation.

If you see the current scenario that people who loose jobs are no longer able to continue their health insurance they will be bankrupt if they get sick and is hospitalized.

If you see the statistics from U.S Census Bureau it says that only 26% of Americans have a college degree or high degree. So what could be the reasons for this? The public schools are free here but after that any degree education costs are high. Students will have to either rely on their parents, scholarship or loans. America with a society with 2% savings and who lives out of credit cards, students cannot rely on their parents to fund them and scholarships are only for the bright ones. So the only option is to take a loan which makes them creditors the day they land with a job. Then they take credit for automobiles, home any thing you think about and their whole life will be revolved around in paying back debts. And this vicious circle will continue into their next generation.

So for U.S to really progress they need to relook at their health and education policies.

Dubai has become bankrupt- Its official now.

When I last time went to Dubai I was fascinated with the construction activity happening in and around Dubai. The number of projects here were so many that Dubai accounted for the world’s 50% of the cranes. The palm by Nakheel developers, Burj Dubai - tallest building in the world –being some of the prestigious developments.

Now I hear that there are no buyers for the luxurious palm villas and the Burj Dubai – Tallest building has been put on all due to a credit crunch. I had always had the feeling that the real estate scenario in Dubai was a bubble which was about to burst. I never could not justify the actual demand for so much of commercial and residential property in a small kingdom whose main economy was tourism and business trading. Dubai even does not have an oil unlike its neighboring state of Abu Dubai.

So with the latest development of Abu Dhabi bailing out Dubai of all its loans shows the reality.

787 Billion Stimulus

Lot of think tanks still debate whether it is the right time to approve a stimulus
Of tax payers money with out a concrete plan on how this can be utilized to overcome the current crises. The big question is what is going to drive the growth. Where will the banks invest in next when the general sentiments itself is very negative.

My feel considering Obama’s presidential priority is that the funds might be used in funding green projects.

Although the following article in LA Times contradict it.
http://www.latimes.com/news/nationworld/nation/la-na-obama-energy-stimulus16-2009jan16,0,922149.story

IT Governance

With the Satyam scandal, corporate governance will become a key factor for western companies to engage in long term IT partnerships with Indian services companies. The government should also proactively regularize and come up with policies to ensure that the companies are in safe hands. There should also be more stringent auditions to ensure that such atrocity does not happen in the future.

India - World's Back Office

India continues to be the preferred back office of the world with China slowly catching up. India still commands a strong 26% of the IT service industry with China just 3%.


So how does the future stand for this Industry for India compared with China. China has a qualified work force which is one of the most essential needs for this Industry and also a supportive government which can give a healthy competition for India.


China disadvantages are the command over English and the protection of the intellectual property. These can be overcome by training and more stringent government regulations.


So will China catch up with Indic in this niche Industry? In India this Industry is still driven by the private sector. For India to continue to be the world leader there should be more support from the government and lot more improvement in infrastructure. India in the long term should also look at improving productivity and quality of these services by implementing innovative processes.


Hopefully with the changing attitude of our government and more focus on improving our infrastructure, and the great vision and international exposure of our IT leaders we should continue to be in the forefront of this Industry.

Indian Banks still healthy

Just read that HDFC Q3 results were net up 45%. Federal bank also was not far behind. Seeing that our banks are still posting profits in this economic down time justifies that our domestic
market is still strong. People are still able to pay the EMI's, there are very few foreclosures
and the banks are not geting piled up with deflating real estate assets.

In general India market still seems to have lot of liquidity compared with its western counter parts.

Is this because of the banking regulation defined by the RBI that our banks are in a better shape?
Well I think will have to do some kind of research to comment more on this.

Will it be Infrastructure Investment?

Thinking more about my previous post, I think government’s plan of big time investment in infrastructure projects can be the solution to crises. These projects create lot of jobs, which in turn can create optimism and general demand of everything.

What is going to drive the growth?

Most of the world governments have declared stimulus packages for the banking industry so that they will have more credit and liquidity. But where will the banks invest all this money to drive the next generation of growth.
If we look at U.S most of their industries are struggling, they have very few manufacturing industry, services industry are also being outsourced or are facing talent shortages, retail industry also had a bad holiday season. Before the mortgage crises it was the housing or the real estate industry which was driving the growth but now with that industry in complete shackles what is going to drive the next phase of growth.

I have no clue.

Madolf and Ponzi Scam

Madolf scam has started hitting the headlines recently and this is considered as one of the biggest financial scams in the world. When I read about Madolf laundering of 30 Billion of investor’s money I was curious to know more about the famous Ponzi scheme.

Ponzi scheme is financial operation of paying returns to investors out of money from subsequent investors.

So how did Madolf scam got burst finally? If we take his case things were going pretty well till beginning of 2008 when the economy was in a growth phase and lot of credit available. Because of his great reputation he was always able to find new investors to pay returns to his previous investors. But by mid of 2008 lot of his investors started withdrawing the principal and he was not able to find new investors and this is when he got burst.

Satyam Impact and its after math

Satyam Fraud has become the biggest corporate scandal in India.
How will this impact the India outsourcing industry?
There are lots of lobbies with in the U.S who are against outsourcing jobs to
outside U.S and they will surely start leveraging this situation to strengthen their fight against outsourcing. They will start questioning the Indian companies’ corporate ethics, professionalism, governance. How this situation shapes up will also dependon how the Indian government is going to tackle this.

This will also be an opportunity for American software services companies like IBM, Accenture to make use of the situation in terms of competing with other Indian software companies like Infosys, Wipro etc

This is definitely a blow to Indian software service companies and it will take some time to overcome this.

Corporate governance

With the Satyam scandal, corporate governance will become a key factor for western companies to engage in long term IT partnerships with Indian services companies. The government should also proactively regularize and come up with policies to ensure that the companies are in safe hands. There should also be more stringent auditions to ensure that such atrocity does not happen in the future.

Deflation and its impact

Deflation is all about general level of prices falling . But why is deflation bad in general, should n't the lowering of price be good for the general public.

Looking closer into it, how does deflation happen? This generally happens when there is a reduced demand which can be due to a wide spread recession, people cuting their costs anticipating greater recession, job losses etc.
Reduced demand can lead to all major manufacturers reducing production which can lead to wider job loses.
This can change into a vicious cycle leading to depression.

Automobile crisis and its bail out

Wanted to always raise my opinion on the automobile crisis of America's Big Three- GM, Ford and Chrystler.


There had been lot of debates and negotiation by the Automobile Majors on a government bail out something in the lines which the financial industry received.

But do you think a bail out with Billions of tax payers’ money is the best solution to this?

Looking at the root cause their key issues are mismanagement, labor costs associated with pay and health care. Until and unless this is resolved, they will not have the cost edge which its Japanese competitors have.

If they are able to fix this , this cost saving can help them to start focusing and investing more on R&D for more innovation and quality.

Until these key issues are resolved any bail out money is not going to save the industry.

2009 And Economy

So we are finally in 2009. Looking at 2008, it started of pretty well for India and the world economy. Our share market crossed the 20,000 magic figures for the first time with retail investors and FDI’s all optimistically pumping in money into market. Things all looked great until the U.S mortgage crises which created major credit crises forcing the U.S banks to pull out their money which they had invested as FDI’s in markets like India. This resulted in the crash towards the later part of 2008 by eroding the Indian market by more than 58 % and the index going below the 10000 mark. This resulted in a huge wealth erosion across India.

This has further rippled into other industries like real estate, manufacturing etc. Luckily our banks were more regulated which has resulted in hardly any bankruptcies compared to the U.S.

Hopefully the new RBI policies and the governments decisions to pump in more money, reduce housing Interest rates will bring back the India Shine.

For the IT industry this will be another challenging year with most of the American and European companies relooking and reducing their IT expenditure.

This should be the time for IT companies focus on upcoming markets like India and China which has lot of opportunities.

Hope fully the recession will be short lived and we might see some up side trend towards the later year of 2009

First Blog

Well can't believe that I have started blogging. Wanted to always get into the blogging world but procrastination had always over ruled me

So let me start my first blog with a Happy New Year.

My new year rather started with an awful and sad note. On Jan 1st me , my family and two of my friends family started on our vacation on Orlando. We had planned the five days vigorously so that we will be able to cover Disney World, Universal Studio and Sea world. But unfortunately our flight got delayed by 6-7 hours because of some minor clinch in the gear and it took about 5 hours to for the flight officials to procure the parts and 2 minutes to fix it.

When the group was just getting over the delay and finally started to enjoy the trip one of the families in the group had to drop out of the trip due to a sad and sudden demise of his mother.

We continued the rest of the trip on a sad note and finally I am back home in NJ.