Category: Your Money

Sunder’s List

Roundup: S&P +0.40%, Dow +0.17%, Nasdaq +0.62%, Gold $1,477.90, London +0.17%, Germany +0.95%, France -0.06%. At pixel: Japan -0.15%, Hong Kong +0.97%

Can’t make this shit up: muppets cheated by chit-fund ponzi scheme are now going to be compensated by people who are killing themselves. Psycho Banerjee announced a 10% point hike in value-added tax (VAT) on tobacco products to raise money for a Rs.500 crore rescue fund. (LiveMint)

Total loans outstanding to medium-size companies shrank 11%, the worst fund flow since 2008. Bank lending growth to large companies meanwhile slowed to 13%, the lowest in five years. (LiveMint)

A broken clock is right at least twice a day and Nouriel Roubini sees asset bubbles bursting. (LiveMint)

QE 1, Austerity 0? The number of Americans applying for jobless benefits fell to near a five-year low (unemployment rate: 7.7%) whereas unemployment in Spain (27.2%) and France (10.5%) has jumped to new highs. (WSJ, WSJ)

Have a nice weekend and good luck!

Gold: Why?!

“I don’t gamble. I only invest in gold.”

When I was growing up, nobody had heard of “Akshaya Tritiya.” And then, perhaps borrowing a page from how Hallmark created Valentine’s Day, jewelers have turned it into the most auspicious day to buy gold. Have people actually stepped back and asked themselves why they are partaking in this madness?

Is Gold money? No.

Try paying for your morning coffee with bullion and be prepare to be astounded at the discount you are offered on your gold. Not only is gold not money in a disaster scenario – it is not even wealth! People will hunger for food, water, and fuel – not gold.

Is Gold a good disaster trade? Only if disaster hits you and spares everybody else. From  Dubai’s blow-up to the Grexit that wasn’t to the almost-collapse of the Euro Zone to the Arab Spring to the death of Andy Rooney, gold was the first thing to fall as investors rushed to sell whatever they could.

Back in 2010, The Economist had warned: the traditional markets for gold cannot be expected to pick up the slack if rich-world investors’ appetite should pall. And this is exactly what Indian investors need to keep in mind when they use anecdotal evidence to gloss over the fact that at the end of the day, gold is just like any other commodity. And it maybe the ultimate Greater Fool trade.

Sunder’s List: The #crash of 2013

Roundup: S&P flat, Dow -0.29%, Nasdaq flat, Gold $1,440, London +0.40%, Germany +1.32%, France +1.58%

So this happened on Tuesday:

A false report of explosions at the White House that wiped out $136 billion from the S&P500 in about two minutes. (Bloomberg)

Dubai wants India’s FX trading. The DGCX is emerging as a serious contender in dollar-rupee trading to the NSE and the MCX-SX. After having managed to corner a nearly 20% market share in the exchange traded rupee-dollar segment this year, DGCX has launched mini-Indian rupee futures that, analysts say, will further boost trading on its platform. (ET)

Credit Suisse: Rate sensitive stocks have rallied in anticipation of rate cut but the macroeconomic environment and competitive dynamics are not supportive of the type of growth that is currently being anticipated. (ET)

The BoJ plans to inject the equivalent of $1.4tn into the system over the next couple of years. So more liquidity washes into emerging Asia. Among the markets likely to feel the most immediate and biggest impact are Thailand, Malaysia and Indonesia, which have historically had close links to Japan’s financial system. Vietnam and the Philippines, as well as India, could also feel a major lift. Even China, though hidden behind a wall of capital controls, is not immune: money, after all, is fungible, and the Fed’s easing has shown it will relentlessly head where returns are highest. (FT)

Good luck!

Real Estate Bill: Buyer Nirvana?

The Real Estate Bill 2011 is  the strongest attempt so far to regulate the massive real estate market. Since there seems to be rare consensus between political parties on the issue, there’s a good chance the Bill will be passed in Parliament. The Real Estate Bill will not only protect buyers from the unethical practices of unruly builders and developers but also promote transparency and accountability in the real estate sector.

Bangalore Properties - Real Estate India - Whi...

It is often the case that developers do not divulge the nature of a housing project, size and cost accurately. Agreements between buyer and developer typically favor the builder, giving him tremendous leeway to change terms without any compensation to the consumer. Take the case of Springfield Apartments in Bangalore where seven wings were constructed illegally and sold by the builder without the necessary approvals. Almost 1,300 residents faced eviction when the fact came to light.

Housing projects also get delayed or cancelled if builders launch projects without acquiring necessary sanctions. The Real Estate Bill aims to right this skewed balance of power and restore confidence of buyers in the real estate sector.

Key provisions of the Real Estate Bill 2011

The Real Estate (Regulation & Development) Bill 2011 supports regulated and planned real estate development via standardized practices and efficient systems for the sale of immovable properties. Key provisions of the draft Bill include:

  • Establishment of Real Estate Regulatory Authority (RERA) in each state to assure planned and orderly growth.
  • Mandatory registration of developers and builders for accreditation.
  • Mandatory public disclosure norms (allowed only after all approvals are in place) that include developer details, project, land status, statutory approvals, and contractual obligations.
  • Promoters’ obligation to adhere to approved plans and project specifications, with clause to refund buyer satisfactorily in case of default.
  • Allottee’s (Buyer) obligation to furnish payments at agreed interest rate without delay.
  • Directive for developers to allocate 70% of funds collected to that project to avoid misappropriation of consumer’s money and delays.
  • Establishment of Authority (one chairperson and at least two members with experience and knowledge of real estate) to advise government in planning and dispute resolution.
  • Establishment of a Real Estate Appellate Tribunal (REAT) by Central Government for quick resolution of disputes submitted by Authority.
  • Establishment of a Central Advisory Council to counsel government and make recommendations to protect consumers and foster growth of real estate sector.
  • Penal provisions to ensure compliance.
  • Jurisdiction of Civil Courts barred on matters before Authority or REAT.

What’s in it for buyers?

Bangalore Properties - Real Estate India - Sou...

The Real Estate Bill will help to contain the circulation of black money that is rampant in the real estate sector. Public disclosure norms and registration of developers will reduce fraud and possession delays as developers will have to complete all approval processes before launching a project or advertising it.

Developers’ unfair practice of reducing common areas, making arbitrary changes, selling off cordoned open spaces, and modifying terms would be restrained as these actions will be penalized. Fair agreement terms will also help buyers.

What’s in it for developers and promoters?

The Real Estate Bill will create an opportunity for honest developers to differentiate their projects and services from the masses. Since state authorities will be given 30 days to reject or accept an application along with necessary paper work, development of projects will not be delayed over administrative red tape. As allottees are also legally accountable under the Bill, developers will be protected from defaulting buyers and bankruptcy.

If the Real Estate Bill is passed in Parliament, buyers will be the happiest lot. Too many unscrupulous builders have come up, looting people as well as the environment with corruptly gotten sanctions, false promises and unplanned development. However, a Bill is as effective as its implementation. Will the Real Estate Bill lead to the maturation of a quality real estate industry in India? I sure hope so.


Bye Bye Austerity?

20110627 Now that is inflation!

In 2010, a pair of Harvard economists published a paper, “Growth in a Time of Debt” that concluded that countries with a debt exceeding 90% of their annual GDP experienced slower growth than their thriftier peers. It was a statistic to which pro-austerity policymakers could cling and Germany, with a “never again” attitude towards Weimar Republic era hyperinflation, got much of Europe to sign-off on austerity to obtain bail-out funds.

However, biggest problem with austerity is that it can potentially kick-off a deflationary spiral that might actually increase indebtedness. And the latest euro-zone stat is proof of that: In the euro area the government debt to GDP ratio increased from 87.3% at the end of 2011 to 90.6% at the end of 2012. Besides, how is growth going to come about if both the public and private sectors contract at the same time?

eurozone pmiThe latest manufacturing PMI numbers are showing that the slow-down has now spread to the “core” Euro-zone economies. “The renewed decline in Germany will also raise fears that the region’s largest growth engine has moved into reverse, thereby acting as a drag on the region at the same time as particularly steep downturns persist in France, Italy and Spain.”

Bill Gross, of PIMCO fame, who had once warned that UK debt levels were too high, leaving gilts “resting on a bed of nitroglycerine” has recently changed his tune: “The UK and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term, is the way to produce real growth. It is not. You’ve got to spend money.”

And last week, Reinhart and Rogoff’s most famous finding has been debunked by a 28-year-old student. Earlier this month, Thomas Herndon, a graduate in the economics department at Amherst College in Massachusetts, found that they had made fundamental mathematical errors in the study – and all because of a flubbed Excel spreadsheet.

Will Europe’s policy makers change their stance and resort to a looser monetary policy and ease up on the austerity principle? Markets in europe (London +1.88%, Germany +2.23%, France +3.14%) started rallying as soon as the dismal PMI numbers came in – at least they seem to believe that the liquidity spigot is soon going to be let loose.