Bull Zone
- Thread starter raosrinivas
- Start date
It is a good idea and good policy to keep interest rates +3% above the inflation rate. so 5% in US is a good point and 10% in India is a good move. if the interest rate is below inflation rate then people will borrow money and they can buy anything they can be sure that at the end of the year they can pay off the loan based on the appreciation of the commodity. if the stock market grows at 30% per year, then in the 3rd and 4th year enought people will get confidence to take out a bank loan at 15% and put in stock market. they don't have to do any work just make the differential 15%.
it is very important in my opinion, where the money lent by banks is going, if it is going to the businesses it will create jobs and jobs create robust economy and products and growth and wealth, but if it goes towards home loans then to that extent business investments will stop and businesses will be left with less money to expand. US is a good example just a few years back banks were marketing loans to everyone even if he can not pay back, does not have a job or even if illegal immigrant that's fine for them. so i believe for the next 5 yrs or so businesses in US will find it extremely difficult to fund their expansions because the money was already given out.
now that fed seems to be done with rate cuts(hopefully), it remains to be seen how much steam is left in the US rally. can DOW 10000 support hold with out the fed ?
it is very important in my opinion, where the money lent by banks is going, if it is going to the businesses it will create jobs and jobs create robust economy and products and growth and wealth, but if it goes towards home loans then to that extent business investments will stop and businesses will be left with less money to expand. US is a good example just a few years back banks were marketing loans to everyone even if he can not pay back, does not have a job or even if illegal immigrant that's fine for them. so i believe for the next 5 yrs or so businesses in US will find it extremely difficult to fund their expansions because the money was already given out.
now that fed seems to be done with rate cuts(hopefully), it remains to be seen how much steam is left in the US rally. can DOW 10000 support hold with out the fed ?
Do you believe in the published inflation figures?
When was Money ever "given out"? Money was generated and money will be generated again, that is what computers are for, it used to be paper before.otherwise DOW would have been less than 8000 now and fund managers and bankers would be begging . Somebody has put it in better words than mine.
http://www.financialsense.com/fsu/editorials/andros/2008/0118.html
http://in.reuters.com/article/companyNews/idINNMBI00126320080328
To put this in a sentence - the bottom half of the pyramid will be crushed ( does'nt matter India or US ) with these interest rates. It is already happening in US, this is just the beginning.
http://www.independent.co.uk/news/world/americas/usa-2008-the-great-depression-803095.html
Also as you pointed out,the homeloans seems to be a US repeat. One thing for sure, if RBI inceases rates sufficiently and brings down the growth rate , currency will appreciate and inflation may come down - oil and many commodities including fertilizers are traded in dollars-stating the obvious again, what happened to Iceland? pls see my last post.
30% is very optimisitic, long term US market returns is around 6% and probably it is closer to 15% for India in the long term.
There is a good chance there will be one more round of selling later this year ( Dow may be down another 20% ? ) but logic does not work anymore , with the rate at which liquidity is being injected. They can pump in few hundred billion and bail out firms at other countries expense - export inflation, as they are doing now to India and other countries. In which currency is commodities ,oil and fertilizes traded? There are enough people in the world who do not realize this.
BTW Getting difficult even to short , could have made some money shorting last month if not for these money machines - they beat us in the game
When was Money ever "given out"? Money was generated and money will be generated again, that is what computers are for, it used to be paper before.otherwise DOW would have been less than 8000 now and fund managers and bankers would be begging . Somebody has put it in better words than mine.
http://www.financialsense.com/fsu/editorials/andros/2008/0118.html
http://in.reuters.com/article/companyNews/idINNMBI00126320080328
To put this in a sentence - the bottom half of the pyramid will be crushed ( does'nt matter India or US ) with these interest rates. It is already happening in US, this is just the beginning.
http://www.independent.co.uk/news/world/americas/usa-2008-the-great-depression-803095.html
Also as you pointed out,the homeloans seems to be a US repeat. One thing for sure, if RBI inceases rates sufficiently and brings down the growth rate , currency will appreciate and inflation may come down - oil and many commodities including fertilizers are traded in dollars-stating the obvious again, what happened to Iceland? pls see my last post.
30% is very optimisitic, long term US market returns is around 6% and probably it is closer to 15% for India in the long term.
There is a good chance there will be one more round of selling later this year ( Dow may be down another 20% ? ) but logic does not work anymore , with the rate at which liquidity is being injected. They can pump in few hundred billion and bail out firms at other countries expense - export inflation, as they are doing now to India and other countries. In which currency is commodities ,oil and fertilizes traded? There are enough people in the world who do not realize this.
BTW Getting difficult even to short , could have made some money shorting last month if not for these money machines - they beat us in the game
For long only investors who do not trade day in and day out, it takes a lot of waiting to buy into anything. because price at which they buy is very critical if one is not looking to make a few points to the up. sometimes the wait may go on for years. with the availability of cheap money and new money coming in through FII's and PN's there has been a move in the sensex for 5k to 20k in a very short term(4 years is a short term for 400%). everyone has joined the party.
with GDP growth of 8.5% and inflation of 5% the real growth of 3.5% is not a bad number. but right now the gap between inflation and gdp growth is almost wiped with inflation at 7.5 and projected gdp growth at 8%. there are a lot of other numbers( inflation, iip numbers, rupee weakness ) which are signalling some signs that we are getting out of steam. may be we could get some good deals in the near future(3-4Years) in real esate, stocks etc
with GDP growth of 8.5% and inflation of 5% the real growth of 3.5% is not a bad number. but right now the gap between inflation and gdp growth is almost wiped with inflation at 7.5 and projected gdp growth at 8%. there are a lot of other numbers( inflation, iip numbers, rupee weakness ) which are signalling some signs that we are getting out of steam. may be we could get some good deals in the near future(3-4Years) in real esate, stocks etc
H
3 to 4 yrs is a very long wait looking @ 2days climate where people want in 4 hrs.......if say parsvanath was bought @ 600 this year......2day @ 200+.....if after a long wait of 3/4 yrs it commands 600......where do 2day's buyers stand ?
Latest Inflation figures 8.1 are a cause for concern. so it is looking more like India is moving towards hyper inflation of > 10% . RBI gov himself believes the inflation numbers may be under estimated. the difference between inflation and hyper inflation is simply that hyper inflation is not controllable. the actions by the FM and the inflation numbers indicate that things are not in control when it comes to inflation. the problem with inflation when it goes to levels like 10% is , people will start taking correcting actions by hoarding, which increases the problems even more. instead of buying for the next 1 month , if people start buying for the next 3 months , prices will go further up.
it remains to be seen if we are going to be below 10%, which is the worst case. Luckily we do not have the same problems are other countries experiencing hyper inflation like iceland, zimbabwe.
it remains to be seen if we are going to be below 10%, which is the worst case. Luckily we do not have the same problems are other countries experiencing hyper inflation like iceland, zimbabwe.
Similar threads
-
Gold Price Rises by Approximately 1%: Are Bulls Regaining Control?
- Started by Veteran123
- Replies: 0
-
Janpanese Yen Continues Depreciation, USD/JPY Bullish Towards 158.00
- Started by Veteran123
- Replies: 1
-
-
