Yeh recession recession kya hai…
Less than 2 years ago, the mood in the country was really upbeat.
The stock markets (BSE Sensex) was looking to breach 20000 which it eventually did, the crude oil prices were below $40 a barrel, which means the petrol and diesel prices would follow and people were freely investing in big cars, bigger houses, clothes, jewels, vacations, etc. The banks were throwing money at us, car loans, home loans, personal loans, credit cards, you dream it, you got it loans.
Then almost like a Tsunami, less than a year ago, the whole world was hit with a bomb that was more brutal than its nuclear counterpart, simply called recession.
It started with expose of the home loan, mortgage institutions with their bad investments, portfolios which included finance through instruments so complicated, in my mind even they could not decipher. All the banks, financial institutions and pension fund, trusts, fell like a pack of cards.
It started with the U.K. and the U.S., but then the domino effect it created left almost all countries completely dragged into it.
We, as Indians, are still not as affected by this, simply because we save much more and we are not totally dependent on the world at large. We don’t use credit cards and we practically produce everything we need. Therefore, we are unaffected by recession. Right…. Wrong.
No country in the world, whether they admit it or not can decouple themselves or deny the fact that they were hit by recession.
Our Stock markets, BSE Sensex crashed to almost 7000, the inflation dropped to almost 3%, simply because of lack of consumption at large and the realty, gem and jewels industry saw the biggest slump in over three decades. The airline, hotels, hospitality industry went spiraling down in losses and there were recruitment freeze, infact downsizing, right sizing or whatever you may call it but in clear terms, sacking a whole lot of professionals, skilled and semi skilled workers across all industries.
Its true that we might be able to come out sooner, because of our saving habits, etc.
I might concede here that we might also be able to benefit eventually because we might plan our spending ( utilization of resources better) and we can offer cost effective solutions to the rest of the world, not depending totally on the U.S or the Europe.
The challenge for the average middle class Indian is to recognize this.
I believe in the 80 – 20 rule. In our context, it means that 80% of Indians lie in the middle income bracket will be affected by the slowdown and the lessons they would have learned during this phase would be of great value to them. 2% of the super rich will really not be affected, as also approximately 18% of the really poor. Also, as a race we are extremely emotional as people. So therefore, when good things happen to us, we tend to go overboard in expressing it albeit when things go wrong we project it like the sky is falling on us.
However, coming back to the lessons learnt during recession.
The most important one is being conservative. I think we should all admit that because of lower interest rates, easy instalment plans, low documentation we simply could not resist.
We used credit cards on deals we didn’t need, bought homes, cars beyond our means, we didn’t care about what interest amounts we were being charged. Well the time has come to space your spending habits into priority wise and affordability wise pattern.
The other lesson is that like most countries, India cannot be decoupled. Therefore if you get an indication of the world markets take a cue from it.
However, the most important lesson or shall I say inference from history is, however, very positive. It means that there is light at the end of the tunnel or there is always a day break after night. What goes up comes down and vice versa.
Therefore, like good times, tough times don’t last forever. Tough people do.
Friday, June 19, 2009
Friday, June 12, 2009
Hail Obama…Fail Obama
Every alternate summer, I like to take my wife and two kids and travel abroad for a 2 to 3 weeks filled with exciting places to visit, especially amusement parks, beaches, restaurants etc.
This summer, we planned our trip to the west coast of the U.S. and as usual, it was as surprising, and a little startling compared to our previous three visits as a family.
California, for me, is one of the most beautiful states in the U.S. This state has character.
White sand beaches in Santa cruz, Animal Zoo and Wildlife Park in San Diego, the rich and famous in the Beverly hills, Universal Studios, Disney parks, the indulgent visits at the finest vineyards at the Napa Valley and small towns that remind you of Europe with their French windows, small green boulevards, decks along the beach with small restaurants with alfresco dining seems extremely artistic, classy and exquisite.
This is where the honeymoon ends.
For the first time atleast in the last 8 years, the mood in the country was not as upbeat as one would like it to be.
Usually, May end and early June heralds the beginning of Summer and preparation for vacations for most American families.The Sun is out all day.
People flock to stores for new summer wear, the flights to various destinations are overbooked, the hotel deals seem like you know you want it but cannot afford it.
The queues at amusement parks, restaurants get longer by the minute and you wonder whether you have come to a foreign country at all.
This year, however, it was different.
Every one knows that the U.S. economy is in recession.
However, what I experienced this time was the biggest casualty of this recession, the Spirit of America.
Long known for the country with the biggest opportunities, where dreams become reality, where you could be anyone from anywhere but if you had the right attitude and dared to dream, you could do it.
Now, it seemed that the biggest fight for them was the fight to survive rather than to achieve. People from all walks of life, the store owners, the working professionals, blue – collared or semi skilled, entrepreneurs or large format businessmen, everyone had a fight to win, a race to run, what seemed to be a losing battle.
Let me give you a few examples. We were waiting in a queue of a restaurant at the Disney park in Los Angeles with our order ready. At the counter, after placing our order, while paying up we realized that we were being asked to pay for much more than we had ordered. Assuming it to be a common oversight on the part of the counter employee, we paid and asked for our receipt to recheck what we had ordered, but to our horror, the employee had printed an incorrect receipt and tore it in front of us. We demanded a duplicate receipt, to which he conceded his mistake and refunded the extra money we had been charged.
Back to New York. I had carried a gadget (a Bluetooth device fitted on a rear view mirror) that my brother had bought on his visit less than a year ago with a full replacement guarantee from Circuit City and wanted me to replace it due to some problem. To my horror, Circuit City had gone out of business and the guarantees meant nothing.
America is known for its deals on clothes, shoes, electronics, etc.
We were at Lee Stresburg Outlets close to Washington Area where you find clothes/shoes of famous brands like Gap, Levi’s, Reebok, Nike to name a few at fantastic prices. As usual, you could see some of the tags in various sections showing you discounts on various items, for example, 50% off or any item for U.S.$20.
After picking up a lot of the stuff that we found reasonable, when we reached the counter to pay up, we discovered that a lot of tags had been wrongly placed. The counter salesperson argued that the customers tend to place tags here and there or sometimes there is a printing error on the price tags, but hello, you didn’t inform us till we checked the bill you had printed and brought it your notice.
So here goes, the real America is desperate. Organisations have closed or are on the verge of closing down. To show sales figures or to keep their job, people have resorted to certain methods which were unheard of in the past.
I do not understand American politics. However, I do understand that when America voted for the first African – American President, they voted for change.
I know it is an uphill task for President Barack Obama to make a difference so soon.
But, as an outsider, I have good reason to believe that the party to celebrate his 100 days in office was uncalled for.
Long ago in school I had heard a verse which made an impression on me. I am sure Mr. Obama has heard it too.
The woods are lonely, dark and deep
But I have promises to keep
And miles to go before I sleep
And miles to before I sleep…
Every alternate summer, I like to take my wife and two kids and travel abroad for a 2 to 3 weeks filled with exciting places to visit, especially amusement parks, beaches, restaurants etc.
This summer, we planned our trip to the west coast of the U.S. and as usual, it was as surprising, and a little startling compared to our previous three visits as a family.
California, for me, is one of the most beautiful states in the U.S. This state has character.
White sand beaches in Santa cruz, Animal Zoo and Wildlife Park in San Diego, the rich and famous in the Beverly hills, Universal Studios, Disney parks, the indulgent visits at the finest vineyards at the Napa Valley and small towns that remind you of Europe with their French windows, small green boulevards, decks along the beach with small restaurants with alfresco dining seems extremely artistic, classy and exquisite.
This is where the honeymoon ends.
For the first time atleast in the last 8 years, the mood in the country was not as upbeat as one would like it to be.
Usually, May end and early June heralds the beginning of Summer and preparation for vacations for most American families.The Sun is out all day.
People flock to stores for new summer wear, the flights to various destinations are overbooked, the hotel deals seem like you know you want it but cannot afford it.
The queues at amusement parks, restaurants get longer by the minute and you wonder whether you have come to a foreign country at all.
This year, however, it was different.
Every one knows that the U.S. economy is in recession.
However, what I experienced this time was the biggest casualty of this recession, the Spirit of America.
Long known for the country with the biggest opportunities, where dreams become reality, where you could be anyone from anywhere but if you had the right attitude and dared to dream, you could do it.
Now, it seemed that the biggest fight for them was the fight to survive rather than to achieve. People from all walks of life, the store owners, the working professionals, blue – collared or semi skilled, entrepreneurs or large format businessmen, everyone had a fight to win, a race to run, what seemed to be a losing battle.
Let me give you a few examples. We were waiting in a queue of a restaurant at the Disney park in Los Angeles with our order ready. At the counter, after placing our order, while paying up we realized that we were being asked to pay for much more than we had ordered. Assuming it to be a common oversight on the part of the counter employee, we paid and asked for our receipt to recheck what we had ordered, but to our horror, the employee had printed an incorrect receipt and tore it in front of us. We demanded a duplicate receipt, to which he conceded his mistake and refunded the extra money we had been charged.
Back to New York. I had carried a gadget (a Bluetooth device fitted on a rear view mirror) that my brother had bought on his visit less than a year ago with a full replacement guarantee from Circuit City and wanted me to replace it due to some problem. To my horror, Circuit City had gone out of business and the guarantees meant nothing.
America is known for its deals on clothes, shoes, electronics, etc.
We were at Lee Stresburg Outlets close to Washington Area where you find clothes/shoes of famous brands like Gap, Levi’s, Reebok, Nike to name a few at fantastic prices. As usual, you could see some of the tags in various sections showing you discounts on various items, for example, 50% off or any item for U.S.$20.
After picking up a lot of the stuff that we found reasonable, when we reached the counter to pay up, we discovered that a lot of tags had been wrongly placed. The counter salesperson argued that the customers tend to place tags here and there or sometimes there is a printing error on the price tags, but hello, you didn’t inform us till we checked the bill you had printed and brought it your notice.
So here goes, the real America is desperate. Organisations have closed or are on the verge of closing down. To show sales figures or to keep their job, people have resorted to certain methods which were unheard of in the past.
I do not understand American politics. However, I do understand that when America voted for the first African – American President, they voted for change.
I know it is an uphill task for President Barack Obama to make a difference so soon.
But, as an outsider, I have good reason to believe that the party to celebrate his 100 days in office was uncalled for.
Long ago in school I had heard a verse which made an impression on me. I am sure Mr. Obama has heard it too.
The woods are lonely, dark and deep
But I have promises to keep
And miles to go before I sleep
And miles to before I sleep…
Friday, June 5, 2009
stop kidding us
Home Sweet Home.
Finally some good news has come our way. An atmosphere of stability and optimism has emerged post the announcement of our new Government.
We can see the effect in terms of the stock markets hitting the upper circuit twice in a day and creating new highs week on week.
However, when most first time buyers wonder whether to invest in a home at this point or not, the answer lies in the basics of investing.
Any financial institution or bank will tell you your eligibility of home loan on the basis of your income statement and tax records.
They may also guide you to find options for a suitable home in your budget.
But, one has to be aware of certain principles to be considered before investing ;
Buy when the prices are low, Hold when the prices are high.
Invest in easily (tradable) reputed project / builder.
Believe in getting the paperwork of your investment in order before investing.
Most of my colleagues complain that they never know when the prices are low and whether the TIMING of their investment is right.
Frankly, if anyone claims to know the lowest price of any form of investment (property, gold, stocks, etc.), he probably figures in the forbes list of billionaires or is taking you for a royal ride.
Therefore investment in property should be need based rather than deal based.
For most first time buyers, they get easily sucked up into fantastic last minute prices or fancy discounts offered by builders/brokers/agents.
Understand that you need to define your threshold in terms of the area of property you need, the location and the price range that your income allows.
If you are able to define your threshold in the variables mentioned above, you will be able to devise a threshold in terms of the price at which you should enter, in other words timing your purchase.
In the era of recession, investing in the right project or builder is probably more important than the price at which you enter.
Many reputed construction conglomerates have stalled projects over many years due to lack of funds. Gone are the days when one found tremendous advantage in booking flats at pre-construction or semi – construction stage.
Sometimes, the market prices of some projects actually drop after the completion.
Because you want to invest in a home which could possibly become your single largest purchase ever, you need to be prudent in making the right choice of the builder or explore the project in question.
A good way of knowing is to ask the builder/broker for references of other buyers/investors in the project.
Another way of knowing is to check other projects that have already been completed.
Tradability depends on factors like the location of the project, the layout of the flats, the amenities provided, the gentry etc.
My suggestion - Invest in ready to move in projects or near ready at best.
Always read the fine print.
I want to know;
( Indicative List )
The ratio of super built up area to the Carpet area of the flat
The payment plan if the project is not complete
The datewise commitment from plinth to all phases of the project
A copy of agreement to be checked by a solicitor.
A copy of approvals Commencement Certificate/Completion Certificate/Occupation Certificate
A copy of permission from the Electricity Board / Water department / Fire department.
Payment of Stamp duty and Registration of the document is mandatory.
If a bank loan is involved, it is advisable to get the knowledge of builder reputation from the bank and allow them access to complete details of the deal.
So you see, the stock market might have little or no effect on the decision to purchase your dream home.
Don’t believe your neighbourhood uncle who tells you the prices of all flats in the area are going to drop by 50% or the nukkad ka real estate agent offers you an A.C. free in each room if you buy the flat offered by him by the end of the day.
Finally some good news has come our way. An atmosphere of stability and optimism has emerged post the announcement of our new Government.
We can see the effect in terms of the stock markets hitting the upper circuit twice in a day and creating new highs week on week.
However, when most first time buyers wonder whether to invest in a home at this point or not, the answer lies in the basics of investing.
Any financial institution or bank will tell you your eligibility of home loan on the basis of your income statement and tax records.
They may also guide you to find options for a suitable home in your budget.
But, one has to be aware of certain principles to be considered before investing ;
Buy when the prices are low, Hold when the prices are high.
Invest in easily (tradable) reputed project / builder.
Believe in getting the paperwork of your investment in order before investing.
Most of my colleagues complain that they never know when the prices are low and whether the TIMING of their investment is right.
Frankly, if anyone claims to know the lowest price of any form of investment (property, gold, stocks, etc.), he probably figures in the forbes list of billionaires or is taking you for a royal ride.
Therefore investment in property should be need based rather than deal based.
For most first time buyers, they get easily sucked up into fantastic last minute prices or fancy discounts offered by builders/brokers/agents.
Understand that you need to define your threshold in terms of the area of property you need, the location and the price range that your income allows.
If you are able to define your threshold in the variables mentioned above, you will be able to devise a threshold in terms of the price at which you should enter, in other words timing your purchase.
In the era of recession, investing in the right project or builder is probably more important than the price at which you enter.
Many reputed construction conglomerates have stalled projects over many years due to lack of funds. Gone are the days when one found tremendous advantage in booking flats at pre-construction or semi – construction stage.
Sometimes, the market prices of some projects actually drop after the completion.
Because you want to invest in a home which could possibly become your single largest purchase ever, you need to be prudent in making the right choice of the builder or explore the project in question.
A good way of knowing is to ask the builder/broker for references of other buyers/investors in the project.
Another way of knowing is to check other projects that have already been completed.
Tradability depends on factors like the location of the project, the layout of the flats, the amenities provided, the gentry etc.
My suggestion - Invest in ready to move in projects or near ready at best.
Always read the fine print.
I want to know;
( Indicative List )
The ratio of super built up area to the Carpet area of the flat
The payment plan if the project is not complete
The datewise commitment from plinth to all phases of the project
A copy of agreement to be checked by a solicitor.
A copy of approvals Commencement Certificate/Completion Certificate/Occupation Certificate
A copy of permission from the Electricity Board / Water department / Fire department.
Payment of Stamp duty and Registration of the document is mandatory.
If a bank loan is involved, it is advisable to get the knowledge of builder reputation from the bank and allow them access to complete details of the deal.
So you see, the stock market might have little or no effect on the decision to purchase your dream home.
Don’t believe your neighbourhood uncle who tells you the prices of all flats in the area are going to drop by 50% or the nukkad ka real estate agent offers you an A.C. free in each room if you buy the flat offered by him by the end of the day.
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