tag:blogger.com,1999:blog-61564335619027808702024-02-20T07:33:59.162-05:00Absolute CapitalUnknownnoreply@blogger.comBlogger103125tag:blogger.com,1999:blog-6156433561902780870.post-34401484445793260722010-07-13T05:57:00.000-04:002010-07-13T05:57:34.872-04:00Greed in the India Equity MarketsInfosys reported earnings that missed estimates today. In addition the industrial production numbers came in at around 11% while the market and analysts were expecting 15%.<br />
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Other signs are also beginning to appear that the Indian economy is slowing down. Obviously this is a case of glass half full or half empty. The Indian stock market has avoided the doldrums faced by U.S., European and Chinese markets and has performed relatively better compared to these markets.<br />
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However, I see today's news out of Infosys as a sign that we are witnessing the exporting of a crisis as we have in the past. In addition, BMW Audi and other German exporters are hiring due to an unexpected rise in demand. This is exactly what was forecast to happen, the Europeans are exporting their recession to the Asian countries.<br />
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The Indian export model cannot survive a 20% devaluation of the Euro relative to the local currency. The Indian economy has already started decelerating. It is only a matter of time before the stock market acknowledges this.<br />
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The market can remain oblivious to bad news for longer than your account can stay liquid. Making money in the market requires patience, or a microphone in the offices of Goldman Sachs and the Fed.<br />
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Today's Indian market is a product of greed by investors that are jumping back in (capitulating) as they see 18000 on the index and fear being left out. Investing based on greed and fear usually results in losses. This time will be no different. Now is not the time to be investing in equities.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6156433561902780870.post-52436876414769201672010-07-06T04:49:00.000-04:002010-07-06T04:49:00.831-04:00A Massive Rounding Top in the Indian Stock MarketFrom a technical perspective the Indian Stock Market is building a massive rounding top which ties in well with the sentiment prevailing in the market.<br />
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We are going to spend the next few years going down. Each time the market looks like it is off to the races, investors will jump in and subsequently get killed. It's going to be a very long decline.<br />
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Every time the bottoms and rallies, people are going to say "OK, that's enough; it's over." But it won't be over. It's just going to be a long, long process. It will take a long time for Indian optimism to break down and reality to set in that the Indian story is closely linked, like every other country now, to global growth.<br />
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Optimism should actually remain dominant through the next two years and even as prices will be edging lower, most people are going to think it's a buy, and you shouldn't get out of your stocks, and recovery is just around the corner, probably for the next three years. And then, for the final half of the cycle, the final three years, that's when you'll get the capitulation phase when everyone finally gives up.<br />
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This is a non consensus view, as today the prevailing sentiment in the market is strongly optimistic.Unknownnoreply@blogger.com4tag:blogger.com,1999:blog-6156433561902780870.post-82564472662510425342010-07-06T04:35:00.000-04:002010-07-06T04:35:02.560-04:00Traxis Partners - Getting It Wrong.. Consistently - Perfect Contrary IndicatorsIn the summer of 2008, many of you may not remember this, Cyrille Moulle Bertaux of Traxis Partners came out with a WSJ article telling us that housing had bottomed and he had charts and data and analyses that convinced Traxis that the bottom in housing and the market was near.<br />
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Barton Biggs was consistently bullish through S&P 880 and the market bottomed at 666. <br />
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Then in May of this year, we had Barton Biggs on Bloomberg when the S&P was around 1180 telling us that the economic recovery was strong and he saw another 15% upside in the markets.<br />
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As more of these bull market gurus fall, all it does is convince me that the entire pay structure for fund managers and Wall Street is skewed and this will be corrected before all is said and done.<br />
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Less than 1% of these guys has any skill. The overwhelming majority are idiots and clueless about the markets and should not be managing money.<br />
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The only bigger idiots are the institutions that buy into their pitches and invest with them.<br />
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Barton made his name with the bull market of the 80s. What is it that they say, do not confuse a bull market with brains?<br />
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Interestingly, Charles Reinhardt of Morgan Stanley is another uber bull equity whore that was predicting a multi year bull market at precisely the top on the S&P 500 in May.<br />
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Wall Street has truly become a wasteland and is being exposed for what it is - a bunch of talent less over paid back stabbers that will do anything to make a buck. <br />
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You would do well to ignore ALL advice you receive from investment companies, whether in the U.S. or India.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6156433561902780870.post-14400883313076477842010-07-02T02:27:00.000-04:002010-07-02T02:27:53.253-04:00A Bubble In Optimism While the World Is Sinking<a href="http://www.amazon.com/Kindle-Wireless-Reading-Display-Globally/dp/B0015T963C?ie=UTF8&tag=httptwaintype-20&link_code=btl&camp=213689&creative=392969" target="_blank">Kindle Wireless Reading Device, Free 3G, 6" Display, White, 3G Works Globally - Latest Generation</a><img alt="" border="0" height="1" src="http://www.assoc-amazon.com/e/ir?t=httptwaintype-20&l=btl&camp=213689&creative=392969&o=1&a=B0015T963C" style="border: medium none ! important; margin: 0px ! important; padding: 0px ! important;" width="1" /><a href="http://www.amazon.com/Apple-iPod-touch-Charger-Bundle/dp/B002WYJFG2?ie=UTF8&tag=httptwaintype-20&link_code=btl&camp=213689&creative=392969" target="_blank">Apple </a><br />
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We are bombarded from all corners of the country, the media, the television, the neighbors, the internet about how India's growth is unstoppable. <br />
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The World Is Flat is a classic and bible of business. Business titles about management, creativity, success dominate bookstore displays. Thomas Friedman is the God of Business in a country that is comfortable with many Gods. Consensus thinking rules and to be skeptical is akin to being unpatriotic. It is a reasonable and understandable sentiment pervading the country.<br />
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Indians spent 50 years of being mauled by government policies that promoted corruption while suppressing the entrepreneurial spirit of the people. India is finally an arguably open market. <br />
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The populace is bought into the growth story. As with all bubbles, this one will only be evident after the fact. Property prices have risen almost a 100 fold in many instances. Not 100%, a 100 fold. Yet the prevailing sentiment is that property prices will continue to rise. An apartment in Gurgaon costs roughly $400,000 which would be enough these days to buy a mansion on the ocean in California. Prices in India are no longer cheaper than the rest of the world. Purchasing power parity has arrived for goods. Compensation however is not keeping up. Average salaries still hover under $25,000 a year for all except the businessman and higher level corporate executive. <br />
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India's success came about as a result of India's cost advantages and economic reform. Economic reforms continue but the cost advantages are starting to disappear. Companies are now turning to villages to find cheap sources of capital. But incremental business on the margin is being lost to the Phillipines and South America, Romania.<br />
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No country is an island. Particularly not today. Europe is struggling with massive debt and potential sovereign defaults. The U.S. is not far behind but benefits from the ability to print unlimited amounts of the world's reserve currency and have debts denominated in dollars. Yet I am told that Africa and islands in the southeast are growing and flourishing and will pick up the slack.<br />
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The most worrisome aspect is that Europe and the U.S. - the major markets for Indian exports - are in a deflationary vortex and a double dip recession is likely in the cards the second half of this year. Europe has had a devaluation of its currency by around 20% which is another way of saying Indian exports just got 20% more expensive to that region. China is slowing down dramatically as it is becoming apparent to the rest of the world that the growth story there was really a bubble that owes its origins to the now moribund U.S. consumer.<br />
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Worry not, I am told. Government spending and domestic demand will pick up the slack. Unfortunately, the lesson of the past 2 years from the U.S. and countless other countries over decades is that government spending is rarely an efficient use of capital and its effects are temporary and usually not multiplicative. Much depends on the monsoon and optimism about the monsoon is justified by the weather forecasters, which may be the only profession with predictive powers worse than those of economists.<br />
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Investing is about the future, not the past. The market already recognizes the growth of the Indian market over the past few years and it is priced in the valuation of stocks. The future however seems far more doubtful. <br />
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Japan was anointed the new superpower before a dramatic 20 year decline that continues. The Tiger economies were dominant in the 1990s and anointed kings untill a dramatic collapse in 1997-1998. China was anointed the next heir to the throne but the fall from the throne looks to be quite nasty. It is India's turn. Will India deliver where others have failed. The consensus thinks so. The consensus is usually wrong.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6156433561902780870.post-43840586565228380002010-06-30T07:09:00.000-04:002010-06-30T07:09:01.607-04:00Investment in stocks NOT a must for a complete and balanced portfolioThe Economic Times reports today<br />
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<blockquote><a href="http://economictimes.indiatimes.com/quickiearticleshow/6103882.cms">Investment in stocks must for a complete and balanced portfolio</a> <br />
'If you really want your money to grow - stocks is the only way to go'- Haven't you heard this umpteen times. Well, it holds true every time.<br />
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As compared to fixed deposits, investments in equity will pay 26.5 per cent higher returns in 5 years. Even for a longer term, investment in stocks pay higher returns even in comparison to real estate and gold. <br />
</blockquote>Investments in equity WILL? pay 26.5% higher returns in 5 years? Well there you have it... Economic Times India writers know exactly what equity market returns will be in 5 years. And if they know what equities are going to do, why are they writing newspaper articles, they should be hedge fund managers.<br />
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<div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/_4sqgoXq1ois/TCskss7rygI/AAAAAAAAADY/PpI9idHvHJw/s1600/tata-share-price.jpeg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://3.bp.blogspot.com/_4sqgoXq1ois/TCskss7rygI/AAAAAAAAADY/PpI9idHvHJw/s320/tata-share-price.jpeg" /></a></div><br />
They trot out Infosys and Tata Steels. Tata Steels share price performance is shown above. What if you were unfortunate enough to have bought tin 2006 and sold in fear in 2009? You would have a significant loss!<br />
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That is the issue that unsuspecting investors in India are learning for themselves. Stop listening to the mutual fund industry marketing buzz and start being wise investors.<br />
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There is a time to buy equities and when that time comes, I will invest agressively. Today is not that time.<br />
Success in the markets requires patience and waiting for the fat pitch. Investors entering the market today are likely going to be disappointed as opposed to investing in secure investments.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6156433561902780870.post-84494609028201268372010-06-29T06:17:00.000-04:002010-06-29T06:17:25.129-04:00Management Hubris - India Decoupling Stock Market Will Be A MythHow ironic that HDFC's Aditya Puri's article prints today just when the China market is down roughly 5%.<br />
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Here is the <a href="http://economictimes.indiatimes.com/markets/analysis/Decoupling-is-set-to-become-a-reality-soon/articleshow/6103516.cms">link to HDFC Aditya Puri article "Decoupling is set to become a reality soon"</a> a self serving media spin article by the head of HDFC Bank<br />
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I am going to deconstruct his comments. Mr. Puri makes the argument - correctly - that European and American economies are struggling and the world has changed structurally. True, no arguments there.<br />
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The financial markets, however, are slow learners, creatures of habit, and therefore, create confusion in the short-term or transition (defined as volatility) period. </blockquote>Really? I would love to know when the markets corrected in Nov 2007 they foresaw a correction ahead in 2008. I do not know if Mr. Puri made any such calls and protected his stockholders. Fact is that yes, markets do forecast 9 of the past 5 recessions but they usually are smarter in sum than any one individual. Anyone that considers himself smarter than the market is suffering from a God complex and has an ego problem.<br />
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<blockquote>The forecast GDP growth rate during the next 3-5 years for the following countries are (%): US: 1.8; Europe: 0.8; East Asia: 8; China: 8.5; India: 8. This reflects the level of structural adjustments required in the Western countries in terms of asset bubbles, financial contagion, stimulus, exchange rate, etc. </blockquote>I am stunned that any corporate executive would be out there spewing forecast statistics, that too from economists? Economists forecasting record for this cycle and most cycles in my lifetime has been dismal. The fact that economists are forecasting 8% growth rates for Asia is meaningless.<br />
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These same economists were forecasting similar forecasts for Japan in the late 80s and the Tiger economies in the mid 90s.<br />
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Besides, investors seeking higher returns on their investment will flock to Asia; this will result in a flood of capital and Asian currencies will see a phase of secular rise against their G-7 counterparts. This could erode export competitiveness, and economies within Asia such as India and Indonesia that are more internally focused, will outperform the others. </blockquote>Yes, investors will probably flock to Asia to seek higher returns. However, in a bear market, there are no safe havens. Just as almost every company benefited during the bull market from global market expansion, what I am seeing today is that there is deflation in Europe and the U.S. and wages are falling dramatically in these countries while wages are rising and inflation is rising in India and China.<br />
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Further, Europe has exported a 20% decline in its currency, the net result of which will be a deterioration in competitiveness for India and China.<br />
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It is shocking to me that the CEO of one of our major banks does not recognize the risks posed by a rising Rupee. The consensus today is that India will decouple. The consensus will be proven wrong in the near future, yet again.<br />
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Mr Aditya Puri might want to check the performance of China over the past 12 months and would see that the present market correction / selloff initiated in China.<br />
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We are entering a phase where the recession is about to be exported to Asia. Europe and U.S. have experienced significant declines and a severe recession. However, a double dip is likely headed. This time around, emerging markets will suffer along side global markets.<br />
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There is no decoupling. <br />
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Here is the first piece of news that Mr. Puri would do well to read. <br />
<a href="http://www.businessweek.com/news/2010-03-03/china-growth-may-slow-in-second-quarter-billionaire-zong-says.html">Chinese growth May Slow</a>Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6156433561902780870.post-62645608437575457982010-03-15T11:49:00.000-04:002010-03-15T11:49:38.583-04:00China & India - No Economic Miracles, Just Purchasing Power DISParityAs I sit here newly arrived in India, I am amazed at how the public is convinced and fully bought into the hype.<br />
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Maybe over time I will stand corrected and begin to see the miracle that is India.<br />
But I know what I see now. I see a preconstruction cycle that I saw play out in the U.S. firsthand. I see an unending supply of land. <br />
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I see a populace that is hustling. It's surprising the number of kids here that are desperate to retire in their 30s and 40s. Maybe that is a sign of prosperity. More likely, they are hating life and sick and tired of the misery that is called a U.S. multinational (MNC). These corporations are chewing and spitting out these workers and garnering market share. Over time Indians will learn the same painful lessons learnt in the U.S. ... Walmart versus the Mom n Pops, Credit Card misery and teaser interest rate nightmares.<br />
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What I also see is that there is a purchasing power disparity. Everything is cheaper in India, for the most part, except for imported items. Those trade at global parity give or take a few bucks. And that more than anything explains the economic miracle that is India. This will continue until the disparity disappears.<br />
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But already there are cheaper options emerging - the Phillipines, European Eastern Bloc countries like Romania etc. India has to move up the value chain, is what the experts say. What exactly does that mean?<br />
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More R&D, higher education, more creativity. And here is where the miracle will run into roadblocks. India lacks the infrastructure - physical and electronic - to make this a reality. Yes there are certainly pockets of wizardry. But the economic product is a sum total of the market. Color me skeptical. And possibly wrong. I will gain more confidence in my views as I get more insight.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6156433561902780870.post-68163910638485418802010-03-15T05:21:00.000-04:002010-03-15T05:21:20.736-04:00Real Estate in Gurgaon Is Peaking, Optimism Reigns, I Am Shorting S&P 1150I am in the land of the optimists. Indians are truly an optimist populace.<br />
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But tell me what I am missing. A friend of mine rented a 4 bedroom luxury condo in Gurgaon, India. For those of you that are unaware of Gurgaon, it is an IT and BPO hub, probably the largest in India outside of Bangalore.<br />
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Here's what the building looks like:<br />
http://www.theicongurgaon.in/<br />
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Now you can buy a unit in this building for Rs 1,54,00,000. Or $342,000.<br />
Or you can rent for Rs 45,000 per month. Or $1,000 per month.<br />
A back of the envelope calculation suggests the cost of ownership is roughly $2,300 per month at 10% down, not including taxes and maintenance, which I am guessing is another Rs 10,000 per month minimum, or $250.<br />
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Two things come to mind. The market is overheated as is obvious to any real estate investor/owner living currently in the U.S. Second, the actual cost of ownership is still pretty cheap to be able to rent a 4 bedroom luxury apartment with all amenities for under $1,000 a month.<br />
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Now the lack of rental pricing pressure tells me that these greedy developers will keep developing until the marginal cost of development and sucking in preconstruction investors is exceeded by the risk. There is no shortage of land around Gurgaon. Nor for that matter in Bangalore, Pune, and other IT hubs. And they will keep developin this until buyers are exhausted, unwilling and uninterested. And the cycle will turn. <br />
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While there is a purchasing power advantage in India, I think it is deflation in the U.S. that will eventually bring the U.S. to parity with India. Either way, color me somewhat skeptical about India's emerging superpower status. India has enjoyed tremendous advantages in terms of costs when offering BPO services to U.S. corporations. <br />
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It has been a story driven by cost advantages. Indian workers and Indian infrastructure is not more efficient than the U.S. <br />
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India also has the benefit of a young work force with some 60% of the population under the age of 40. But I am guessing there will be a lot of older guys willing and able to work in the U.S. for a long time to come. Sad but true.<br />
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As far as the market goes, the average retail investor is now growing ever more confident and complacency is rampant. As we all know, it is precisely times like these that the market serves up a cruel reminder.Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-6156433561902780870.post-52332551734965938282010-03-12T12:05:00.000-05:002010-03-12T12:05:29.598-05:00Greed or Fear for the Rest of the Year?Now that I am somewhat settled in India, I hope to recommence my commentary on the Stock Markets.<br />
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With the preponderance of articles available on the Indian market and my distance from the U.S. markets - I am now living in Gurgaon, India - I intend to focus more on the global macro environment as well as Indian stock market.<br />
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Having somewhat successfully timed the previous top 1150 and exiting in the 1085 range on the S&P 500, the same setup presents itself.<br />
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My three weeks in India have been illuminating in terms of the optimism that is driving this market. But I fear that most - actually almost all - investors are naive about the markets and may end up learning some harsh lessons. Even the supposed pros posting their views in the Outlook India magazine this month seem inexperienced to deal with the challenges of the current market. One that impressed me though - Sanjoy Chatterjee. I learnt something while reading his missives. <br />
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Coming back to the markets, global markets have moved in synchronized fashion since the March lows and each has been flirting with technical retraces. It is striking how optimistic Indians are about the economy and their future prospects and in striking contrast to my experience in the U.S. (Florida, NYC).<br />
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The Indian story reminds me of the U.S. circa 2007, soaring and ridiculous real estate valuations, a consumer addicted to purchasing and an expectation of continued hockey stick progression. One difference though is that the Indian consumer is spending within his means and not overextended, yet. All that could change though, were the real estate market to correct as a significant amount of wealth is being attributed to the mind boggling rises in property values.<br />
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Investors - particularly institutional - continue to ignore the ramifications of a market that is driven by huge amounts of liquidity pumped in by central banks.<br />
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In anticipating what lies ahead, it will certainly not look like the consensus. The consensus is a global economic recovery and improving fundamentals. Certainly that is what stock markets are forecasting. The risks are significant - particularly of the sovereign variety - but the catalyst for a surprise is lurking in the shadows.<br />
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Markets are beginning to see positive economic news. It is precisely in this type of economic environment that the policy execution risk becomes elevated and a misstep could lead to unexpected consequences.<br />
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Given the overvaluation in equities, the moribund U.S. consumer, severe amount of monetary stimulus in the global economy and the weakening sovereign balance sheets, the risks look to outweigh rewards at these levels and this stage of the rally.Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-6156433561902780870.post-45844542405688146852010-01-27T17:29:00.001-05:002010-01-27T17:29:23.131-05:00Covered Prior to Fed Meeting today at S&P 1084Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6156433561902780870.post-77658665369569691952010-01-13T20:42:00.003-05:002010-01-13T20:56:50.939-05:00Re Entering Short S&P 1147Bullish sentiment continues to increase as measured by both the weekly II data and a Bloomberg survey. II said Bulls rose to 53.4 from 48.3, the highest since Dec ‘07 while Bears fell 1 pt to 15.9, just shy of the lowest since Apr ‘87.<br />
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Bloomberg said bulls on the US market rose to the highest since ‘07.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6156433561902780870.post-79141235639047773592009-12-15T16:40:00.000-05:002009-12-15T16:40:08.435-05:00Bond Market Makes It's Presence FeltAs the administration pushes its spending proposals, the bond market has been speaking quite loudly the past few days and just broke through its trading ranges of the past six months.<br />
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Technically speaking, we have a clear inverse H&S pattern possibility on a 60 min and a much larger daily scale.<br />
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These technical setups equate with fundamentals and it is difficult to say when the vigilantes make life difficult for the various government entities. But this much is clear. While equity markets can be controlled and manipulated even for a time, the bond market is far bigger than any government entity.<br />
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While some are calling for the markets to go higher, and it is highly likely, the preponderance of news today has to be considered negative between the Empire State survey, the PPI, the rise in yields.<br />
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Eventually insitutional money will realize that this time really is not different, ie, not different than past credit crises which are usually followed by fiscal crises. <br />
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That being said, the markets will likely break through resistance and head higher anyways I guess. Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6156433561902780870.post-53379340944405905292009-12-15T15:06:00.000-05:002009-12-15T15:06:52.765-05:00The Same Old Story with Real EstateRealtors are again putting out the same old story, are these guys ever bearish?<br />
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Prices are on sale and if you do not get in now, you'll miss out.... the same old story of greed and fear.<br />
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Having been a landlord for many years myself, let me tell you that a vacant apartment can be death to your finances. If you're an investor buying on financing, it is a risky business. We're still clearly in a deflationary path on rents.<br />
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One very simple way to determine demand and supply is looking at the craigslist listings for rentals. Search craigslist las vegas or craigslist palm beach or any other location and if you've been tracking this data over the past years you'll see that where listings used to average about 100 a day during the peak we are now up to over 500 listings <b>each day! Care to compete with that kind of competition?</b><br />
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</b><br />
Here is what <b>is happening in the Palm Beach market based on my personal conversations with agents and investors</b><br />
<b><br />
</b><br />
<b>Lenders like Option One </b>that own defaulted inventory are not foreclosing on that inventory. I know of property that owners have walked away from over 18 months ago and is still not foreclosed. Why? Because lenders know if they foreclose they'll be responsible for taxes and maintenance and liens. So lenders are opting to let the foreclosed owner keep the property until they find a willing buyer.<br />
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Option One recently offered a tenant at a local community $3000 to move out so that they could start showing the property without actually owning it. This kind of illegal activity is underway in Florida and I am guessing other parts of the country.<br />
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All it does is confirm the huge amount of shadown inventory that continues to sit on lenders books.<br />
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<b>Rising Rates Coming</b><br />
Now if you're an investor that has the cohones to buy in this market, granted there are a few good deals <b>if</b> you know how to land a renter. Hats off to you.<br />
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But if you're an investor, you need to consider what will happen to prices when rates go up. It does not take a rocket scientist to figure out that prices will continue to stay under pressure for a long time to come as rates are most definitely headed higher over the longer term. And if you don't get that, then you really have no business being an investor.<br />
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Regardless of how you spin it, investing in real estate is an unattractive opportunity unless you have a 20 or 30 year horizon and are willing to deal with the headaches of being a landlord during that time.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6156433561902780870.post-60387891310059251242009-12-10T13:16:00.000-05:002009-12-10T13:16:06.985-05:00Time SymetryEW normally requires Wave 5 to be 100% of the time spent in Wave 1. That requirement was satisfied to the T in the chart below. No idea if the count is right but it does offer hope to us bears. If this is indeed the count, this may be the confirmation that Wave C is finally complete. And if that is true, time for the fireworks to begin on Wave 3 down.<br />
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As an aside, added small position at 1105 earlier today.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/_4sqgoXq1ois/SyE6scnOkII/AAAAAAAAADI/-G29xlNgRwk/s1600-h/time-symetry.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://3.bp.blogspot.com/_4sqgoXq1ois/SyE6scnOkII/AAAAAAAAADI/-G29xlNgRwk/s400/time-symetry.jpg" /></a><br />
</div>Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-6156433561902780870.post-38627900292274674812009-12-10T12:25:00.000-05:002009-12-10T12:25:03.369-05:00The Real Story on Bonuses & Value ProvidedMe Likey. However this news will only contrast how powerful the finance lobby is in U.S. as it will never happen here.<br />
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<div class="ft-story-header"><h2>Bankers furious at UK bonus supertax</h2>Bankers in the City of London reacted with fury to UK government plans to levy an immediate 50 per cent supertax on’ bonus pay-outs, saying the move played into the hands of rival financial centres.</div><div class="ft-story-header"><h2>France to impose tax on bank bonuses </h2>President Nicolas Sarkozy is to follow Britain’s lead and impose a one-off tax on bonus pay-outs by banks operating in France. </div>The French government is still working out the details, but intends to bring Paris in line with London by forcing banks to pay <a class="bodystrong" href="http://www.ft.com/cms/s/0/c29c2988-e4fc-11de-9a25-00144feab49a.html">50 per cent in tax on bonus pay-outs </a>for 2009 above €27,000. <br />
<br />
<br />
As a former worker on Wall Street let me provide some details on how the bonus structure on Wall Street works.<br />
<br />
I was a Senior Analyst at a top 5 investment bank. Total compensation was a combination of a base salary, and a bonus. Bonuses were usually a combination of cash and restricted stock.<br />
<br />
Base salaries today range from $120k to $150k for senior analysts, possibly higher as i have been out of the industry a few years. In addition, bonuses ranged from 100% to 200% of the base. Managing Directors and VPs have base salaries in the $200s and bonuses multiples of that.<br />
<br />
The question though is this - does the Wall Street employee provide a corresponding value to the salaries? No. In my opinion, my job and those of most analysts and senior analysts could be performed by an average finance graduate and unfortunately, even better by a finance graduate coming out of India.<br />
<br />
And that is the reason for the outrage amongst Americans. Wall Street salaries have no connection with performance.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6156433561902780870.post-13281924108344168132009-12-07T12:03:00.002-05:002009-12-07T12:03:56.922-05:00Adding to Shorts - S&P 1107I could talk about fundamentals, but why bother. This is a technically driven market rally and this trade is based on technicals weakening.Unknownnoreply@blogger.com2tag:blogger.com,1999:blog-6156433561902780870.post-77313076790830439682009-11-30T13:55:00.000-05:002009-11-30T13:55:20.335-05:00Back In The Channel ... What Happened to the Dollar trade?I cannot help but be satisfied that the S&P is comfortably back in the<a href="http://absolutecapital.blogspot.com/2009/11/confluence-of-resistance.html"> bear channel</a>. <br />
<br />
Tech is showing leadership to the downside and on a day when the dollar is <b>down</b><br />
, the markets are down as well? What happened to the relationship that drives all asset markets? One day does not a trend make but this is now the second day this has happened.<br />
<br />
Impulse Character - One of the other items that I would point out is that the moves down have a definite impulsive characteristic to them. Impulse waves generally point to the direction of the trend. Particularly on a smaller time frame you can see this clearly, a struggling upwards move and a strong down move in bunches.<br />
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Sadly when the market breaks most that believe they will be able to exit will not be able to exit. Tops are a process and it certainly seems like reality is starting to set in.<br />
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Time will tell, I remain short for now.<br />
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PS - will be travelling next couple days so I may or may not be able to post.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6156433561902780870.post-4940262821285903152009-11-27T14:32:00.000-05:002009-11-27T14:32:14.305-05:00A Great List of ResourcesAlthough I follow a number of bloggers, I rarely find any useful resources or indicators.<br />
<br />
Mact is one of the guys that I respect and he posted these indicators and I think an excellent analysis that I wanted to share with you. Mact is the disqus name, look him up. The guy is a good trader. Generally I find that I agree almost 100% of the time with his commentaries and views match my own almost without exception. That being said, I'm more a swing trader and he is a day trader. <br />
<br />
His post is below:<br />
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1. highest SOS on SPY since the march lows....big boys jumping ship.<br />
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</div><div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/_4sqgoXq1ois/SxAl6X1l2qI/AAAAAAAAACk/UNFS_ZJObKM/s1600/moneyflow.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/_4sqgoXq1ois/SxAl6X1l2qI/AAAAAAAAACk/UNFS_ZJObKM/s400/moneyflow.png" /></a><br />
</div><br />
2. Sentiment - 8th lowest bear reading in past 20 yrs<br />
<br />
<div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/_4sqgoXq1ois/SxAmVUoVkjI/AAAAAAAAACs/BwEl3DNuFcc/s1600/sentiment-high-11-27-09.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/_4sqgoXq1ois/SxAmVUoVkjI/AAAAAAAAACs/BwEl3DNuFcc/s400/sentiment-high-11-27-09.png" /></a><br />
</div><br />
3. ISEE showing blowoff sentiment<br />
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<div class="separator" style="clear: both; text-align: center;"><br />
</div><div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/_4sqgoXq1ois/SxAm-f6lVEI/AAAAAAAAAC0/yNx89a1TwJM/s1600/options-isee-11-27-09.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/_4sqgoXq1ois/SxAm-f6lVEI/AAAAAAAAAC0/yNx89a1TwJM/s400/options-isee-11-27-09.png" /></a><br />
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5. price keeps goin up but internals and volume cont's to weaken.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6156433561902780870.post-48542502231850577632009-11-27T12:24:00.001-05:002009-11-27T12:24:21.441-05:00Goddamn Tryptophan!Due to a bout of overeating - why do fat people always cook so well? - turkey, I woke up too late today to take early profits.<br />
<br />
I was able to close out shorts and reopen at slightly higher levels.<br />
<br />
I am astounded at the goldilocks market, good news, bad news it does not seem to matter.<br />
<br />
Market participants seem to be in the "Dont Fight the Fed" phase. But this is getting absurd. As usual futures were gunned and bulls have got to be feeling giddy with today's performance.<br />
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At some point, maybe not in my lifetime, reason will return to the market.<br />
<br />
However, from this market observer's perspective, being long this market is riskier than bunjee jumping off a bridge.<br />
<br />
Risk levels have just gone up. Who will be next? My guess is something is brewing in Greece and Eastern European countries intermediate term and longer term, I am certain China will deliver a shocker.<br />
<br />
The U.S. carry trade just got a lot riskier as well from a currency perspective. It is clear that emerging markets represent higher risks than U.S. equities.<br />
<br />
I will be focusing on shorting emerging market stocks and small caps.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6156433561902780870.post-72330544767324076192009-11-26T16:59:00.000-05:002009-11-26T16:59:39.105-05:00Dubai: A Repeat of MiamiThose of you think that this news is a $60 billion check and not a big deal are not thinking this through.<br />
<br />
If you have followed Dubai over the years, the only true comparison to what is happening in Dubai is Miami. Now this may be hard to believe, but the <b>Dubai bubble is going to be actually far worse than Miami.</b><br />
<br />
Investors were convinced that millions in oil money would have to be invested somewhere. The plans were audacious - the <b>second tallest building </b>in the world, a <b>man made complex in the ocean </b>visible via satellite and numerous skyscrapers, stars being paid huge contracts to be a part of the story.<br />
<br />
What was missing? Demand. The story that unfolded in Miami, Las Vegas, Arizona and Florida will unfold in Dubai. <br />
<br />
Why? Fundamentally, when massive overbuilding and speculation occurs, as it has in Dubai, the mania is difficult to identify to the participants. It is only now starting to sink in with the unfortunate real estate speculators that Dubai is a massive bubble.<br />
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Expect to see this news lead to a wave of investors walking away from contracts, speculators walking away from projects and follow on impacts.Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-6156433561902780870.post-4622108141192595872009-11-26T16:31:00.001-05:002009-11-26T16:37:08.643-05:00Equities - You are Back of the BusTime and again, it has been proven over the years that the bond markets are usually smarter than the stock market.<br />
<br />
To Wit:<br />
<blockquote><div class="ft-story-header"><h2><a href="http://www.ft.com/cms/s/0/38a7e9b0-d92b-11de-b2d5-00144feabdc0.html">Fear pushes US rates into negative</a></h2>By Michael Mackenzie in New York <br />
Published: November 24 2009 19:19 | Last updated: November 24 2009 19:19<br />
</div>Negative interest rates are back. Yields on short-term US government debt have <a class="bodystrong" href="http://www.ft.com/cms/s/0/38f71676-d56a-11de-81ee-00144feabdc0.html" title="FT: Short-term US interest rates turn negative">fallen into negative territory</a> as banks and investors park their cash in havens before the end of the year.<br />
</blockquote> Equity investors have been ignoring the robust demand for treasuries, negative short rates.<br />
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One need only be reminded of Sep 2008 and Dec 2008.<br />
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</div><div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/_4sqgoXq1ois/Sw7zh3uFGtI/AAAAAAAAACc/PlaoMLqSWyc/s1600/short-rates.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/_4sqgoXq1ois/Sw7zh3uFGtI/AAAAAAAAACc/PlaoMLqSWyc/s400/short-rates.png" /></a><br />
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Ignore the bond market signals at your peril. Robust demand for bonds at historically low yields, negative short rates are not a healthy sign. <br />
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Secondly, we have Dubai and we also have an imploding Greece. These could be one off events. But they could also be the first dominoes. In the larger scheme $60 billion or thereabouts in Dubai is not that big a number given where we have come from.<br />
<br />
But what is far worse is the structural damage that is being inflicted in the region. China is a bubble. India is a market share gain story and FDI flows, not much more. Brazil is a commodity play.<br />
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And we have seen the bogus recovery stats with the bulk of GDP growth this past quarter driven by cash for clunkers and housing programs. <br />
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<b>Take it all away and what do you have left?</b><br />
A strapped, over debted, suffering consumer and governments entering the scenario consumers were in 5 years ago, teaser rate debt. Leverage is a bitch. It usually comes back and bites you.<br />
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After a huge move, the risks are now to the downsideUnknownnoreply@blogger.com6tag:blogger.com,1999:blog-6156433561902780870.post-61597819956974405312009-11-25T12:56:00.001-05:002009-11-25T12:56:46.368-05:00Adding to TZA, SDD Shorts at S&P 1108While the S&P index and Dow appear at highs, the small caps are telling a different story. Limited bailout monies, limited exposure to weak dollar.<br />
<br />
SDD and TZA both look to be forming rounded bottoms. According to McHugh :<br />
<blockquote><span style="font-family: verdana; font-size: x-small;"><b>Stocks continue to trace out the path we annotated over the past few night's newsletters, a small Rising Bearish Wedge, which is usually a termination top pattern. Historically, stock prices generally rise the day before and after Thanksgiving, and historically have a bad Monday afterwards.</b></span><br />
</blockquote>Despite the S&P rising the past few days, my TZA position is still profitable. SDD is another small cap play.<br />
<br />
As I have mentioned previously, I use these highly leveraged securities as short term plays. Timed correctly, they offer significant benefits versus options. The leveraged returns allow me to play with smaller positions than I would normally need to invest to generate returns.<br />
<br />
My position is relatively light as the pattern is not entirely clear, but the divergences building on the 60 min RSI make me comfortable that my entry will pay off. Having enough ammo on hand is critical to playing this strategy. And I do.<br />
<br />
Happy Thanksgiving.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6156433561902780870.post-62554073277503426442009-11-24T15:30:00.000-05:002009-11-24T15:30:32.105-05:00Secular Trends Trump CyclicalHere's a secular trend:<br />
<blockquote><h1><a href="http://blogs.wsj.com/economics/2009/11/24/adults-moving-home-in-recession-delaying-marriage-kids/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Feconomics%2Ffeed+%28WSJ.com%3A+Real+Time+Economics+Blog%29&utm_content=Google+Reader"><span style="font-size: small;">Adults Moving Home in Recession; Delaying Marriage, Kids</span></a></h1> The recession has caused many adults to move home, shack up with roommates and delay having kids according to a study to be released today by the <strong>Pew Research Center</strong>. The report, which draws on <strong>Census</strong> data as well as a nationwide survey, follows <a href="http://online.wsj.com/article/SB125356996157829123.html">media reports</a> on some of the same phenomena.<br />
<br />
<b>One-in-ten adults ages 18 to 35 (10%) say the poor economy has forced them to move back in with mom and dad.</b> <br />
<br />
<b>12%</b> said they moved in with a roommate.<br />
<h1><span style="font-size: small;">Recession Hits Immigrants Hard -</span><span style="font-size: small;"> Survey Shows First Decline in Foreign-Born U.S. Residents in Nearly 40 Years</span></h1></blockquote><blockquote>The number of foreign-born residents of the U.S. declined for the first time since at least 1970, as a recession and tight labor market <b>dented America's image as the land of opportunity</b>. <br />
</blockquote><blockquote>A decline in construction jobs lured fewer immigrants from their home countries, especially those from Mexico, according to the Census Bureau's annual American Community Survey.<br />
</blockquote>Due to the ill advised policies, more homes and inventory will continue to come into the market. Despite what NAR wants you to believe, secular trumps cyclical.Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-6156433561902780870.post-79602651089643785782009-11-23T22:33:00.000-05:002009-11-23T22:33:19.619-05:00The Fallacy of Investors<h1><span style="font-size: small;">Sadly, it is only a matter of time before we reach similar situations in the U.S.</span></h1><blockquote><h1><span style="font-size: small;">JAL seeks 40 percent <a href="http://www.reuters.com/article/businessNews/idUSTRE5AM1K820091123?feedType=RSS&feedName=businessNews&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+reuters%2FbusinessNews+%28News+%2F+US+%2F+Business+News%29">pension payout</a> cut for survival</span></h1><h1><span style="font-size: small;"><span style="font-weight: normal;">TOKYO (Reuters) - Japan Airlines Corp (</span><span id="symbol_9205.T_0" style="font-weight: normal;"><a href="http://www.reuters.com/finance/stocks/overview?symbol=9205.T">9205.T</a></span><span style="font-weight: normal;">) asked retirees and employees on Monday to accept an average 40 percent cut to their pension payouts and warned the struggling airline could face bankruptcy if an agreement could not be reached.</span></span><span style="font-size: small;"> </span></h1></blockquote>The cuts will impact 17,000 current employees and some 9,000 retirees. <br />
<h1><span style="font-size: small;">Meanwhile, more <a href="http://www.slate.com/id/2236136/">speculation in China</a>:</span></h1><blockquote><h1><span style="font-size: small;"><span class="h1_subhead">Chinese are just like New Yorkers. They can't stop talking about real estate.</span><span style="font-weight: normal;"> There's one distinctly American habit the Shanghaiese seem to have picked up easily: talking about money, profits, and real estate prices without self-consciousness.</span></span><span style="font-size: small;"> </span></h1></blockquote>The fallacy of investors over the ages has been an expectation that the recent past will extrapolate into the future. However, real estate like all other investments can be a painful asset to hold as it is one of the most leveraged of investments that individual investors can have exposure to.<br />
<blockquote><br />
The parents, in their 50s, are both<b> longtime employees of Shanghai's public bus company</b>—the husband a middle manager, the wife a retired laborer. Their daughter, Yang Gao, a recent graduate of Fudan University, is going to start work at Ernst & Young next month. They were happy to share details of their personal finances. The Gaos were given the opportunity to buy workers' housing elsewhere in Shanghai very cheaply a few decades ago. That <b>apartment, which they still own and rent out, has soared in value.</b><br />
</blockquote><h1 style="font-weight: normal;"><span style="font-size: small;">When taxi cab drivers, bus drivers and the common man start to benefit and get caught in asset bubbles, it is usually in the last stages. Nasdaq stocks, Florida real estate anyone? <br />
</span></h1><h1 style="font-weight: normal;"><span style="font-size: small;">Just to jog memories, New Yorkers - along with their NJ cousins - were amongst the most aggressive investors in Florida and Las Vegas and in my opinion, responsible for the speculative frenzy that drove Florida into stratospheric valuations. </span></h1><h1 style="font-weight: normal;"><span style="font-size: small;"> </span> </h1>Unknownnoreply@blogger.com0