Real Estate in Gurgaon Is Peaking, Optimism Reigns, I Am Shorting S&P 1150

I am in the land of the optimists.  Indians are truly an optimist populace.

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.

Here's what the building looks like:
http://www.theicongurgaon.in/

Now you can buy a unit in this building for Rs 1,54,00,000.  Or $342,000.
Or you can rent for Rs 45,000 per month.  Or $1,000 per month.
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.

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.

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. 

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. 

It has been a story driven by cost advantages.  Indian workers and Indian infrastructure is not more efficient than the U.S. 

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.

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.

Covered Prior to Fed Meeting today at S&P 1084

Re Entering Short S&P 1147

Bullish 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.

Bloomberg said bulls on the US market rose to the highest since ‘07.

Adding to Shorts - S&P 1107

I could talk about fundamentals, but why bother.  This is a technically driven market rally and this trade is based on technicals weakening.

Out of Gold Miners

Taking profits on recent entry in gold miners
After a huge move, the risks are now to the downside

Adding to TZA, SDD Shorts at S&P 1108

While 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.

SDD and TZA both look to be forming rounded bottoms. According to McHugh :

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.

Despite the S&P rising the past few days, my TZA position is still profitable.  SDD is another small cap play.

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.

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.

Happy Thanksgiving.

ReBuilding Shorts S&P 1092

Exiting Last Close Positions Now for 2% Profit at S&P 1088

Will exit substantially most of the short positions soon

Looking to Add Short at the close 1099

Edit : 3:58 pm - Increased short exposure moderately in TZA QID & EDZ
Not risking too much here

Taking Some More Profit at 1090

Taking Profits at S&P 1092.03

Sold QQQQs for now
Took partial profits on TZA and EDZ
Entire position is in profit, up roughly 6%

I will be looking to take some more off later today & tomorrow

Out On Positions Initiated This Morning

Edit: 3:00 pm - Back in Shorts

Adding Short Exposure to Smallcaps & Tech at S&P 1105

Initiated short position via QID in tech stocks
Added to small cap position via TZA
S&P 1105

Expected Up Move Underway, Adding to Shorts 20%

S&P 1110.67

Short position initiated based on divergences that are developing in the S&P 500

Sold TZA added this morning for Small Profit

S&P 1094.68

Weekend Beer

Edit: Sold additional TZA at 1091

Hoping to add on move higher

Move below 108.75 on SPY will make me reevaluate my analysis

LongTZA, Short EDZ - Short the Market

S&P 1096.79
Could be short term trade

Edit: Clarification: Long TZA Long EDZ, short the market - 1:47 pm

Selling 50% Position at 1088

Will look to reenter on bounce

Adding to Shorts

Adding to Technology, Real Estate, Small Cap shorts
S&P 1097

Gradually increasing short exposure as we continue to get overbought
If I am right, these are going to be intermediate term longs.

Revising Upside Targets to 1123.15

Significant resistance exists at S&P 1123.  Any and all bears have been beaten to a pulp exactly what you would expect as the market reaches a topping point for this bear rally. The Fed and free money will fix everything.

The poorest consumers get hosed.  Americans will struggle mightly - all but the richest anyways - to take a trip outside the U.S.

At the rate the government is going, Walmart will become Whole Foods.

I am going to stay bearish until 1123.  Fortunately I took profits at 1046 and anticipated a ramp up to 1066.  At that point, if the market continues to demonstrate strength, I will take my lumps and move to the sidelines.

Momentum following idiots are making hay.  Any thoughtful analysis of the future impacts can be discarded.  One only need to look to the Fed and see that the money printing is out in the open.  Nothing else matters.

If the U.S. can extricate itself out of this by inflating their way, it will kill the field of economics as we know it and we can call the new science Bernankism, the science of inflating to prosperity.

Sold All Gold Miners Today

With the euphoria around Gold and Gold Miners and the market nearing a top, I think Gold is going to underperform over the short term.  Either way, taking 20%+ profits and moving to the sidelines is a wise move.