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Commentary

Linkfest: Shadow Inventories, New Normals, Bridges to Nowhere

Random links:

  • U.S. “Shadow Inventory” Crosses 7 million houses. With real estate developers going gung-ho again in India, and rising RE prices, it might be cheaper to invest in the US rather than locally – and there you get much better than the 2-3% rental yields you get here.

    But the situation in India is not as good as they make it out to be. It’s highly non-transparent, very broker-cartel controlled and there’s a looming hungama about Diwali. Prices going up? DLF’s latest offering in Capital Greens “Phase 2” Delhi, at 7,500 a square foot was lapped up, they say. And yet, you see online ads of sellers in Phase 1 – to be ready much earlier than phase 2 – at 5,500. Been tracking real estate prices in Gurgaon, Navi Mumbai and Bangalore – rates are NOT going up.

  • John Mauldin welcomes you to the New Normal – where the U.S. needs to create an average of 250K jobs a month, to get back to 5% umemployment in five years. That’s not been seen anytime in the last 10 years, or in average 10 year periods, or even the best 10 years of the last 20. They need to create those jobs, for sure. And I have a strong feeling this will result in the going away of jobs from other places, if it has to.
  • Natural Gas has exploded up 60% in the last month. Yet, the storage capacity of gas has been reached, says Bloomberg. If it wasn’t such a bitch to transport, the Ambani brothers would have stopped fighting over these issues long back. Oh, and the government’s lopsided policy of “gas allocation” at different prices to different industries doesn’t quite help. Will the glut crush them all?
  • India’s Credit Growth, as of Sep 11, is less than 14% – the lowest in the recent three years or so. Banks are raising capital betting on a turnaround; they expect it to scale to 20%. The RBI seems to agree. With the sixth pay commission hike arrears – worth 17,500 cr. – being released in September, the next month should see some improvement in consumer good sales, and provide glitter to Diwali. We’ll have to see if it sustains after the earlier-than-usual Diwali season is through.
  • Interesting reading on China’s Investment Boom: The Great Leap into the Unknown (HT @lukkha) China has more spare cement capacity (340m tonnes) than the consumption of India, USA and Japan combined! (And in India’s we’re going nuts adding to capacity) The story has a lot more fascinating details like how China has overtaken Japan in the infamous “Bridges to Nowhere” madcap infrastructure spending metric. An example: they had to use 380 kg. of dynamite to blow up a bridge in Sichuan so they could rebuild it and thus “spend the stimulus money”.
  • Nilesh says:

    >on your rental yield point – this has always been so. one of my colleague was in UK at the time of real estate boom all over the world. and at that time also rental yields were higher there (you can buy a house and rent it out and rent will pay for EMIs).

    also recently when our VP was globe hopping (China, Philippines, Singapore, India etc), guess what.. our employer has to pay highest room rents ($) in India (even after hotel room rents have corrected by as much as 50% in India). real estate in India is unique in all aspects.