Indian Economy: News and Discussion (June 8 2008)

vina · Post by **vina** » 22 Oct 2008 18:33

As someone posted a few weeks ago, in this environment don't hand money over to ANYONE, especially a builder , unless it is ready for possession, with all the paperwork and clearances in place. Put your money in for a project that is promised for completion "soon", you might never see it in the worst case and in best case if your builder survives, a delay of 3 to 5 years while you continue servicing the "loan"..oops, the millstone around your neck.

Talk is , if sales dont happen soon, many of the builders including the publicly quoted large ones will be cash flow negative. In a highly leveraged business like Real Estate, that is a death spiral very difficult to get out of (no one is there to buy their much touted "asse(t)s" oops land "bank"

to meet liquidity). When the rubber hits the road, the land "bankers" will find their asse(t)s lot more illiquid than MBS paper securities and will have to mark down the prices to reality than the stratospheric prices they valued those at when going public. Ah, now you do the math and find out for yourself what that will do to the already battered valuation of the companies.

Now when faced with the moment of bitter truth and reality , what will our builders, who in the best of times are not exactly known for their probity and business practices do ? . Will they like Tata say "A Promise is A Promise" and complete your building exactly as promised and hand you the key with all paper work on the appointed day , or will they beat a Paki like "Strategic Retreat " ?.. Why do I think Pakiness will be the rule and a Tata like ethic the far and few in between exception ?

vina · Post by **vina** » 22 Oct 2008 21:52

Somebody in ICICI has gone bonkers.. Awright, there is a perception that the bank is not "bullet proof", you need to do some paki like "image building" or "poshitivenewj" thing with the public and do a communications exercise ..so what would you logically do ?.

Put in a conservative yindoo brahmin or bania family in Dhoti and 9 yards saree and everything..the picture of the "establishment", old man , with grandchildren putting retirement money in the bank and beaming with peace and happiness and no frown and worry lines.. Peace , Progress and Prosperity like a Panda propaganda clip .

..

But no sir, what does ICICI do ?. They put some bolloywood chintz and glamor on screen! . Not solidity and gold, but tinsel. So now they are running ads of Shah Rukh Khan coming on screen and mouthing cheesy lines like "I trust ICICI bank with my money and I always will!

" .. Yeah right..As if the scared Abdul on the screen would be convinced about the solidity of the bank by Shah Rukh's endorsement.. No sir , the old ,conservative middle class yindoo would have carried more heft and street cred..

Well, Shah Rukh would have got a fat fee for the endorsement. ICICI didnt atleast skimp on that. Surely that money could have been far better spent.Just goes to show what happens when you put callow, immature pimply faced fresh out of school marketing kids with zero experience in life and everything in general to do such things. What were they thinking ?. The guys who approved those ads and approved putting Shah Rukh there must be brain dad. The top Jarnail would have said, "we must project positive image" (Pakiland like) and the acolytes come up with this ?.

Raju · Post by **Raju** » 22 Oct 2008 21:55

news from Mumbai an year ago was that ICICI had stopped all promotions and salary increments for all of its employees in 08. This news apart from other such tidbits eventually lead to ICICI current run.

John Snow · Post by **John Snow** » 22 Oct 2008 22:24

Vina garu well said, the idiots in management dont get the simple fact that fat cats like S Khan etc will keep their money in black(in India) and white (in swiss).

Instead they could have purchased (like Ashaji of Surf avertisements i late 70s and 80s) a bunch of farmers to middle class moms and dads, taxi wallah etc to say
My Bank ICICI bank, ICICI(Eye see Eye see hai) even in Sleep
( ICICI hi dekh ta whoon din ya raath
Jama ya Karz maye) (savings or withdrawls)

Copy right to Bharat Rakshak onlee, Where comes today....... etc etc

Katare · Post by **Katare** » 23 Oct 2008 02:06

Pretty much all the major Banks have reported stellar revenue/profit growth for this quarter -

Bank of India Q2 net rises 80% on robust credit growth

Dileep · Post by **Dileep** » 23 Oct 2008 06:48

Hmm, you (and I) are a feeble minority my friend. The rest of the 1.2999 billion will collect and eat their turd if monkey khan comes of screen and say "I eat my turd for breakfast every morning, you should too". People believe in Tinsel, not gold.

Malabar gold kicked the @ss of two generations of trust built by Bhima, simply by the words of Monkey Lal. Even my lady, who didn't consider anyone else (the 916 of Bhima should be better than 916 of Alapatt!!) wanted to go there.

I have a policy not to feed the monkeys. So, will NEVER buy something endorsed by them, not even a pack of taste buds chilly powder.

Singha · Post by **Singha** » 23 Oct 2008 06:48

callow, immature pimply faced fresh out of school marketing kids

but dont ya know - they are "IIM trained" and with redoubtable analytical and
"hypercompetitive white male" skills?

nothing however replaces good common sense which the aam aadmi has
more of than the freshly minted MBAs running around showing 'leadership'
around the farm.

was taken to a expensive rest in church st for a team lunch yesterday.
the mood was not very good...big restaurants mostly empty...didnt
see any overweight financial types coming in small groups as they used
to do....usually the big guy in a sonata or merc leading a troop of
younger types...all in well pressed white shirts ofcourse (turnbull & asser,
dunhill ties etc picked up in singapura or london)

andy B · Post by **andy B** » 23 Oct 2008 07:24

Gurus:

I have a few questions that I just need to ask, please bear with me -

Q). How is it that banks in India are posting stellar profits and growth?
- Is it bcoz most of these banks have been shielded from the financial storm thats hit most of the gora banks bcoz of the stringent rules and sort of conservative (in terms of investments) yindoo banking system.

Singha · Post by **Singha** » 23 Oct 2008 08:21

the outstanding credit of all types as a % of GDP is much lower in Yindia than OECD,ASEAN. this is esp
true in housing loans and usage of credit cards which has low penetration in India(do not take blr as a
guide). afaik all housing loans in India are considered "prime" and there is no subprime. the job scenario
is not too bad - there is no wall street being culled here. only sector being affected majorly is IT
which employs say 10 mil people and supports 50 mil others in ancillary fns , hotels, restaurants,
transport, security etc. and its just a downturn not a culling and burial as in wall st.

the PSU banks or even pvt banks did not over leverage themselves by 40X their assets as wall
street did in a bid to expand/acquire or whatever.

Yindia has never been subject to the exuberant highs, hyperinflation, new currencies, bailouts,
genaralissimos in red striped pants that even big south american and asean nations are prone
to. nations like argentina and chile seem to have a decadal cycle of this.

fyi argentina was one of the top10 richest nations in the 1920s. they screwed up badly
somewhere and no just middle income. didnt even have ww2 or native indians to blame,
I doubt native indians were much there unlike brazil due to cold climate.

vishwakarmaa · Post by **vishwakarmaa** » 23 Oct 2008 14:50

Wall St. has beaten even the Argentina in financial collapse.

American crisis - A new low of innovative ways to take oneself to gutter and try to sink the world too in the process.

ramana · Post by **ramana** » 24 Oct 2008 04:05

Maybe they now have Paki outlook.

vsudhir · Post by **vsudhir** » 24 Oct 2008 04:19

Capitalism, CPI(M) style (Biz Today)

Why waste time trying to attract investments when you can do it yourself? Even as the CPI(M)-led Left Front government in West Bengal faces a long struggle to restore investor confidence following Tata Motors’ withdrawal from Singur, the Kerala unit of the CPI(M) is foraying into the thriving tourism and hospitality sector via cooperative societies controlled by it—and charging market rates with pleasure!

With the coastal state receiving only minuscule private sector investment in tourism and hospitality— the only booming business— party-controlled cooperative societies are getting to everything from water parks to hotels and even hotel management institutes.

CPIM like the mafia has a legit money-making front. WOnder if the CPIM submits taxes and all? In any case, happy to see some development come to the CPIM zone. Basically, I thought the commie mafioso will extort protection money from businesses located in the red zone but here they've gone one up and fwd integrated into the businesses directly.

vsudhir · Post by **vsudhir** » 24 Oct 2008 05:14

Credit crunch ensnares India (IHT)

Paul · Post by **Paul** » 24 Oct 2008 05:25

fyi argentina was one of the top10 richest nations in the 1920s. they screwed up badly
somewhere and no just middle income. didnt even have ww2 or native indians to blame,
I doubt native indians were much there unlike brazil due to cold climate.

In the first half of 20th century, Argentina had a per capita higher than Italy.

It was the Perons rule which set Argentina down the downward spiral from which it has never recovered since.

Dileep · Post by **Dileep** » 24 Oct 2008 07:44

The CPM here is a corporate. They use the ideology to kill the competition onlee. There is a minority of old timers (including the CM) who are still stuck in the old mould, but they are going to die off soon.

andy B · Post by **andy B** » 24 Oct 2008 08:12

Singha wrote:the outstanding credit of all types as a % of GDP is much lower in Yindia than OECD,ASEAN. this is esp
true in housing loans and usage of credit cards which has low penetration in India(do not take blr as a
guide). afaik all housing loans in India are considered "prime" and there is no subprime. the job scenario
is not too bad - there is no wall street being culled here. only sector being affected majorly is IT
which employs say 10 mil people and supports 50 mil others in ancillary fns , hotels, restaurants,
transport, security etc. and its just a downturn not a culling and burial as in wall st.

the PSU banks or even pvt banks did not over leverage themselves by 40X their assets as wall
street did in a bid to expand/acquire or whatever.

Yindia has never been subject to the exuberant highs, hyperinflation, new currencies, bailouts,
genaralissimos in red striped pants that even big south american and asean nations are prone
to. nations like argentina and chile seem to have a decadal cycle of this.

fyi argentina was one of the top10 richest nations in the 1920s. they screwed up badly
somewhere and no just middle income. didnt even have ww2 or native indians to blame,
I doubt native indians were much there unlike brazil due to cold climate.

Singha Saar thank you heaps for the reply I have been working on a uni/work project and had to make a report on how asian banks are faring amidst this turmoil, I owe you a beer at the next BRF meet (Ofcourse at this stage I m crossing my fingers that I will be able to attend otherwise you will have to come down to Melbourne

)

Sachin · Post by **Sachin** » 24 Oct 2008 09:33

Dileep wrote:There is a minority of old timers (including the CM) who are still stuck in the old mould, but they are going to die off soon.

And then what remains are true Mafiosi from the various villages in Kannur District

. Total party control of the whole social life in Kerala. The way law and order setup is getting eroded, and judiciary made to look like a scare-crow I am expecting things to go worse..

Any ways, totally off-topic.

Singha · Post by **Singha** » 24 Oct 2008 12:05

sensex dipped below 9k today.

Raju · Post by **Raju** » 24 Oct 2008 12:11

Rs has falled below 50 now and is at 50.11 to a $.

Singha · Post by **Singha** » 24 Oct 2008 13:08

no buying interest, it might close below 9k today. no bottom fishing indicates people
are too scared to even dip toe in piranha infested water.

I am expecting a close of around 7500 end of year which would be a 4 yr low.

PC was on TV as usual trying to talk things up, but people tuned out long ago.

vina · Post by **vina** » 24 Oct 2008 18:05

Hmm. Senex closing at 8700 odd.. A whopping 1000 point drop. I should say, 10,000 to 8700 has gone in a twinkling of an eye.

Thank god it is the weekend. The US is going to get absolutely murdered today with the dow futures indicating a 550 point loss on open.

Singha · Post by **Singha** » 24 Oct 2008 18:11

for inexplicable reasons even decent coz like suzlon, telco, m&m lost 30% last week.
the realty stocks ofcourse got murdered.

nobody has any clue where the ship is going, half the crew are dead and half
are too drunk to care. the helm spins aimlessly with the wind.

I need my can of Foster's tonight.

R Vaidya · Post by **R Vaidya** » 24 Oct 2008 19:45

India should rethink US model

http://www.dnaindia.com/report.asp?newsid=1200055

rvaidya

vina · Post by **vina** » 24 Oct 2008 21:24

Suzlon anyway was massively inflated like L&T. Tata , AL and other global guys like Volvo, Scania etc are cutting production of trucks by upto 50% to prevent inventory buildup. The market is pricing that in. All sectors are getting murdered.

I believe Unitech lost close to 50% just today, in a single session!. If this doesnt put the writing on the wall for Real Estate prices in India, I dont know what will.

Singha · Post by **Singha** » 24 Oct 2008 21:31

and thats on top of some 20% drop yesterday. down 95% from its peak. Let alone new projects
they will have to sell their land bank at distress prices to complete their current ones or have
a mob of customers setting fire to their plush offices.

no more treating customers rudely with a take it or leave it attitude and senior officials always
busy meeting PE guys from NYC/HK rather than attending to the clients.

these guys like unitech and dlf better fall in line and admit where they stand now. bengaluru is
quite meek and the sobhas and purvankaras will get more leeway but sc*** with the dilli public
and they will hunt you donw and punish you.

Suraj · Post by **Suraj** » 24 Oct 2008 21:32

RBIs participatory note rule relaxation measures are unlikely to yield much foreign interest, since a lot of PN use came from hedge funds, who are rapidly unwinding. Roubini predicts a next wave of collapsing hedge funds. RBI and FinMin might be better served by establishing a domestic credit worthiness rating mechanism (none of the S&P nonsense) and enabling greater investment by public cos and govt pension funds in the market now. With the market close to 2004 levels it's essentially unwound down 4 years of foreign hot money driven mania, and there are long term fund holdings available on the cheap.

Singha · Post by **Singha** » 24 Oct 2008 21:37

on TV had a ticker that FIIs now have sold around $12b this fiscal but still own $40-50b in indian
equity. was saying they are going to sell into any uptick regardless of price or company and might
even unwind anything they can even if sensex continues the downward slide.

smaller brokerages are going bankrupt and closing down as they survive on retail investor trades
which are pretty much nonexistent.

fitch, moodys and S&P should be banned and chased out of our pond. someone like crisil or insurance
bodies asked to setup a agency.

Reliance MF manager was saying they are maxing out on cash and have $1b hoard ready but
not buying anything much now.

kshirin · Post by **kshirin** » 24 Oct 2008 23:58

vina wrote:The big elephant is govt spending.. SLR cut and govt bond sales program suspension will inject liquidity.. But what about the commie-ding dong driven NREGA and other fat babu pay rises that the UPA got had committed to when the going was good 6 months ago ? . The inflation spiked because Chidambaram took the best case optimistic scenario and planned for that and had no maneuver room when it shot up. So what will you do when the fiscal deficit starts gaping once again and inflation starts going up , this time due to macro imbalances, rather than commodity price led as was recently ?

I think the govt immediately needs to tighten it's bloated belt. Let AI and IA go under and stanch the bleeding immediately. That will immediately take excess capacity out of the Indian market and Jet and KFcan go back to competing. Do that with some 20 terminally ill PSUs and govt companies and announce a downsizing of govt depts.. (how about dept for promotion of Hindi aka.. Rashtrabasha ?..) I am sure there are hundreds of such depts around. Impose a 10% budget cut right away on ALL depts.. Tell them to chop heads /retrench if need be.. But get people costs as percentage of total costs of govt down by 10%.. That will free up massive amounts of productive capital.

I have also always maintained we need to reduce Govt to 25% of its size (barring teachers and doctors and other essential public services), just imagine how the economy would gallop if that could happen. BTW there is a 10% expenditure cut being levied, but the real issue is redundancy. Very few in Government - barring a small percentage of dedicated folk - really work more than 2-3 hours a day, massive governance reform is required, but no party has ever implemented this so I don't know if we can just blame the UPA. It is painful to see the fatcats lounge around and waste hard earned taxpayers money, and till a few years ago I could barely tolerate the inequity of it....I have shut it out of my mind now but when I think of it it still pains me... very few other countries have this scale and extent of malnutrition...a respected bureaucrat I knew who passed away several years ago used to say this moral and physical corruption was unjustifiable and unbearable, because no other country lived so much on the brink. So I would support a slashing of Government, withdrawal of several posts here and abroad after a rigorous work audit, and tightening up of law and order. Today's article oin IHT on India makes unpleasant reading...perceptions are changing and we have to do something to stop this...

http://www.iht.com/articles/2008/10/23/asia/letter.php: LETTER FROM INDIA
Want to be heard in India? You'd better form a militia

vishwakarmaa · Post by **vishwakarmaa** » 25 Oct 2008 01:15

ramana wrote:Maybe they now have Paki outlook.

Jehadis were a Western innovation. So, its not surprising that Americans beat even Pakis in making lows.

kshirin · Post by **kshirin** » 25 Oct 2008 01:21

Just saw this, why did it not have a positive effect on market sentiment, seems sober and reassuring. Releasedtoday...

http://www.rbi.org.in/scripts/BS_PressR ... prid=19327

Governor, Dr. D. Subbarao’s Press Statement on Stance of Monetary Policy for the Remaining Period of 2008-09

vishwakarmaa · Post by **vishwakarmaa** » 25 Oct 2008 01:30

Some 3 years back, I said "Fitch, Moody and S&P are a bunch of thieves which operate for achieving political motives of American foreign policy." I was laughed off among the friends.

Now, when I ask them same today, they are wordless and aghast that their western masters have nothing left to clarify.

Western hypocrisy of free and fair market is naked and open for all to see.

Factually speaking, USA is bankrupt. The recent moves of American govt. of taking over its private banks is desperate and greedy move to prevent the bankrupt american banks being sold to Japan, China, Europe and Rich Gulf investors. In other words, an explicit and forceful measure to retain dollar monopoly on world economic system.

I don't rule out that IMF is bankrupt too and they are doing forgery in account books just to manage their dominance over poorer countries(which are not poorer anymore, but forced to think so).

vishwakarmaa · Post by **vishwakarmaa** » 25 Oct 2008 01:39

If USA govt. would have let foreign investors buy its bankrupt american banks, this crisis wouldn't have become so worse and won't be having such bad effects on the world.

But just for their greed to manage control over world economic system, they forced a state funded bailout which took time and hence a massacre took off on the world due to delay and situation got worse.

USA is directly responsible for the bloodbath around the world. World is paying for American greed.

In a free-market system, turn out of events would have been different. Dollar would have collapsed and Euro,Pound would been playing bigger share in world trade. But just to prevent this natural course of decline of Dollar and hence american control on world trade, they intervened and announced a state investment into private American banks.

Right now, fight is going on between a new world-order and an old whining-america trying everything to keep its outdated controls on world financial system.

kshirin · Post by **kshirin** » 25 Oct 2008 01:44

Can someone please explain how significant these measures are (I am not an economist but it seems important to understand this):

http://www.rbi.org.in/scripts/BS_PressR ... prid=19324
RBI Governor announces Mid-term Review of Annual Policy for 2008-09

"The exchange traded currency futures started trading on the National Stock Exchange (August 29, 2008), the Bombay Stock Exchange (October 1, 2008) and the Multi Commodity Exchange – Stock Exchange (October 7, 2008).
CCIL to operationalise settlement system of the foreign exchange forward segment within a month.
Domestic oil and shipping companies permitted to hedge their freight risk with overseas exchanges/ OTC markets."

Satya_anveshi · Post by **Satya_anveshi** » 25 Oct 2008 01:52

US is in a predicament to choose either one of a) retain $ as reserve currency b) reverse globalization. They are done with having and eating their cakes.

One should have listened to David Smick (author of World is Curved "Hidden dangers to the global economy") on Charlie Rose show yesterday. He gave an interesting analogy to mortgage related securities to salad bowl. International players didn't buy salad's anymore and US was left with a bowl full of salad

. I thought the salad bowl was more like a begging bowl

That mofo was sounding as if its a world's problem if world does not buy their salad.

vishwakarmaa · Post by **vishwakarmaa** » 25 Oct 2008 01:54

There is one shift happening in global economy. Dollar is on decline since the start of this DECADE. Actually, this started long ago in gradual fashion when other centers of trade emerged in global economy.

Decline in dollar as world currency is natural demand of changing structure of world economy. Its an oxymoron to think Dollar is natural currency for global trade. Its not. It was not supposed to, actually. It is "a Forced currency of Global Trade".

USA is doing everything possible under the sun to prevent this natural demand of global financial system to outcast the weak dollar and bring in alternate strong currencies in the global financial system.

Just look at events in past 10 years.
1. To prevent Saddam Hussein from selling OIL in Euro and rejecting Dollar as oil-currency, USA invaded Iraq and arrested the decline of dollar for some time.

2. Oil plays a big part of global trade volume and its important to make sure that every oil trade in the world is done in dollar. To ensure that, USA invaded Afghanistan and got hold of future oil-pipelines in an important region close to oil-rich central asia.

3. Iran made a natural and good economic decision to reject weak Dollar and accept strong Euro as Oil-currency to sell its Oil in. So, it started selling oil in Euro. USA declared war on IRAN.
(Axis of Evil = Countries threat to America's forced monopoly on the world.)

Americans won't be able to push dollar artificially up by forcing and bullying the world to trade in weak dollar. Ultimately, they need something catastrophic to ensure Dollar comes back stronger. They don't care if world dies of hunger in this process. Only thing important for Americans is their love for greed and hunger for power.

vishwakarmaa · Post by **vishwakarmaa** » 25 Oct 2008 02:01

It is artwork of American psy-op players that they are presenting their domestic financial problem as a 'Global financial problem' and asking the world to pay back, for the mistakes committed by harvard and Princeton graduated *intellectual* but greedy Americans.

As a less known analyst at NSE said, - "America is exporting its domestic financial problems to the world and hedging that risk on the world. She is taking others down with herself."

Satya_anveshi · Post by **Satya_anveshi** » 25 Oct 2008 02:14

I read this someplace else:

America is a capitalist economy when it comes to profits and a socialist economy when it comes to losses.

This is American capitalism.

SwamyG · Post by **SwamyG** » 25 Oct 2008 03:08

Singha wrote:nothing however replaces good common sense which the aam aadmi has
more of than the freshly minted MBAs running around showing 'leadership'
around the farm.

Well said, I had independently arrived at the same conclusion Common Sense zindabad. I have been hurt in the stock market each time when I allowed myself to get caught in the hype and become greedy. Greed is a zone in which we are made to break our own rules and discipline; causing us to make decisions that we repent sooner or later.

Wealth building is slow and study. But like in the proverbial story, we just want to cut the goose and get the golden eggs instantly.

Common sense along with the age old collected wisdom is as much valuable (if not more) than what we learn in schools.

SwamyG · Post by **SwamyG** » 25 Oct 2008 03:22

RVaidya & all other gurus:
Do you think if the Indian Economy will recoil and disengage itself from the global economy? "Aping the West" used to be such a popular phrase in discussions. Is there a chance that academics and experts would adopt a more local flavor of growth? The elephant always sways when walking.

After India started to grow at a faster pace, our desi media went on a hype spree. They were over-reacting in my opinion; and I think they are over-reacting now too. The 24/7 news channel need to sensationalize darn something, and now economy is a choice subject around the globe.

Suraj · Post by **Suraj** » 25 Oct 2008 03:34

Folks: This is the Indian economy thread. I understand we live in a globalized world and what happens in the US affects India, but some of the recent posts, especially vishwakarmaa's, are not relevant to the thread topic. But please use your discretion as to when a post is better off in the Global Economy thread.