The Ben Bernake Dillemma

“most economists use statistics like drunks use lampposts: for support more than for light”
-Churchill


The challenge before Bernake is to make a decision to pause/stop the fed rate hike this FOMC meeting or not. While, in the last meeting the central banker suggested that forward is likely to be a slave of data (statistics). The rising inflation (11 year high) reported substantiates a rate hike. However, the growing unemployment (bad data) and slump in Housing shows that another rate hike can push to recession as equity markets are jittery coupled with geopolitical uncertainty and rising energy prices.

Come what may it is going to be trouble some for the America’s.

What needs to be watched is that whether Bernake uses the statistics as a lamp post for support or light.  While in the past we saw all assets price increasing commodities, real estate and equity – a further rise in Fed rate will shake the equity markets and the real estate. I therefore, do not see a rate hike but the inflation data going forward is going to be worrisome. Get ready for some challenging times ahead……

Real estate - Southwards?

Its always a treat to read Deepak Parekh's review of housing scenario.

A very well written Chairman's statement from the HDFC's annual report.

Excerpts:
The siren of caution in the real estate market is now ringing loud and clear.Tom Barrack, arguably the world's greatest real estate investor, likens the current real estate market to a game of polo. "I feel totally safe playing Polo on a field full of pros, but when amateurs are all over the field, someone can get killed.
They have more guts than brains and charge after every ball and don't know when to hold back." It is the same with the current Indian real estate market, even in India we need to licence projects and rate developers. If there is no clearing  off the turf, the amateurs are going to get trampled, taking seasoned horsemen down with  them.
Should the housing market in Mumbai look like a classic case of  `irrational exuberance', how then does one explain the same in Delhi, Bangalore, Pune and many more such cities? Home prices have spiralled in the last fifteen  months. House price vertigo is more than a local or national condition – it is  a worldwide phenomenon. Southwards is where prices must go.