Real Estate

Almost every asset class has seen sharp correction over the past few weeks, be it stocks, commodities, currency like the dollar, even Art has seen some softening in resale prices, but real estate prices have so far remained over heated in most commercial parts of the world. Even residential property rates in the emerging markets like India, China, Taiwan are over heated. Continued over heated prices is a cause of concern for business as well as genuine home seekers.
Huge money flows have gone into real estate segment, be it PE funds, massive loans from financial institutions and banks to builders and home buyers, black money has also flown with great intensity in to this area. Rentals are also ruling high making the business operations and other commercial activity less profitable or even viable to run. This has caused inflationary pressures in the final product prices. This real estate segment has to undergo a major price correction in order to restore affordability and investment viable proposition.

Yen Carry Trade Unwinding

For two days running, stocks across the world are bearing the brunt of a credit crack that first started in U.S. sub-prime market and now has spread to other credit instruments. This collateral damage has prompted hedge funds, PE funds, large financial institutions to pay back the capital that they have borrowed from Japan very cheaply. With the losses mounting on their mortgage books, they will now have to withdraw from risky assets like stocks and return the borrowed money and this is causing Yen to strenghten against the Dollar, now trading at 114.32 after touching a high of 113.55 against the Dollar. Serious downward stock price adjustments had happened in the last few days, dow jones has re-traced all the gains it had made during this fiscal year and all other emerging markets are also follwoing the suit. For the first time in the last four years, serious credit squeeze is happening and this is not good for assets like stocks. Only selective buying can be made in stocks which are having the strongest of fundamentals and business momentum. Commodities are also correcting and this is good news for commodity user industry and hence to some extent for Inflation.

Dow Jones is Down Again Sharply

On August 03,2007 Dow jones fell sharply again by 280 points, thus retracing all the past few days gain in one trading session indicating that worst is not yet over for global equity markets.
To tread cautiously is the name of the game.
Watching carefully the Credit Market in the U.S. will be extremely useful in knowing future course of action by big players like Investment banks, Pension funds, Mutual funds, PE firms, Insurance companies, Hedge funds etc, in the financial markets.