Crude Oil At US$88/Barrel

Crude Oil is breaking all records and hence is a major cause of worry for nations dependent on their energy needs. Oil rich nations are making huge profits out of this run away rally in crude prices, therefore they will now have more free cash to deploy in stocks, commodities, real estate across the emerging economies, causing further asset inflation in already highly inflated assets in these economies.

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.

Problem Of Plenty

For the past two and a half decades, U.S. federal reserve has done nothing but to print more and more dollars and that has created the problem of too much money chasing few asset classes and hence bubble like situation in each and every asset.
Asian countries are holding U.S.treasuries worth trillion of dollars just to finance U.S. consumer's shopping list and keep their growth going.
This never ending credit cycle has turned financial markets across the globe at very risk of un-sustainable inflated levels. After all where does that huge sum of money goes other than stocks, bonds, real estate, currency, they have to park it somewhere. And thats the problem for these markets.

Mutual Funds

I have always believed Mutual Funds are the best way to approach Financial Markets. Mutual Funds offers diversification, expert approach, cost optimization, spreading of risk etc.
One can invest in stocks, commodities, real estate, bonds etc through Mutual Funds.
They are the best suited in a volatile market like stock markets.
One should examine the past performance of a Mutual Fund scheme before making a investment decision, it gives a fair idea about its consistancy in past performances, dividend pay-outs, performance in bad market conditions etc.
More about mutual funds on my next post.