Dubai Crisis- Is it the end or the tip of the Iceberg?

Dubai Crisis- Is it the end or the tip of the Iceberg



We all know that the financial crisis in Dubai World is due to heavy exposure in Real Estate Investments and the fall of property prices, and a very little demand for the already completed projects.


Money is locked in declining assets. The same scenario was seen in 2008 in US with large Investment Banks collapsing under their weight by holding huge exposure in real estate market. The ripples of that effect was heard in Asian and European Countries also.


But at that time, the asian countries some what remained insulated from that effect. In India also, those effects can be seen by the fall of property prices and lack of demand.


Now the million dollar question is whether the worst is over or the worst is yet to come. Normally, when a financial bubble is burst, its effect can be seen for 5 to 10 years. For example, the dot com burst had it effect for another 10 years. The same is going to happen now also.


In India, large number of IPO are coming in Infra, Power and Reality sector. This indicates people are still confident of this sector. It does apply that the worst is yet to come. We are likely to see Dubai Crisis scenario in coming months in some Asian and European Countries.


What I feel is that the Dubai crisis is just a tip of the Iceberg. When the whole Iceberg is known to the world, I don’t know how it is going to affect our career and living.

Economy and Stock Markets

Economy and Stock Markets

Are Economic growth and Stock Markets are interrelated. Half of the economists will say ‘Yes’ and half of them will say ‘No’.
According to me it is ‘Yes’. Stock Markets and Economic growth are interrelated because the rise of Stock Markets would attract small investors into the Market which will propel the stock Markets further, which in turn fuel the start of new companies and projects, which in turn help grow Economy.
A rising Stock Market would invite retail Investors and Foreign Investors to invest in the Stock Markets through secondary Markets and also through Initial Public offerrings. This process will infuse huge amount of idle money into the system
The money that came for circulation would be used by the companies to expand, backwared integrate and forward integrate. Thus the production capacities of all companies increases, so they produce more end products.
These end products has to be sold and this will be done by exploring new Markets locally or internationly. Thus the earnings of the companies will increase, which in turn means increased tax for Governments.
Thus a rising stock Market will surely propel a Economic growth.

Is the Bear Market over Worldover?

January 2008 saw the start of a bloody decline in stock markets World over and it terminated the bull run in the stock markets that started on 2003. The decline continued till  october2008 in most of the Asian Markets and the decline terminated around february in US and European Markets.



People ranging from ordinary men to investors in the stock market panicked and the period saw many layoffs in all sectors of the Economy. Unemployment rose in US and world over. The severely affected country was USA.


Many Banks and Financial Institutions in USA went bankrupt mainly because of sub prime crisis which is due to the burst of real estate bubble and Stock Market decline. The tremors are felt heavily in European countries and it is felt mildly in Asian Economies. It was said at that time, that World was going to face the worst bear market.


Ever since that, Governments offered stimulus packages to boost their respective countries economies. The stock Market were recovered from the lows very quickly. Now, everybody saying that the bear market is over. The stimulus packages given by their governments boosted the economy and everything is normal today.


But My opinion is, even though Stock Markets have rallied for the past 9 months, the present rally seems to be temprory.


No bear market completes its term in just 9 months. So, the real and the worst bear market is yet to come. It may take another five or six years to complete. Hisotry will always repeat itself.


Be prepared for it.

Market Cycles

I have observed that any free markets in the world are behaving cyclically. Careful examination of the time period taken by the market in each legs reveal that they are behaving rythematically.



It seems world Equity markets are moving in 33 year cycle. A new bull market is started in Dow Jones Index in 1950 and it continued for 1983 and the current leg is likely to terminate 2016.


Whenever equity markets are in last phase of a cycle, Bullion markets are behaving in opposite direction of the equity Market. So, Equit Markets are in bull phase if Gold Markets are in bear phase and Gold marekts are in bull phase, when Equity Markets are in bear Phase.


The 1970s Bull Market in the International Equity Markets were lead by Japan. The 1980s and 1990s Bull Market in Equity Markets are lead by south East Asian Countries. The 2000s Bull Market is lead by India and China. So the next bull market is likley to be lead by some other new countries.


The smart Investors should always look for the right Market to invest and the right marktet to withdraw their funds. It will not be profitable for anyone to hold on to their same investments in all period.


Market cycles will help you to time the market at appropriate time. So do study the Market cylces and take investment decisions based on the study for profitable Investments.

Is a Bubble building in Gold?

In Financial Markets, herd mentality is in work. Investors always go by the herd.
Last year, they chased real estate and property prices shoot up world over and investors bought properties as though there is no tomorrow.

So, this effectively set up a stage for impending financial Bubble and that happened. Property prices fell all over the world. Many caught in the melee. Banks went bankrupt. Companies went bankrupt. Individual went bankrupt.

But still, herd mentality is in work. Now, the people are chasing Gold assets and it has effectively set the stage for the next financial Bubble, that is ‘Gold Bubble’.


Financial Bubbles are created when all of the investors who are interested in a particular asset want to get hold of it. Once the buying potential recedes, then a huge selling potential is created. Once prices start coming down, panic selling by all the investors push down the prices beyond its intrinsic value. This is how financial bubbles are burst.


The present price rise in gold reminds me of bubble is being built in it. It is likely to burst in another six months. The same story will happen again. Banks will go bankrupt. Companies will go bankrupt. And individuals will go bankrupt.

Let us see, if this happens shortly.