THE DUBAI CRISIS!!

THE DUBAI CRISIS!!

The announcement of Dubai world seeking a stand still in debt servicing clearly indicates, that the Global financial crisis is not yet over.

 The economy of Dubai had relied on the massive borrowings. It build the economy mostly on trade,reality and tourism. Moreover Dubai invested largely in foreign assets such as Casinos luxury hotels. Ocean liners, properties  etc. Its economy is substantially financed by international borrowing.

In 2007   global financial melt down hit its growth, trade and tourism very hardly, resulting in entire collapse of commercial trade abandoned construction projects,unoccupied  commercial complexes, which lead the property prizes to tumbled down to its bottom.

At this juncture servicing the huge debts raised to create these assets became difficult. The Dubai world one of the government owned company owing nearly $60 billion to international banks asked for a  stand still as regards debt servicing from its borrowers for six months since late November.

Here it is very important to discuss how this same crisis was handled by both US and Dubai. In US the capitalistic country several private banks, including investment banks have been bailed out of with large dose of public or other wise  taxpayers money. But in Dubai the international lenders to the government owned entities have been left alone to handle the massive credit related problems. In Dubai government  entities are substantially in excess of the GDP of the country hence it considered a sovereign risk in the conventional sense of the term.

 The international banks which lend to Dubai world are in no financial position to take even a partial write down on these assets. It is now certain that the process of cleaning up bad debts and recapitalising them.

After the Dubai world travails, the international credit market unlikely to offer government owned corporates without  an explicit sovereign guarantee .

Which is the long term Investment bet? Deposits,Gold, Stocks or Real estate?

Which is the long term Investment bet? Deposits,Gold, Stocks or Real estate?
During the 20^th century, investments in the real estate showed steady returns. Sometimes the price rise is fast and sometimes it is slow. But the rate of return is some what better than the Fixed deposits and also above Gold. But is somewhat riskier than fixed deposits.
Likewise, Investments in the Gold also showed good returns and at times it is stagnant. It sometimes performed better than fixed deposits and at times it is under performed when compared to fixed deposits. But is riskier than fixed deposits.
Investments in the Stocks is the riskiest of these investments. But the returns were phenomenal during the Bull Market and it showed negative growth in bear markets. But on Average, it performed better than other investment avenues. But the risk factor is much more in Stocks.
My investment plan would be to invest 30% in Stocks, 30% in Real estate, 20% in deposits and 20% in Gold. Any investment plan should take into consideration atleast 5 years time frame. And the best way to invest is to invest at bear markets.

How Interest rates affect the Stock Market?

How Interest rates affect the Stock Market?

Interest rates are the percentage at which the Lenders lend the money to creditors. The lenders may be Banks or Individuals or Financial Intstitutions. The creditor may be any one.
But here, the Interest rates we are talking about is the rate at which a central bank or federal bank of any country lends the money to other banks. In USA, the central bank is Federal Reserve and in India, it is Reserve Bank of India.
Central Banks world over lends money to other Banks of their country. The Interest rate at which it is being given to the Banks really matters. If there is inflation, in order reduce the price rise, Central banks increase their lending rates in order to reduce the flow of money in to the system. This in turn reduce the price rise.
And in times of deflation ( prices decline steadily ), Central banks reduce the lending rates to inject money in to the system.

If interest rates are hiked, then the Banks will increase their lending rates and the Industry which is financed by Banks will get affected by the rising interest cost. Thus it affects the bottomline of the Company.
Since companies bottomlines are affected by rising Interest cost, their earnings will be affected which in turn affect the sentiments of the stock Market, which in turn affect the stock prices of the companies.

Fundamental Analysis of a Stock

Fundamental Analysis is the way of analysis of security based on their internal and actual performance of Company unlike Technical Analysis in which just the movement of prices is studied, without considering the fundamentals of the company




Fundamental analysis of a security is the study of Balance sheets, Profit or Loss account, assets and liabilities, sales income, other income, interest payment and etc.


Based on this an Analyst comes a conclusion about the future of the stock or the Company.


Some of the main value they see are PE ratio, EPS and Book value.


PE ratio is the ratio between Price of the Stock at the Market to the earning of the stock per share. Higher it is, the stock price is highly valued. If it is less, then the stock price is priced low.


EPS denotes Earnings per Share. It is the ratio of profits made for the year to the number of shares of the company. If the value is high, it means the earnings are high for the company and if it is low, then the earnings of the company is low.


Growing sales figure or slowing sales figure would influence the future performance of a company.


An analyst also see the performance of the sector at which a particular belongs to. They analyze the performance of the company with the sector’s performance. And also they see the future for the that sector.


Various factors like this influence the movement of the price of a particular stock. Study of this factors is Fundamental Analysis.

Technical Analysis Introduction-2

In latter years , in the course of market history many analyst propounded their own theory, and new indicators are introduced .Many indicators based on momentum have become popular nowadays .

Japanese candlestick techniques are used along traditional western charting techniques.

The price of a security represents a agreement between a buyer and seller. It is the price at which the buyer decides to buy and the seller decides to sell.


If he expects the price to move up, he will buy it. If the investor expects the price to move down, then he will sell it.

Humans as a individual, are not easily predictable. But as a crowd their behavior is predictable. A individual as a member of a crowd would behave differently.


Because of the participation of people of various emotions, anticipation and expectation, the market movement is unpredictable. Because of this there is always a gap between demand and supply which makes the prices to swing constantly .

Technical analysis, in other words is the study of this demand and supply ,and anticipate price changes.