Thursday 25 May 2017

Bullet train from Mumbai to Ahmedabad

The cost is expected to be 17 billion US dollars. Let us assume that cost of maintenance is 10%. So if the project is used for 50 years, the total cost over 50 years will be 13,781 billion US$.
Let us say the cost of ticket is Rs 1,000. So per day about 500 lakh people have to travel by this train so that project does not make any loss. This is impossible because the bullet trains don't have that carrying capacity and there is not so much traffic between the two cities.


BitCoin is a bubble

In Year 2000, .com stocks were going exponential. Many people, without knowledge of how to read a company financial statement, were buying .com company stocks. Some people (initial investors who cashed out before the bubble burst) did make money. But many people lost a lot of money in .com crash.

Nowadays, Cryptocurrencies (like Bitcoin) are going exponential. Many people want to buy these cryptocurrencies. This is a repeat of .com bubble.
.com companies stock crashed because the companies were not making any profit. So the shares did not have much value.
New cryptocurrencies are springing up almost daily. Cryptocurrencies have no intrinsic value. So, in future, most cryptocurrencies will crash (but some will likely succeed).

Some people (initial investors who cash out before the bubble bursts) will make money. But many people will lose a lot of money in cryptocurrencies.


Monday 8 May 2017

Real estate as investment

Why do real estate prices keep rising faster than people's income in most parts of the world?
Governments want real estate prices to rise faster than the economy. When prices rise,

  • more taxes are collected.
  • more employment is generated.

To aid the rise in real estate prices, governments

  • give tax concessions to real estate investments.
  • lower interest rates for real estate loans.
When real estate prices rise, more people are attracted to the real estate investments. The cycle is self-fulfilling and similar to a Ponzi scheme.

How will this cycle end?
The cycle can end in two ways

  1. There is a collapse of real estate prices. This is unlikely because government will pass laws to cushion the fall e.g. lower interest rates, tax concessions to real estate investments, etc.
  2. Real estate prices will stay flat or be mostly stable. This is more likely because of government's support to real estate.

Real estate has ceased to be a good investment in most parts of the world. Sure, if you want to live in a house, go ahead and buy it. But, if you are purchasing property, so that you will sell it for a profit in few years; then it is likely that you will make a loss or (at best) little profit.