Ukraine .vs. Energy Policy July 22, 2009
Posted by Bipin Agarwal in Future of transporation, Global Economy, Politics and economy.Tags: economy, Energy, ENERGY economy, OIL, Russia
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Energy policy will be increasingly important for every country, starting from OIL producing to OIL consuming countries. Ukraine, is dependent on Russia for its OIL and they have to navigate their policy carefully, and not let US define their policy based on what is important for US.
Bipin Agarwal
SOLAR GOLD rush .vs. Saudi Arabia July 19, 2009
Posted by Bipin Agarwal in Future of transporation, Global Economy, Politics and economy, Real Estate Development in Global Economy, Recession.Tags: Energy independence, Global Economy, Green energy, middle east, Recession, Soalr Energy, US economy
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Decoupling of Oil from world economy article on my blog received overwhelming response from all over the world. Reactions were all over the map from denial to skepticism to curiosity. Mission accomplished, at least the conversation started.
One of interesting question came from a university in UK, inquiring about the impact of OIL decoupling on Saudi Arabia. As we all know there is no other country more synonymous with OIL than Saudi Arabia.
Saudi Arabia current reality
Saudi Arabia is in an interesting position in the context of money, world economy, and politics. US president recently said that middle east peace is the hardest problem to tackle. It is further complicated by the nature of the government and demographic of the country.
Relationship between developed countries and Saudi is based on mutual benefits; OIL is the backbone of developed countries domestic economy, and foreign policy. Saudi is a buyer of lot of defense equipments (defense industry is critical for developed countries) that are of no use for Saudi. However it seems that US (largest developed country) has a little upper hand because OIL is priced in Dollar. We all know that pricing of the OILis dependent on the relationship between Middle East and US, not demand and supply as lot of economist or people would like to believe. Without the support of developed countries OIL will be trading at dollar twenty a barrel.
How Saudi Arabia can play the game
Saudi Arabia should continue to have strong relationship with developed countries, and generate as much reserve as possible using OIL export. Saudi Arabia needs to pursue aggressive SOLAR strategy as well. From a branding point of view it means, they need to position as an Energy supplier of the world, not an OIL supplier. Some of thoughts are outlined below:
- It is very important that Saudi Arabia make huge investment in SOLAR energy plants and Technology Company all over the world.
- They currently have lot of dollar reserve. I would argue that lot of reserve should be directed to building and owning SOLAR energy capacity all over the world. Dollar will eventually lose value and they should not wait.
- Energy grids, the way electricity is transported, is a critical component of the infrastructure that requires massive investment. This is a huge investment opportunity for Saudi Arabia. Best thing is that this investment will have no resistance from the receiving country. Off course the country has to be friendly, otherwise they can seize the asset. It is a pure investment play.
- Significant number of countries in the world will welcome Middle East investment if it is meant for SOLAR energy production.
- Saudi Arabia will reduce it dependence on OIL as the only source of revenue. Remember there will be lot of opposition from the developed countries, because they will lose influence over Saudi Arabia,
- I think Saudi Arabia should not encourage lot of real estate development in their country. Currently this is a big source wasteful expense.
Summary
Every country will have to adjust to this reality of SOLAR GOLD over time. Middle East countries with significant reserve can take advantage of the SOLAR GOLD opportunity by investing in SOLAR power generation, solar technology company, and infrastructure for electricity grid.
It is not possible to discuss every country in detail in this article. If you would like to discuss a county of your choice, please send me a note @bagarwal.india@gmail.com
You have a question, about Global economy, Real Estate, and Politics correlation, feel free to ask by sending email or writing a comment.
http://www.redhawkinvestments.com
Bipin Agarwal
bipin.agarwal@redhawkinvestments.com
De-coupling of OIL from world economy July 9, 2009
Posted by Bipin Agarwal in Future of transporation, Global Economy, IT Offshoring - Future Direction, IT offshoring and Real Estate development, Politics and economy, Quality of Living, Real Estate Development in Global Economy, Real Estate Development in India, Real Estate development in USA, Recession.Tags: Energy independence, Global Economy, OIL independence, Quality of Living, Recession, SOLAR Power, US economy
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OIL Power – OIL, the dominant source of energy has impacted the world economy and power struggle among countries for a long time. The effect has been more visible for last twenty five years. Middle East, Russia, other Oil producing countries have enjoyed unprecedented boost to their economy and foreign reserve because of high oil prices. We all know that it is not a pure supply and demand dynamics. This game has worked well because there was no other significant sources of energy that was easily and readily available.
Past Effort to Change – There have been lot of attempts to create new sources of energy including nuclear power, wind energy, bio-fuel, and clean coal. All of these efforts have been successful to some extent, but none of them significant enough to change the dynamic of world economy and power status. Lot of that has to be with the economics of the particular method (bio-fuel, clean coal), time it takes to set up the plan and disposal of waste (nuclear), predictability of the energy generation (wind). As a result, none of the method so far have emerged as a challenge to OIL energy.
Off-course like everything else, corporate interest and desire to maintain power status by countries has further compounded this challenge. Both OIL and defense industry (selling arms to protect the supply of OIL sources) has played a significant role in creating hurdles. Politics has played a big role as well. Keeping the OIL price high forces the poor country to spend their significant resources for buying oil, hence limits investment in other areas for productive growth. Further, the market for automobile has been too large for these corporate to let it go easily.
What Has Changed – It is fair question to ask. There is lot of new dynamic from developing countries to developed countries. Growth in the developing countries India and China have changed the market dynamics for Oil consumption. These countries cannot afford to import OIL they need to support the economic development. Economic development is putting a lot of pressure on the politicians to find alternate source of energy. Developed countries, US and part of Europe have so much debt that they have to figure out a way to reduce OIL consumption. US is suffering the most from OIL dependence. There is lot of domestic pressure in US to end Oil dependence.
Solar, the GAME Changer – We all know that SUN is, as predictable a source of energy as far as humans are capable of visualizing. The capability to harvest this energy on a large scale in a economic way has been a major barrier to solar becoming a challenge to OIL.
Good news is that now we do have a scalable and reasonable economic solution to harvesting solar power. Significant reason for this change is because we can cost effectively manufacture the devices capable of harvesting this energy as opposed to conventional means of either drilling (oil and gas), digging (coal), or changing the course of rivers (Hydro). Recent decision by US government to review sixty seven thousand acres of land for solar power generation is a further validation of the direction of solar based energy. Large corporation currently own large tract of land to participate in the opportunity, I call it SOLAR GOLD. Gold is not black any more.
Impact on World economy and Power – Every country will feel the impact of this change (SOLAR GOLD) differently. It is not possible to discuss every country in detail in this article, So I will talk about some regions, countries. If you would like to discuss a county of your choice, please send me a note @bagarwal.india@gmail.com
Middle East and Russia, there have been a lot of conversation that OIL at dollar eighty a barrel is what they need. It cost about couple of dollar to produce a barrel of oil. Why do you think world will come to the rescue of Middle east and Russia if Solar is available. While Russia is better positioned then Middle east because of their defense capability, but that is not good enough. President OBAMA is playing the card right by going to Russia, putting the arms control pact and engaging Russia for nuclear issues so that defense capability (industry) becomes a non-issue. These are not well positioned for long term.
China & India – Both countries are heavily dependent on importing Oil and Gas currently. China has been pro-active in securing the oil supply like USA has done for decades. This does change the long term picture. Both countries will resort to using Solar in big way and this position them very well in the long term. These two countries are currently not dependent on Oil Export for their economic prosperity and it will be huge advantage in the long term.
Other developing and emerging countries – This is a mixed bag. Some of the developing countries have OIL export in combination with other industries (Mexico – OIL and manufacturing). Other countries in this block have lot of domestic economy. It is unlikely that any of these countries will ever become a super power. There will be wide range from being no effect to significant impact for each of the country.
Europe – There is part of Europe that is well developed, West Germany, UK, France, Denmark, etc. then there is part of Europe that is still developing such as Eastern Europe. It is unlikely that any country in Europe will be a Super power in the long term, However Europe as a block (European block) has the potential to be a significant player, that is only if they can stay together which is very unlikely. It is human nature. US, China and for that matter some of the countries within Europe will do everything possible to make sure that Europe is divided and chances are that they will be successful.
USA -It is interesting. USA is a huge importer of OIL but also is superpower. How did that happen? Dollar as a world currency has helped USA more than anybody is willing to admit. Defense capability, other industries such as financial services, technology helped USA to be the dominant world power. Immigration policy of USA to attract the brightest from all over world has played a key role. USA is also taking big steps to reduce dependence on the OIL. USA is pushing for electric car as a transport mechanism and pushing Solar to produce bulk of its electricity. Since all this is being done in the private sector with government incentives, USA is moving at a fast pace to maintain the Superpower status.
Summary
Every country will have to adjust to this reality of SOLAR GOLD over time. If you are a country that is largely dependent on Oil export only, there is lot of work cut out for you. Country currently importing huge amount of Oil (USA, lot of European, developing countries), there is a significant opportunity for you to position yourself for success. It will require a focused effort, a combination of policy, investment, and incentives both in the area of energy production, education, and infrastructure. A country with a population base (critical mass) will have an inherent advantage (USA, China, India) to play in the super power league.
You have a question, about Global economy, Real Estate, and Politics correlation, feel free to ask.
http://www.redhawkinvestments.com
Bipin Agarwal
bipin.agarwal@redhawkinvestments.com
Future economy .vs. Bill Gross, George Soros, and Nouriel Roubini June 22, 2009
Posted by Bipin Agarwal in Future of transporation, Global Economy, Politics and economy, Recession.Tags: Global Economy, Real Estate Development, Recession, Twenty Minute Lifestyle, US economy
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Everybody who has any interest in economy, market, recession, recovery from financial meltdown, probably have either heard or read about these three people;
- Bill Gross (Bond king, PIMCO)
- George Soros (philanthropist, and ex. Hedge fund trader)
- Nouriel Roubini (Dr. doom, NYU economic professor)
If you are thinking, that these three ultra smart people will have similar views and thinking about the current and future state of economy, You are dead wrong. Alan Greenspan, ex. Fed chairman is also very influential, who can move the market but you cannot count on making your economic strategy dependent on him, because he is a paid consultant and he is paid by the likes of PIMCO, UK government, political think tanks, etc. Let me first give you a little background of the above three people, on their incentive, and interest which I believe have hugely effected their views.
Bill Gross: This Sunday June 21st there was front page write up on Bill Gross in New York Times. Article outlined clearly that his view are more reflective of how he is going to make big money based on his partnership and connection with US government. If it is good for him, that is what counts. He is a fund manager and trader. He is a strong supporter of PPIP (Public-private investment program), because that is how he and his funds will make billions in fees and his investors may do well.
George Soros: Last week George Soros wrote in Financial Times that worst of the recession is behind us. Government should continue to do more in the form of stimulus until credit market is liquid, after that, they need to figure out as how to get out of the market and work on reducing their debt. Market are not efficient, his theory of reflexivity (or his fixation with the theory) drives his views. He is a big supporter of OBAMA administration. His life experiences are definitely inspiring. He spends more of his personal time on Philanthropy, and world cause. His most recent gift to Eastern Europe of 100 million dollars to deal with economy is most recent example of giving.
Nouriel Roubini: Dr. Doom as he is now known in the world is a economic professor. He is famous, is making lot of money by consulting, publishing research paper, etc. In the current economic environment, where People are fearful, will pay you a lot of money if they think you have a solution. The fact is, he has no solution, He only has suggestion to government that will not listen to him any way. He is in a safe zone. He is covered. If economy turns out to be his way, he is covered. If economy gets better I do not think people will ask him question and in any case, he will take the credit.
Conclusion & summary: After reading the overview I provided above, and off-course you should read more about them, you cannot formulate any definite point of view of the future economy. But unfortunately, these are the guys who make headlines on Financial Times, New York times, CNBC, Bloomberg, Yahoo news, etc. It is possible that you can make money by investing with Bill Gross, and his funds, You certainly do not want to buy expensive research form Roubini, that will make you only poor and no better insight then you already may have. George Soros is interesting. He is optimistic and making some good obvious suggestion to government.
I personally think that lot of the pain about residential real estate we had to go through is behind us. We still need to realize the full extent of losses for commercial real estate, credit card portfolio loss. It is possible that the loans sitting on the balance sheet of financial institutions are still overvalued, so what? these loans will be written down over time when they mature or people decide to sell their house or foreclose. There could be another couple of hundred billions in write-off by financial and non-financial institutions, however that will not impact the economy much. Biggest unknown right now is, the USA government deficit financing and how it will impact the USA domestic and worldwide economy. Unfortunately, you one can not predict the economic outlook for short or medium term (up to 10 years) based on economic fundamentals only, economy is hugely effected by the political events and strategy. In the long run, it is more important to know, who will come out as a winner once the dust settles down. USA, China, Mexico, Germany, India, Africa, and Brazil are well positioned for long term overall economy. However it will not be a smooth ride. Hold your rope tight.
You have a question, about Global economy, Real Estate, and Politics correlation, feel free to ask.
http://www.redhawkinvestments.com
Bipin Agarwal
bipin.agarwal@redhawkinvestments.com
CHINA Super Power – Do not move their Cheese June 18, 2009
Posted by Bipin Agarwal in Global Economy, Politics and economy, Real Estate Development in Global Economy, Recession.add a comment
CHINA IS A SUPER POWER already.
- China GDP will grow by seven percent or more next year.
- China will mandate buy China for domestic usage
- China will buy IMF bonds
- China owns about 800 billion of US Treasury
- China has two trillion dollars of foreign reserve. This will grow to three trillion in next five years.
- China wants to have significant say at IMF
- China does not want to called as part of BRIC, It should be renamed as BRIM (Brazil, Russia, India, and Mexico)
CHINA wants it bad, and they may be right. They have all the attributes it takes to be a super power. Financial times has a special addition called CHINA confidential to give outside world a good insight into CHINA. These are all facts, not fiction.
Why there is problem in accepting CHINA as a super power? It is time that G-7 or G-8 should be re-organized to represent the new world financial powers. Current grouping based on the dollar value of GDP is misleading and does not take into account the realities of the world economy.
If other super power, IMF, or world economic forum or other developed countries have a problem in accepting CHINA as super power, I have another suggestion.
Let us have cheese and non-cheese economic blocks. All the countries that consume significant amount of cheese; USA, Italy, European countries, should be grouped into one category. Countries that do not consume a significant amount of cheese; CHINA, India, Indonesia should be grouped into a separate category. It will be then possible to look at GDP of cheese eating countries and non-cheese eating countries. This will stop the currency war among dollar, Euro, yen, pound, and Yuan.
What I have described above is not a joke. There are several benefit of doing it. You may have read the famous book; “Who Moved My Cheese”. Here is the link if you are interested.
http://www.whomovedmycheese.com/
Once you have above two categories defined, if any of the country in the non-cheese block does not succeed financially, they can not say; “Who Moved my cheese”, well you are in the non-cheese block, there is no cheese to be moved.
Reality is that America is well positioned to prevail economically for lot of reason. I do not think America need to worry about China in the short term or long term.
You have a question, about Global economy, Real Estate, and Politics correlation, feel free to ask.
http://www.redhawkinvestments.com
Bipin Agarwal
bipin.agarwal@redhawkinvestments.com
Investment outlook for next twenty years May 22, 2009
Posted by Bipin Agarwal in Future of transporation, Global Economy, Politics and economy, Quality of Living, Real Estate Development in Global Economy, Real Estate Development in India, Real Estate development in USA, Recession.add a comment
Where to invest? This is an age old question, answer to the question changes with time depending on the political environment, social and economic environment, and individual circumstance. Current political, economic environment and social value system (individaul .vs. family) could not give more confusing, and conflicting messages.
Economic and Political Environment – Debt rating of so called rich countries are on credit watch with negative outlook. Recently UK was put on negative watch by S&P, US is next an dso are so many other countries. China is focused on domestic spending, export monopoly, political turmoil, and desire to be on the top in next twenty years. Record number of war conflicts, from Iraq, Africa, to Asia, along with growing number of business bankruptcies, government sponsored stimulus adds further complexity to the decision of future of investments.
Investment Environment – There is lot of confusion about the area of investment. Everybody I talk to seems to be confused where to invest. Gold, real estate, retail, commodity, transporation, stock, bond, fixed deposit, or just cash?. Future economic environment will be inflation, or deflation, or stagflation? There is no one answer that applies to every investment decision. It depends on your particular situation, net worth, objectives, lifestyle, risk appetite?.
This write-up is not a wealth management planning guide. Primary focus of this article is to outline the macro level investment opportunity for people who can take long term view of their investment and are looking for investment return much higher then, offered by fixed deposit and have the risk appetite. Again specific decision will have to take into account the political and financial system of the country. Best way to decide about the macro ares of investments is to somewhat ignore all this confusion, and focus on fundamental needs of life. People need a place to live, they need to eat and also they need to move. Somebody asked me, what about clothes, well this is not a future growth industry because of level of automation and consolidation that has happened in this industry. The three macro area of investing are:
- Real Estate
- Food
- Transportation
Real Estate – Real estate investing is not about just building the house and offices and expecting them to sell. After all, real estate valution is the cause of the current economic issues. This has been the case across all the countries including developed, developing, and poor. Key driver for real estate moving forward will be affordability. Population is growing and will cross 7 billion by 2013. From cost and maintenance point of view it is impossible to build single family home (large or small) spread over large land. Recent effort by TATA in India to build a small home for bottom 30% of the population for a cost of 10,000 dollars is a good step in the direction. However, key failure in this scheme is that every house is sitting on a land and there is no vertical construction. Another encouraging trend across the world is about apartment/condo living. This makes effective use of land and also offers lower maintenance cost. There are other effort such as what China is doing in building concentrated community (business and residents together), Eco-friendly community effort at different places, and ‘Twenty-Minute Lifestyle’ effort by REDHAWK investments.
Food – This is a tricky one. You may be thinking, what is wrong with me? Everybody needs food, this is a obvious opportunity, what is so tricky about it. Well, size of this opportunity is dependent on the eating habits of the people. Most logical one, veg .vs. non-veg. We all know it takes five to six times of more raw food and water to feed a non-veg eater. There is one exception when people eat fish. They are naturally grown and lot of people in Europe will not consider them non-veg. In spite of the above debate, this opportunity is going to grow. Agriculture will be a large part of opportunity. We should expect that per capita spending on food will go up because of the limited fertile land that is available. What Korea, and some other countries are trying to do by leasing large part of fertile land is because of two reason, 1) fear, to make sure food is available for their population. 2) future business opportunity.
Transportation – It is a human nature to move around. People move in search of better life, opportunity, curisity, and pleasure. Globalization, and disaprity in the wealth of rich and poor has further intensidied the desire to move. Migration from village to city, from city to bigger city, across the country, movement withing the city and across city, all requires some form of transportation, personal or public. Infratructure spending for transportation will surpass any other organized spending by government and people. Given that government have limited resources, we will see increasing investment opportunity in the area of transportaion infrastructre by building road, rail link, airport and trasnporation serives.
Summary – Investment opportunity for future should not be confused with the wealth management. There are lot of corporations that can give you wealth mangement advise based on your personal situation. This write-up is fcoused on business making investment decision and people investing in these business to create wealth. By definition, Investment should not be short term focused. Ability or need to create liquidity is a key data point while making investment decision.
You have a question, about Global economy, Real Estate, and Politics correlation, feel free to ask.
http://www.redhawkinvestments.com
Bipin Agarwal
bipin.agarwal@redhawkinvestments.com
https://twentyminutelifestyle.wordpress.com/about
Globalization – Root cause of the financial problem April 29, 2009
Posted by Bipin Agarwal in Global Economy, IT offshoring and Real Estate development, Politics and economy, Quality of Living.4 comments
Last few decades countries have created financial success by exporting their problem. Look at Japan, Korea, China, Middle east, USSR. We all know it looked good for some time, it has not been sustainable. This has been all done in the name of globalization.
Every country want to outsmart all other country by growing their export. Sounds great on paper, go little deeper and we will realize that it is not a sustainable solution in the long run and will cause enormous disruption.
My prediction is that the country that is in a best position to accelerate Glocalization will emerge from this financial turmoil. China, US, Europe (as a block) are in a strong position in that order.
Economy should be local for every country. I am not advocating socialist agenda, I am advocating a real solution to this financial chaos.
Simple rule to create a long term viable economy.
WTO (World trade organization) should mandate that trade gap between the countries should be zero (export = import).
or
Create a uniform single world currency and economy will adjust itself to reality of the world.
Alternative energy firm announced in UK that they will close their plant because government is not giving incentive. They can manufacture the wind turbine in China for 10 cents on dollar and send it to UK. Good business decision, bad decision for UK. It is fine to engage in such trade, if China will import from UK the goods or services of equal amount. If UK government does not bail out the Land Rover, TATA will shut plant there and take it low cost place. Great for TATA, bad for UK. should not be allowed to happen.
There should be pressure on each county to work hard, live within their means, and create a long term viable economy. If it is so simple, why do not people do it?
Every county thinks they are smarter then rest. Let us look at China, US and France. US can sell one F-18 to a country, provide them the loan for financing it. Now rest of people in that country can work hard for their life to pay for that F-18 which has no value for them. Why do politician in these country accept that, well that is how they become rich.
Business are obsessed with supply chain optimization by co-locating all the manufacturing into one location. Wrong focus. That is how justify producing a can of beans in a plant in China, and waste three time the resources to deliver it to consumer. This destryes the local economy and kills job. Let there will simplification of supply chain. Is there really a reason for baby food to be consumed in US should be produced in China? none, what so ever.
Has anybody asked a question, why politician are always so rich? They do not get money by digging hole. They get money by mortgaging the future of the fellow country man. Sounds Harsh, Truth is not always pleasant.
Long run, Glocalization is where the world is headed. We will be in denial until this change has happened.
Reason Glocalization will happen is not because government or large corporation want it, it is because people will demand it. Check out the following link.
Glocalization will Kill Globalization
if you have a question, about Global economy, Real Estate, and Politics correlation, feel free to ask
http://www.redhawkinvestments.com
Bipin Agarwal
bipin.agarwal@redhawkinvestments.com
https://twentyminutelifestyle.wordpress.com/about
Walk Score and Twenty Minute Lifestyle April 27, 2009
Posted by Bipin Agarwal in Global Economy, Quality of Living, Real Estate Development in Global Economy, Real Estate Development in India, Real Estate development in USA.Tags: Global Economy, Quality of Living, Real Estate Development, Twenty Minute Lifestyle, US economy
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April 26, 2009
Today there was a front page article in Denver Post on Walk Score, a Colorado based company. The site give you a walk score based on different facilities from your address. you can check out more at www.walkscore.com
This is a good start but only a small step based on the Twenty Minute Lifestyle (tm) concept promoted by Redhawk Investments Group. All of the development based on Twenty Minute Lifestyle will have a top walk Score of 100.
Walk Score alone is not enough for quality living. Quality of living for a family is based on distance, facilities, and factors such as:
- Place of work
- Long term viability of business and quality of job opportunities
- Environment
- School for kids
- Health care facilities
- Recreation
- Retail
- Affordability
- Quality of infrastructure to support walk or bicyle
- Quality of transportation infrastructure to City or other important
- Quality of neighborhood (income profile and education profile)
- Connectivity to Airport, Highway, Railway station, etc.
I want to thank Walk Score team for validating the concept we have been promoting world wide for almost three years. True quality of living that is vibrant, sustainable, and environment friendly, will require top down approach to future of real estate. Walk score is only a bottom up approach, more useful for real estate brokers then business, families, and environment.
We all know that if you live in down town and you work there, you can walk to lot of facilities, however there are lot of reason that families will not live there or should not live there; including affordability, quality of neighborhood, safety, lack of family interactions, etc. You may have a perfect walk score but totally unsuitable environment to live. There are lot of neighborhood, where Walk Score will be 100, but weather you should live there is a decision you need to make based on factors outside the scope of walk score. In short, Walk Score, good as a selling point for your real estate broker, not good for family. It is these factors, that makes Walk Score a bottom up effort as opposed to Top Down approach of Twenty Minute Lifestyle micro city.
River Walk, a development planned in Fort Collins at I-25 and Harmony, is a good example of Twenty-Minute Lifestyle. Development is planning a suitable mix of commercial, residential, health care, recreation, retail, community supported agriculture (CSA), and other amenities. There be a hub for connecting to public transport infrastructure. When you are living in a Twenty Minute Lifestyle, Walk Score will always be 100 plus so many others things that can not be measured using Walk Score. There are several other such micro city around the world.
Future of real estate in the world will be a cluster of Twenty-Minute Lifestyle micro cities built around the efficient public infrastructure. President Obama announced a high speed train infrastructure for US. This is what China is doing, This is what other developing countries are also planning. To read more about US infrastructure follow the link.
if you have a question, about Global economy, Real Estate, and Politics correlation, feel free to ask
http://www.redhawkinvestments.com
Bipin Agarwal
bipin.agarwal@redhawkinvestments.com
Government should buy struggling financial institutions April 20, 2009
Posted by Bipin Agarwal in Global Economy, Politics and economy, Recession.4 comments
April 24, 2009
Stress test framework has been issued. It seems like a reasonable framework.
This is what a risk management part of organization of these financial institutions was supposed to do, what happened? What were CEO, CFO, high paid management, and Board doing? CEO of Bank of America has demonstrated that CEO can not be trusted to take care of shareholders. Board members are typically recruited by the CEO, you can not expect them to behave any different.
Come May 4th, final report will be out. At this time, government, not the financial institutions should decide the capital raising approach if these financial institutions do not have adequate at risk capital. Why would private investors invest in the common equity of failing financial institutions? As I have suggested earlier, get rid of the dead wood and move on. Press, politician will make lot of noise to protect their owners.
US government, please focus on the real banks, and not your vote bank.
God bless America
Bipin Agarwal
April 20, 2009
First quarter 2009 results for all major US financial institutions are out. As a follow up to my blog on March 4, 2009 I wanted to reiterate my conclusion.
I had suggested earlier that Government should acquire these major financial institutions at the market value and get over this market gyrations every day based on the prediction of the analyst or economist who in any case have no clue of what is going to happen.
From market point of view, CITI and BOA are the two wild cards related to so called stress test. Government is not helping by not being upfront. It seems like there is a fight going on between industry, government and some vested interest. Some would like CITI to be nationalized, CITI may be saying if you do that to us, we will take BOA down with us. Please get over it. Take care of the country first. This is not the time for personal agenda.
The latest estimate from IMF is that there will be total loss of 4.1 trillion as a result of the credit crisis, few weeks back IMF estimated that US financial institution will loose $2.7 trillion from the credit crisis. This estimate for the United States was nearly double the IMF’s projection from just six months ago. I would make a humble request that entire IMF management should resign for their incompetence.
I read yesterday that Dr. Doom (NYU prof. Nouriel Roubini) is predicting another 400 billion in losses for US. I have to be honest and respectful, Dr. Doom has no clue. He is always shifting the goal post.
I saw another comment from the Nobel Prize winner, that makes lot of sense and is consistent with my view. “We have little to lose, and much to gain, by breaking up these behemoths, which are not just too big to fail, but also too big to save and too big to manage,” said 2001 Nobel Prize recipient and Columbia University professor Joseph Stiglitz, one of the witnesses testifying before the Joint Economic Committee of the U.S. Congress Tuesday morning.
Simple proposal for Banking industry – Solution I have proposed is not complicated. US government, please acquire BOA, CITI, WFC and several other regional banks. clean up the balance sheet. create a regulated banking utility (regional) to handle basic banking function. Take all the loan portfolio, create six businesses out of it, that will be initially majority owned by government and can be then sold off over time. Politicians (both party) will create lot of noise, who cares? Trust me, they will be relived at the end and can go back to their voters saying the Problem Fixed.
Stay tuned.
March 4, 2009
Everyday sames news get repeated on the TV about economy, recession, CDO, credit loss, and market keeps swinging. Now that government is conducting the stress test, they will know the real health of the big 19 financial institutions. The institutions that do not pass the test, government should acquire them (buy them at the market value) or let them fail right away without any further support.
In addition to cleaning up the US financial institution, US need to put pressure on other countries not to be the safe haven. This will help world economy.
Acquire the banks not nationalize them
Shareholders have paid dearly for the mistakes made by the corporate executives, consumer, and government. it is time to bring some sanity to this mess and move on.
US can acquire some of the large financial institutions like CITI, and Bank of America at the current market value. It will create lot of confidence in the market and get rid of everyday bad news. US should buy rest of the AIG as well and be done.
Put pressure to eliminate Safe haven
Another area where US can force and help clean up the financial world is to force the disclosure in offshore tax haven world. Why it is legal to move your money (legal or illegal source) into a different county? Switzerland, Panama, lot of other countries are involved. Rather then focusing on Iran nuclear ambition, US along with UN should focus on this issue.
There are significant benefit to both US and developing countries if black money can be reduced. It is possible to introduce legislation in all the countries to give people one time opportunity to declare all illegal asset, pay 50% tax and they become legal. After a cooling period of one year, any illegal money will be subjected to full seizure and jail term. We will see right away that money will flow back to the countries from safe haven countries and US will benefit a lot because of the perceived transparency of the market and fundamentals of the country.
Conclusion
It is time for all the political parties to come together and focus on the country for a change. You all will get the credit for making it happen. Democrat and Republic alike are doing more damage to the confidence of the people then any other known issue.
Alan Greenspan, Bill Gross, Warren Buffet are all stock picker or losers. Alan Greenspan could not figure out how to run FED, when he was in-charge (I do not know what music was he listening). Warren Buffet got lucky with two stocks (McDonald and Coke), Bill Gross has lost more money for the investors then he will admit. Economic policy of country should not be decided based on what these people are saying. FED, Treasury, and Economic council has the people to make it happen.
God bless America.
If you have a question, about Global economy, Real Estate, and Politics correlation, feel free to ask
http://www.redhawkinvestments.com
Bipin Agarwal
bipin.agarwal@redhawkinvestments.com
Obama Master Stroke – High speed Train infrastructure April 18, 2009
Posted by Bipin Agarwal in Global Economy, Politics and economy, Quality of Living, Real Estate Development in Global Economy, Real Estate development in USA.2 comments
Updated April 29, 2009
Financial Times today carried an article, Bill Ford chairman of Ford is advocating the gas price of $3.50 to change the auto buying pattern of consumer. Thank you chairman for endorsing my position in the article I published on April 18th below.
In fact I had suggested, tax of $2 per gallon is more appropriate. This will change the buying pattern, tax dollars help create the high speed train infrastructure, lead people to innovate to create personal urban transportation (Smart car, Nano, improved bicycle, other less or non polluting transportation mechanism.
Thank you Chairman Bill Ford. Bipin Agarwal
April 18, 2009
Few days back President Obama announced the massive investments for building high speed train infrastructure for USA. I call it a Master Stroke. I have been advocating such an initiative for almost a year. This initiative will go a long way in making US energy independent and also reduce carbon foot print. This effort is also consistent with my forecast of accelerating glocalization. Biggest challenge for the government is, not try to do everything right but is to make sure that there is clear agenda (no right wing or left wing) and there is transparency.
I am no Dr. Nouriel Roubini (famous and accidentally right) who has been branded as Dr. Doom. I would rather be focused on providing solution for USA and be identified as Dr. Boom (does not matter that I do not have a formal Dr. designation).
Industry to loose – You should expect Oil, aircraft, and Auto industry to call it a wasteful spending with no ROI. This is expected, most of the industry is having a difficult time adjusting to new reality of USA. Easy way to stop all the pain of oil industry is to impose a energy Tax (two dollar per gallon). People will pay the same price they were paying a year back. However this money can be used to build the mass transit infrastructure. This money will also reduce the Fed deficit, in addition Fed will be able to raise the interest rate to avoid inflation as well.
Industry to win – Industrial Company, financial company, construction, real estate development, environment, alternative energy, and average worker will win big. Most important, USA will be the big winner. There will be lot of real estate development opportunities. GE, Hitachi will benefit a lot. New real estate development around the concept of Twenty-Minute Lifestyle™ will gain significant mind share.
Industry in the middle – There will be some industries that will not see any significant upside or downside. Expect them to declare that economy is on a stand still or government stimulus plan is not enough. It happened today with CAT declaring that China is doing a better job on infrastructure then USA. That is great. US government need to spend the money based on the priority for the country not based on the need of specific company.
Great opportunity for Colorado – Colorado is the state for next twenty to fifty years. Several mid tier cities in Colorado are ready to grow but do not have the connectivity to each other. Colorado has a unique opportunity to grab this opportunity and layout a blue print for high speed train connectivity from Colorado spring, Denver, Fort Collins, Bolder, Grand Junction, etc. I undestand that these are long term plans, but we have to start now. Phase one could be the Fast train from Fort Collins (I-25/ Harmony junction ) to Denver to Colorado Spring. Colorado. Political leadership, wake up and make it happen. All the best, Incredible Colorado!
https://twentyminutelifestyle.wordpress.com/2009/03/17/colorado-destination-for-twenty-minute-lifestyletm/
Reason Glocalization will happen is not because government or large corporation want it, it is because people will demand it.
if you have a question, about Global economy, Real Estate, and Politics correlation, feel free to ask
http://www.redhawkinvestments.com
Bipin Agarwal
bipin.agarwal@redhawkinvestments.com
Twenty-Minute Lifestyle 