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Dutch Disease


wealthymatters.comThe term “Dutch disease” originates from a crisis in the Netherlands in the 1960s that resulted from discoveries of vast natural gas deposits in the North Sea. The new found wealth caused the Dutch guilder to rise, making exports of all non-oil products less competitive on the world market.Today the term is used in the context of exchange rates,to refer to the negative consequences arising from large increases in a country’s foreign currency inflows including – foreign direct investment, foreign indirect investment,foreign aid etc in addition to the ill effects on non-resource industries a by the increase in wealth generated by the resource-based industries.  Read more of this post

How To Pick The Right Class of Mutual Funds?


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Some Real Estate Facts To Mull Over


wealthymatters.com(1)Long term returns from residential real estate

Robert Shiller, by tracking the US home prices data from 1890 concluded that in the longer run, property prices grew at an annualised return of around 3%, just keeping pace with inflation.Housing price rises could not outstrip inflation in the long term because, except for land restricted sites, house prices would tend toward building costs plus normal economic profit.

I have no such data for India.But here is what I can attest to:an ancestral house acquired 120 years ago for 6000 Rupees is now valued at 1.2 crores-an annualized return of about 6%.I think this is close to the long term inflation rate in India.

 

(2)Is home ownership all that it is touted to be?

In a poorer country like Bangladesh, 90% of the houses are owner occupied. Whereas in a richer country like Switzerland, only 33% of the houses are owner occupied.

Europeans are more comfortable with renting compared to Anglo Saxons and we Indians need to decide whose model we choose to follow.Read what Niall Ferguson has to say about property ownership. Read more of this post

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