GWE (Global Wealth Effect) In My View-Part-3

CANADA- Somehow the Global wealth effect had not left its strong effect on Canada.That does not mean that Canada did not get some of it. Growth of Canada was planned and basically because of internal wealth(Canada's natural resources industries) like oil reserves in Alberta and McMurra.The targeted customer for Canadian oil and gas, is its neighbor country US. The wealth effect was there(2003 to 2007) and it will continue to stay long but its not from global wealth.

South Africa-The economic downturn is slow. In past 17 years South Africa saw this rescission. Mining was one of the caused for South Africa's booming economy and also for economic downturn. Rising employment and wealth effect due to high asset prices leads to:

Strong business confidence-->Leads to--> High commodity prices -->Supports-->Private Investment.

However South Africa survived the rescission because commodity price, raised by 5.5% in the 2nd quarter(2009).

South Africa's government committed to spend $98 billion Dollar on Infrastructure over the next 3 years (not bad). Analyst are assuming that this country economy will shrink only 1% in 2009 and will grow slowly in 2010.

Global Wealth Effect (GWE) In My View-Part-3

Dubai-The city enjoyed most of GWE (Global Wealth Effect) in past years. The lifestyle was rich (I can say rich enough that people were thinking they were in a drug). It was a dreamland, for Investors. Money was like a low hanging fruit in Dubai. In every Six month there was a new big project. Stadium, amusement parks, shopping center and off-scale apartment complex (you name it) are the example of how Dubai get the most out of Global Wealth Effect.

There was even shortage of worker for the on-going projects. So most of Dubai employer get workers from outside the country by providing work permit. Workers from Bangladesh rushed to Dubai to get the gold(jobs with very good wages), promised by their employer. Life was more than perfect for last 4 to 5 years started from around 2001 to 2006.

Now in Dubai, the life is back to below normal. Some apartments homes that once traded for five million dollar have dropped to two million dollars. Still no one is interested for buying. Foreign workers are sitting without work. They are trapped in between the fight of their employer and Dubai government's new rules. Investors are pulling back their money to just survive before hits by a monstrous storm(current economic downturn) which they even don't know how monstrous.

A favorite quote of Mr. Warren Buffett is

Only when the tide goes out do you discover who's been swimming naked

.

This is so true.

Continuing...

Global Wealth Effect (GWE) in My View -Part 2

All over the world, people were thinking something is wrong, but no one was sure what is exactly to blame on this economic downturn.

Spending make the economy get rolling smoothly. It is the oil for economic growth. In India, people are very proud that because of their buying using cash (and lot more credit), they are responsible for the Excellent Economy. In a sense, it is true.

However, my point is where the limit? If one person buys five plots of land and three apartments, the earth is not expanding by miles, so what is the point of blocking the resources?

The simple reason for land price hike is for one land the owner gets many bids. Now it is the seller market. In my view, people in India were not used to this type economic bubble. The sudden economic growth in India left its effect on its cultural, social and emotional fabric. People have started searching their identity by gathering wealth and young people are now just careless.

China is maintaining its status by providing made in china brand and producing goods for the rest of the world. They have also enjoyed the economic bobble but less as compared to India. Chinese government being the largest trade partner of USA, has more control of their country. Even though it is a communist country, it has created controlled pools of growth and development in large cities, so that the rest of the country can have a sustainable growth and lifestyle. The current growth of China is due to the increased productivity of these cities that are in constant scrutiny of the Chinese government.

China took the advantage of the Global wealth in a positive way by taking right decision at right time, the result is in current economic situation (recession) the country is still managing(I am optimistic for China). In my view, there is an entrepreneur in each Chinese family.

Global Wealth Effect (GWE) in My View

I want to give my 2 cents here about the culprit of the current economy. We can find many articles and discussions about the current economic situation (2008-2009, the black hole in my word). The bailout plan does not work in many scenarios. I am neither an economist nor a high stake investor, just an IT professional who’s been watching the market and people’s behavior.

I have been noticing in past years, the affordability of normal people has crossed the border. In a positive sense, I can say it is good that people can afford so many things in their everyday life. For example, Organic Food, which is supposed to be more expensive as compared to non-Organic food. I am surprised that people with a minimal wage can afford Organic food and products.
Organic Beets in a farm (California) ---->


While surfing in net I stumbled upon so many products with un-believably low prices. We cannot always blame China for the low cost products. So many American companies are facing tremendous competition, reducing the cost of their products, and offering deals package without making usual profit. The whole thing is just to enroll them in to the racetrack.

In India, the salary hike for an average employee was 50% more than the usual salary For example, an IT Engineer with 3-year experience was getting double than what it supposed to be and on top of that, many benefit packages। Even though the inflation is high, the affordability was crossing the border due to much higher wage inflation। Past 3 to 4 years India was a heaven for credit card companies introducing their plan and product. They even used to offer money to whoever just has a JOB. The reaction was this; The People in India suddenly thought that they are in a Global Economy & it is going to stay forever. So they started spending beyond the limits (off course who will not!) with zero savings. The price hike for Apartments and homes has been 70% from 2005 to now. Everybody thought that they could get easy money by flipping properties left and right.



Part 2 of this view is coming…