All about Bubbles
No I'm not talking about the cartoon character but real bubbles. You know those that seperate people from their hard earned money. Yeah I know fools and money should never mingle but bubbles are quite extreme in that even non-greedy folks fall a prey. There are bubbles and then there are bubbles triggered by bubbles. At present there are 3 bubbles in my view
1. Outsourcing bubble: This has certainly assumed the proportion of mega bubbles. Outsourcing to India has assumed a great proportion but the fact is that only a few of those outsourcing deals really benefit the outsourcer. In my own place of work we have outsourced a part of our IT work to India. Well they are cheap around $20/hr or so but they take 10 times as much time to do the work as $100/hr American worker. When I meant American worker I don't mean white caucasian male, that term means anyone who is under direct control of our team and whose activity can be monitored by us. The bane of outsourcing is not their lack of talent but more a lack of control exercised by us. Anyway this bubble has not yet been recognized in the offices of the concerned. For these people it's the $/hr that matters not how many hours it takes to get things done.
2. Housing Bubble in India: Just yesterday I was talking to my friend who tells me that a 6-acre property near Coimbatore went from 32Lakhs to 60Lakhs in 2 weeks. If this is not insane then we need to find a new word for this phenomenon. This housing bubble is definitely driven by the outsourcing bubble. People working in IT have hit pay dirt what with their annual salary being near 15-20L for experiences ranging from 5 to 10 years. Where should they invest this money ? In tangible assets ofcourse. Not to mention the fact that interest on their homes can be tax-deductible. This new found financial flexibility empowers builders to offer the insane money for properties that could be developed like I noted in the first sentence.
3. Housing Bubble in USA: This one has started to fizzle now. The gas has started escaping from underneath. Prices are actually falling in once bubblicious areas like NOVA, SoCal, Miami, LV etc. While I'm not much concerned about the 3rd bubble I'm highly concerned about 1 and 2 as my exposure to those are greater.
The next 2 years will tell us whether 1 and 2 are bubbles are a new plateau. If they do become a new plateau I'm afraid that this tectonic shift will leave a lot of people in the lower plane and result in social upheavals.
Till next post CIAO
1. Outsourcing bubble: This has certainly assumed the proportion of mega bubbles. Outsourcing to India has assumed a great proportion but the fact is that only a few of those outsourcing deals really benefit the outsourcer. In my own place of work we have outsourced a part of our IT work to India. Well they are cheap around $20/hr or so but they take 10 times as much time to do the work as $100/hr American worker. When I meant American worker I don't mean white caucasian male, that term means anyone who is under direct control of our team and whose activity can be monitored by us. The bane of outsourcing is not their lack of talent but more a lack of control exercised by us. Anyway this bubble has not yet been recognized in the offices of the concerned. For these people it's the $/hr that matters not how many hours it takes to get things done.
2. Housing Bubble in India: Just yesterday I was talking to my friend who tells me that a 6-acre property near Coimbatore went from 32Lakhs to 60Lakhs in 2 weeks. If this is not insane then we need to find a new word for this phenomenon. This housing bubble is definitely driven by the outsourcing bubble. People working in IT have hit pay dirt what with their annual salary being near 15-20L for experiences ranging from 5 to 10 years. Where should they invest this money ? In tangible assets ofcourse. Not to mention the fact that interest on their homes can be tax-deductible. This new found financial flexibility empowers builders to offer the insane money for properties that could be developed like I noted in the first sentence.
3. Housing Bubble in USA: This one has started to fizzle now. The gas has started escaping from underneath. Prices are actually falling in once bubblicious areas like NOVA, SoCal, Miami, LV etc. While I'm not much concerned about the 3rd bubble I'm highly concerned about 1 and 2 as my exposure to those are greater.
The next 2 years will tell us whether 1 and 2 are bubbles are a new plateau. If they do become a new plateau I'm afraid that this tectonic shift will leave a lot of people in the lower plane and result in social upheavals.
Till next post CIAO
posted by Karthik S at
12:01 PM
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