In the Indian markets when one asset class is losing, other asset classes also catch up fast. So if you think you have invested in real estate, equities and debt – you may not be diversified enough.

In fact if you have diversified across asset classes at all points in time, one of the asset classes should be giving you NEGATIVE RETURNS. If this is not happening, the diversification is not enough 🙂 . For example a geographical diversification should take you to US, Asia, Europe for sure…

Also need to remember that money is fungible – and moves across geographies and asset classes. This is dangerous.

Indian promoters also move money across companies – only the very very high corporate governance companies do not play such games. Look at the fact that Vijay Mallaya is trying to take money from his other companies to fund KF.

Take the similar case in the US. One very big loan in the US bank’s books is the student loans. Student loans are not covered by the bankruptcy laws. Imagine a family paying off the housing mortgage for 10 extra years because the property prices have come down. Their son starts repaying the student loan – and he may have to pay that for 10 more years too.

Now this kid has a education loan, parents (and he too) have a housing mortgage, both have a car loan…..and NO JOB.

I think the next sub-prime is the Student Loan program.

Soon the rupee will be available for Rs. 40. And the rupee will be fully convertible. Wow!!

Remember: You saw it here first….

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  1. sorry if GAAR comes through in its original avataar…and Vodafone is made to pay with this retrospective amendment….we will see the dollar at 75. And if crude settles at 110$….our growth will also be lower.

  2. The education sector in India needs a lot of regulation. I am glad that recent medical students are asked to sign bond if going for higher studies.

    In India, the government is taking huge hit by giving subsidies. The education sector is somuch used to this free funding, I don’t think in future it would ever stop. Similarly the private managements are fleecing the students but the huge profits are going into selective hands fuelling black money and have become safe investment for political class.

    In US, it is only the case of banks and students. It is not political as like India. They have been taught more responsible at the early stage in US. I am of the belief that loan on head makes one more responsible than free money.

    These days any crisis may happen anywhere but the preparedness to deal with it or recovery is important. I don’t think our country is better prepared to deal with any crisis than its counterparts in the west.

  3. My guess is there could be one more Housing related Sub Prime before getting on to education loan. The cost of house loan is huge and there is mad rush even now. Inspite of burning fingers people are still looking to buy house. it is pure peer pressure that is building this rush.

    Human tendency is to forget the lesson learnt…. Banks will reduce interest rates and everybody will rush for loans and rest is history everybody knows it.

  4. I think you did mean that the dollar will be available for Rs. 40.
    However, we must realize that India requires a steady stream of jobs *AND* export market to be supplied by the US. If either of these are affected by dollar coming down to 40, you can bet your “bottom dollar” that Indian govt will not sit on its bumcheeks. It may do more ridiculous things like purchase another 200 tons of gold from IMF or somebody at even ridiculous prices, and pay for that using “dollar reserves” which it will create by buying lots of dollars from the market and raw printing of money against those “reserves”.
    So, Mr. Subra, I will disagree with you that the dollar is going to 40. If that were to be even a remote possibility, before that, you will see TCS, Infy, Cognizant, Wipro and their likes will retrench young IT workers in droves. Unemployment situation in India will resemble that of 1986-87.

  5. By that logic, Rupee should have been 35 at 2008, which was not the case. I think this is delusion state of mind especially when in case this scenario plays out each country will try and depreciate their own country. Read this first here!

  6. Probably what Subra sir is predicting is, if Next Subprime happens india may stand to gain and that is when rupee will stand to gain…

    my stand is could be yes but may not be due to education loan

  7. Yes, there is a possibility that INDIA will gain but really!!! One would think so….

    – very HIGH corruption levels
    – Government approach towards national growth
    – Political plays and never ending money making machine
    – Worst of all, “who cares for the country” attitude by everyone

    Does not paint a confident picture for India, does it!!!

  8. Rupee@40 Save my IT JOB 🙂

    Real Estate Bubble in India., it is the hiding place for black money., so It may won’t increase but no falling., if it falls it will be temporary flipback. (my view., may be absolute wrong) 🙂

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