Speculation and investments

A couple of interesting articles to think about.

Bill Kirkman has something to say about buying homes versus houses:

When you buy a house are you making an investment? In a sense, that is a pointless question, and most people would say that of course the answer is yes. …
The answer which I gave is entirely accurate, but in my opinion it is not the whole answer, nor indeed the more important part of the answer. The crucial part, surely, is: “We are buying a home.”
I do nevertheless believe that continuing to see houses as primarily investments rather than as primarily homes is fundamentally flawed.

Along similar lines, here is C P Chnadrashekhar speculating that the current slide in rupee may be due to speculative trading:

In sum, a series of changes that have occurred since financial liberalisation began have increased India’s exposure to the adverse effects of currency speculation. Given the nature of these changes there is little that the RBI and the government can do about such speculation, despite the claim that: “While introducing currency futures, the Reserve Bank and the Securities and Exchange Board of India (SEBI) had put in place various safeguard mechanisms to monitor positions, prices and volumes in real time so as to control excessive speculation.” In any case, there is nothing whatsoever the RBI and the SEBI can do to curb speculation in the NDF market that is outside its jurisdiction.

It is, therefore, possible that the sudden and sharp depreciation of the rupee is the result of the spillover onto domestic spot markets for the currency of speculation-driven price trends in derivative markets. In which case the slide is difficult to control and can continue with no clear prediction possible where the decline will take the currency in the days ahead.

As much as one can see the problems in these two cases, I think there is little that can be done in terms of practical, politically acceptable solutions!


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