Category

Blackstone

The Future is Already Here… Bitcoin’s Surge in Value is Proof of a Connected Global Economy and India is Crucial to its Development

By Blackstone, COVID-19, Emerging Technologies, India, Mainstream Impact Investment, News

Suppose you live in the South of France: the Boulangerie (and every other shop for that matter) is Brexit sceptic, but you’re being paid in Pounds. Naturally you convert to Euros. It makes life easier. It makes sense. But why would anyone convert Sterling, or any other currency for that matter, into Bitcoin? You can’t buy bread with Bitcoin, it won’t get you a ticket on the Underground and Amazon doesn’t take it for any kind of lockdown delivery. As a non-fiat cryptocurrency, it’s about as much use in your purse or wallet as an IOU signed by Donald Trump.

So why is the value of Bitcoin skyrocketing?

Last week it was trading against the US Dollar at a staggering $27,000 …and there’s no sign of it slowing down any time soon. The aggregate value of Bitcoin is now more than $500 Billion, which exceeds the market capitalisation of MasterCard and it’s twice as much as IBM. Over the last ten years a single dollar invested in Bitcoin has consistently returned more than $100 invested in the S&P 500.

BlackRock (www.blackrock.com) now predicts Bitcoin will replace gold as a reserve of last resort. 

What’s that all about then?

Part of the reason, for sure, is the limited number of Bitcoin in circulation: when the cryptocurrency was launched in 2009 (we still don’t know who did it) the number of “wallets” was restricted to 21 Million, and latest estimates suggest the number of unique users is now hovering at something in the order of 18 Million. The rate at which new Bitcoin reserves are released decreases by half every four years, so naturally investors believe its value can only go up as demand increases. Economists call it Says Law (www.investopedia.com), where increased demand combined with limited supply means a higher price. And functioning as it does through a decentralised Blockchain ledger, the Bitcoins in this restricted wallet can be converted into other currencies, products and services on the Internet, so it gives them “real” market value.

Trust comes into it too…

Those same Blockchain ledgers that act as the locked vault of the currency have proved to be highly safe and reliable, like…well, just like a locked vault. Exactly like a Pound coin (or a Euro for the man in the Tabac and the lady in the Boulangerie with flour up to her elbows), it doesn’t require either party to a transaction to trust in the good faith of the other. It’s the coin itself, or the Bitcoin in this case, that makes the transaction work. Just like fiat currencies (issued by Governments), Blockchain gives Bitcoin an elaborate system of checks and verification systems to make sure the payment will actually go through. And because there are no intermediaries it costs less too, as well as being exceptionally difficult to counterfeit.

With that substructure of trust and certainty, and with all 21 Million Bitcoins in circulation, the price of one Bitcoin would be $514,000 (adopting traditional monetarist M3 (store of value) modelling), and that’s more than twenty times higher than its current market value of $27,000. Small wonder then that the market price is so resurgent at the moment…it has a lot of headroom to catch up on.

It’s not something that’s been lost on the world’s most vibrant distribution hub either. Sitting at the very heart of the planet’s trading networks, India is making the most of Blockchain technologies to turbo charge future economic development, not just across the subcontinent but in global markets too.

You can expect Bitcoin to be a key part of the process…

Executive Overview

Economic commentators have concluded that the pandemic has brought ten years of technological innovation in six months, and looking at the exponential changes brought about by Zoom and Amazon, Bitcoin and Blockchain, I wouldn’t be at all surprised if that was right.

If you would like to know more about joining our Mainstream Impact Investment journey click here

Better Connected than Ever? – How Connectivity boosts Indian Real Estate.

By Affordable Housing, Blackstone, Construction Technologies, COVID-19, Economic Growth, Environmental Policy, Housing Need, Housing policy, India, Natural Capital, News, Real Estate Markets, Sustainable Growth

All roads lead to other roads: a dizzying complexity of cables, rail and road networks have literally girdled the earth, making us better connected than ever before. A hundred years ago it took twenty days to travel by steamship from London to Mumbai, now it takes nine hours by plane.

Subject to lockdown restrictions, you can cross the English Channel in two hours by ferry (plus three more waiting for the driver in front to get back to his cab), or else zip through the Tunnel in 30 minutes; and the electrons that carry your Internet messages travel at 2,200 Km a second, which is probably why Zoom is doing so well at the moment.

But none of this happened by accident: it was all planned, built and delivered to meet economic demand…except, of course, the electron, which does what it does by itself. Economic progress is everywhere driven by connectivity.

And that’s where Big Government comes in: periodic swings in the private funding cycles needed to build all those airports, roads and railways are increasingly being offset by government deficit spending programmes (or quantitative easing as it’s now known: the deficit’s more attractive, younger sister). Only big government is big enough to dampen regular (and inevitable) private sector investment fluctuations, which is why most advanced economies over the last forty years have set fiscal spending targets of up to 20% of GDP.

Nothing less will level out the swings and troughs, and without it the roads, railways and airports won’t get built at all…the Channel Tunnel started out as a private venture, ran out of money and finished up nationalised in all but name. Without Big Government you wouldn’t be able to zip under the Channel …you’d be stuck behind a lorry at Dover.

It’s a lesson India has taken to heart.

Connectivity boosts Indian real estate. How?

Over the next ten years the subcontinent is expected to invest a staggering $715 Billion in its new rail networks, with full electrification expected by 2024 and the entire system becoming carbon neutral by 2030 (www.ibef.org/industry/indian-railways).

By 2050 India’s railways will comprise 40% of rail services across the world, meeting a surge in passenger numbers driven by an increasingly wealthy travelling public. All of this is being powered by Big Government (Prime Minister Modi’s Government to be precise): including a programme to expand investment in new rail terminals, new stations and more extensive container operations across the subcontinent (www.outlookindia.com).

And the picture is pretty much the same on India’s highways where the network has doubled in size (from 71,000 Km to 142,000 Km) in the last ten years. As with rail, the expansion is being driven at pace to meet unprecedented levels of demand from a burgeoning and increasingly wealthy population, in stark contrast with the United Kingdom where road traffic levels have increased by 80% over the last twenty years, but capacity has risen by a sluggish 10% annually: and even that unimpressive figure is falling off year by year.

All of which means India is now better connected than ever before; and in combination with those same (unprecedented) demographic trends on the subcontinent, enhanced connectivity is also having a radical impact on India’s domestic housing markets. New Science parks in Chennai and Bangalore and new railways and highways in Mumbai are pushing prices through the roof as an increasingly urbanised population embraces the opportunities offered by better communication systems.

The improvements to connectivity boosts Indian real estate. So with all roads leading to other roads, it means we’re better connected than ever before…but nowhere is that more apparent at the moment than India.

Invest in Red Ribbon Asset Management

Red Ribbon is committed to identifying and building on investment opportunities that are fully in compliance with its core Planet, People, Profit policy: not only offering above market rate returns for investors but also protecting our Natural Capital through innovative programmes like the Eco Hotels Project.

Executive Overview

I suppose it’s a truism that property values are all about location (and location, location): but what’s interesting in India at the moment is just how radically the location itself is changing.

Taken together with an increasingly wealthy, tech savvy and burgeoning population, the Modi Government’s radical infrastructure programmes are re-shaping the commercial environment and pushing property prices higher than ever before.

Jaisalmer city and Fort at sunset

Joining the Dots for the Future…A walk around Indian Real Estate Markets

By Blackstone, Construction Technologies, COVID-19, Housing Need, Modular Construction, Real Estate Markets

History doesn’t move in straight lines, we’re much too unpredictable for that: so nobody should be surprised that in the same month as a group of glum beancounters at the Office for National Statistics reported a 20.4% slump in GDP for the UK (the worst ever), their happier colleagues at the Land Registry were trumpeting a 2.6%, year on year increase in UK property prices. There isn’t a straight line between the two: the underlying decisionmaking is just too unpredictable to allow for anything more than a childish squiggle. It’s what practitioners of the dark arts of econometrics call “a random walk”, like a drunk stumbling home from the pub: we know where he started out from and where he ended up, but it’s the bit in the middle that’s a mystery. Why did the catastrophic oil crisis of 1973 barely make a dent on US property prices, having sent the rest of the economy into free fall? Why did an otherwise localised slump in US property prices cause economies across the world to crash in 2008? These are random walks between two points (or pints in the case of our drinker) … the trick is to join the points up. 

Which means searching for medium and long term trends, key drivers that act as a platform for what the future might look like: and there’s no better example right now than India’s Real Estate Markets.

According to an influential IBEF forecast, Indian Real Estate will be worth $1 Trillion within the next ten years (from a base of $120 Billion in 2017), and by 2025 (just five years away in case we forget), the sector as a whole will make up 13% of the subcontinent’s GDP. That’s worth reflecting on: despite the near term, COVID driven shocks, not to mention the pandemic’s catastrophic impact on overall levels of social cohesion, there is no straight line in sight: the subcontinent’s residential and commercial property markets are showing persistent and robust signs of long term growth, and this particular honey pot is proving as attractive as it was when, in 2019, overseas and mostly private equity investors staked no less than $14 Billion in the sector.

Blackstone alone has invested more than $12 Billion in Indian real estate since 2018: including the first of the subcontinent’s newly established REIT’s, which raised $670 Million in 2019 in collaboration with Embassy Group.

In response to (and partly in anticipation of) that inexorable trend, the Indian Government launched a series of property-related initiatives, including the Smart City Mission: delivering more than a hundred better-connected infrastructure and technology centres across the country and offering a prime opportunity for investors. Add to that the recent launch of the Alternative Investment Fund (AIF), which green-lighted investment across 1,600, previously stalled urban housing projects in major conurbations from Mumbai to Chennai and, of course, the continued resurgence of the Affordable Housing Fund. Prime Minister Modi’s Government has also approved the creation of 417 new Special Economic Zones, of which 238 are now live. Impactful as it might be at the moment, COVID 19 has neither the persistence nor potential to stand in the way.

As Blackstone themselves could no doubt testify, Foreign Direct Investment is a key part of this mix: increasingly responding positively to enhanced levels of market transparency on the subcontinent, a transparency that has acted as a powerful nudge to create a more investment-friendly environment increasingly aligned to western markets (and due diligence requirements in particular).

So there’s no straight line to follow in these turbulent (short term) times, only an increasingly less random walk firmly rooted by a long-term compass. And, to repeat the point, there’s no better example of that at the moment than Indian Real Estate Markets.

Find out more about Modulex

This image has an empty alt attribute; its file name is Modulex-Logo-300x77.jpg

Modulex is setting up the world’s largest steel modular buildings factory based in India. It was established by Red Ribbon to harness the full potential of fast-evolving technologies and deliver at pace to meet the evolving needs of the community.

Executive Overview

Every so often we have to raise our eyes from the papers on the table, and goodness knows we’ve had enough to distract our attention from the bigger picture over recent months: that’s why, as we gradually emerge from global lockdowns, I’m confident longer term trends will be much more important than any of our day to day fixations.

I’m confident, in short, that the future can’t and won’t be navigated by straight lines…

Red Ribbon

At Red Ribbon we understand that the transition towards a resilient global economy will be led by well-governed businesses in mainstream markets, striving to reduce the environmental impact of their production processes on society at large and on the environment as well.

Newsletter