Engineering view of Financial housing model and the cause of the BUBBLE explained
Modeling and analysis are always useful to understand the effect of the noise and the influence of the external factors.. As known SP500 index has the best rally since 1974 . One of the reason is low interest rate mortgage which is causing housing market recovery. Well don't forget : Worst bubble for a country is always real estate crash .
Here the analysis for the bubble generation
What happens when a ( saturation limit ) : Number of houses are limited. i.e there is no new construction then model has saturated output fed to the system . Control engineering point of view , wrong output is used as feedback , then system goes unstable . BUBBLE.
Financial analysis 2
Why Switzerland does not have up and down economy as other developed countries and inflation is zero … . My argument is
When you analyze any financial crisis the first crisis is always at / due real estate business. Then why Switzerland is robust in the real estate business? It is because of their hard policy towards real estate business. They do not treat real estate as a business ground, it is considered as basic necessities rather than business i.e. you cannot buy and sell frequently using mortgage plans. There is a locking period to buy and sell house ….
Is income always proportional to the investment ?
Is income is always proportional to the investment ?.
If you say YES , then you have not started doing business :) .Why check out this example
1. You invest in selling Beer during the festival season
your investment is 100CHF . you gain profit 50CHF .It is possible because people need Beer at any price during festival seasons
If you think
50CHF profit for 100CHF then 50000CHF for 100000CHF. Wow Good business
But in real life
You cannot carry and sell so many cans of beer and cannot find lots of festival season to sell your 100000CHF worth cans of beer :)
It is simple argument but most of us forget that there is a limit ( saturation ) for the investment