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Commentary

Readings: Self-Investing, Rent-Free, Ripoffs, Salary Hikes and More…

Some interesting links:

  • Value Research: You’re smart enough to learn about investments yourself. (HT: Samarth Modi)
  • Trader Mark: Live rent free for three years? Just default on your mortgage. That’s what Mark says is driving up retail growth while there are so many houses underwater and so much unemployment. If you don’t have to pay a mortgage, you can spend on other things, like iPads. And if you stop paying, banks aren’t willing to foreclose early – there are modification programs (you can enrol, pay a bit and then redefault), there is way too much backlog for the foreclosures and recent Mark To Market suspension rules means banks don’t want to take a loss by booking it.

    (Funda is this: As long as you own the asset, you can mark the collateral at it’s purchase price. But if you foreclose and sell it at market value, you gotta show the booked loss. For banks booking of the loss is a huge capital problem – when you lever your capital 20x, then every $100 you have you can take on $1900 as debt and lend it all out. If you take a $40 loss, then your capital is $60, 20x of that is $1,200 – then what? Gotta return the extra debt taken, by redeeming current loans – which, haha, is not going to happen, because they’re all underwater mortgages pretending as good loans.)

  • Matt Taibbi: How the nations biggest banks are ripping off American cities with predatory deals.
  • WSJ: India gets double digit salary hikes. Human resources consulting firm Hewitt Associates found in a recent survey that the average pay increase in India this year will be 10.6%, as opposed to 6.6% last year. [Darn. I quit job at wrong time]
  • ICICI Sells residential building at 17,000 per sq. ft. in Prabhadevi, Mumbai to Videocon for 61cr.
  • Fundoo Professor: The Alchemy of Finance at Reliable Engineers (Brilliant)