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Commentary

Readings: Guarantees, Neta-Babu, Term Plans

Readings after a hiatus:

Dhirendra Kumar takes a jab at the labour ministry for asking for a “guarantee” of equity returns. The labour min seemingly asks for a guarantee and a minimum return – yeah, what’s different between that and buying government bonds, one would think. The EPFO looks screwed, with the corpus of 5 trillion (lakh cr.) that needs to pay out either 8.5% or 9.5%; if they fall short, they will need the government to put in money.

About 100 years ago: The New York Stock Exchange decreed that commissions of 1/8% is sacred, it will be charged for all transactions, even outside the exchange. From then to now, what a difference. (That’s about 15 basis points, still lesser than what delivery transactions in India tend to cost)

The National Housing Bank (NHB) has increased the risk weights and provisioning for housing finance companies (HDFC, LIC Housing Finance etc.). Loan to value above 90% isn’t allowed, and for loans of 20 lakhs or more, the limit is 80%. Additionally, risk weights of loans above 75 lakhs are at 125% – that is just following what RBI did for banks in November. Provisioning for teaser loans goes to 2%. Obviously this is a non-issue – the stocks didn’t even flinch.

I didn’t know this – NHB has banned prepayment penalties for pre-closure of housing loans if the money is paid through the buyer’s own sources.

Manish Chauhan at Jago Investor has an excellent review of term insurance plans. The data’s outdated, a little bit – let me see if I can expand on this a bit.

Sucheta Dalal on the Mutant Superbug, the increasing neta-babu nexus that we will just not stop. While she makes many allegations without presenting any evidence*, the main point she makes is valid – we seem to have an even higher neta-babu control over our economy.

* Like “stock tips in lieu of cash”, etc. I believe that might be true, but in the absence of evidence, it’s just a random allegation. Did she hear someone say it? But like Niira Radia said Kalal Nath “can make his 15 percent”, that doesn’t make it true. It has to be not just believable but true; especially when there is more research possible. Note: even I make this mistake a lot.

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