If your house is worth less than the loan you took

Assume you bought a house for LKR 100 mn. Assume that you had cash of LKR 5 mn, and you took a loan of LKR 95 mn to make the purchase. Now, suppose house prices started to tumble, and the house is now worth LKR 70 mn.

Now, one of your richest uncles passes away, and leaves you off with LKR 100 mn. What would you do? i.e. 
a) pay the loan off
b) default on the loan, and buy a better house elsewhere (all the prices are going down, so there is this house which was LKR 140 mn then, but now going for LKR 100mn…)

:)
fyi: I am not sure what I would do…

Should interst expense be tax deductible?

Interest expense is tax deductible for corporate tax. But is this something that should be disallowed, say 2015 onwards?

Why? because at present, the tax payers are subsidising a private company because of its choice of funding.

Say company x is 100% equity financed, but company y is only 50%  equity financed. If its in the same business, I don’t see why tax payers should subsidise company y.

Thank you Airtel

Dialog slashed prices (again). Getting ready for the (much delayed) launched from Airtel. I am waiting for them to cut data rates. When that happens, I may actually surf using my phone.

The Fed and the stock market

A friend described what happened during the last month (weeks) as the “nationalization of risk and privatization of rewards framework”. How True. Looks like the US lawmakers are not yet ready to sign a USD 700 Bn cheque to the Treasury. I hope they don’t. The excuse that the world economy may go in to a recession and thus deserves a tax payer hand out is a load of crap.

The private institutions other than Freddi and Fannie should have been allowed to go under. People in power seem to make decisions with their politician hat on their head, rather than the future in mind. By wanting to purchase illiquid assets/ bad debt the Fed is encouraging moral hazard.

Dialog Reduces Tariffs?

Checked the Dialog website and it says about giving a discount for calls with a longer duration.

I sincerely hope LKR 477 is only a one time charge. Its a pleasure to see them quote the LKR 477 all inclusive, wish they did the same for the call charges too!

The beauty of competition. Communication tariffs seem to be the only commodity under the influence of gravity in Sri Lanka – everything else just keeps on going up.

By the way, should this price reduction have an impact on the share price?

How much tax do you pay?

I am used to people asking me (and I asking them) “when did you do your A/Ls?” (in other words, what is your age)?

The other day, a colleague asked me (accidentally I believe) how much tax I pay? (now wouldn’t that give away my salary?) I didn’t answer; despite he accidentally disclosing his salary…

By the way, do you know your friends’ salaries? I am not speaking about colleagues, real loveable friends’ salaries? Do they know yours?

R&B: One of our manager buys a bottle

Hm, some people get higher salaries, but they don’t spend it on others; but others do!

Went to R&B sometime back, four guys and a few girls. Ordered a bottle of Vodka and a few chases. One of our managers paid with his credit card – and the rest of us where going to pay him back at office. When we asked, he says “oh, don’t worry about that”. Wow….

Loved R&B. First time I’ve been there. I think what I liked most was the people that I went out with. Two of the girls are leaving to Australia soon. Sad. I suppose that is part of life.

The increase in cost of food

Economics 101: (un-targeted) price ceiling are meaningless. Food prices continue to increase. There is a supply / demand imbalance. Demand is growing due to changes in eating habits in India and China. They are apparently eating more grain and more meat as they get richer. It takes more land area to grow grain to produce meat.

The American government subsidizes bio fuels, encouraging production for bio fuel (reducing what is available to eat), thus driving up the price of corn and in the process, prices of other food.

What I suggest:
In Sri Lanka: let the price increase to encourage farmers to produce more, see that proper infrastructure is there to transport produce, see that there is adequate storage facilities, encourage competition.

In the US: Please stop skewing price signals by taking away the subsidy for bio-fuels.

You would want to read the Economist’s “Food and the poor: Global food shortages have taken everyone by surprise. What is to be done“

We order alco – our manager foots the bill

Our manager is one of those rare individuals: the type who is well off, and is not stingy. He took us out for dinner yesterday. Most of us wondered whether its okay or not to order alcohol as a) its generally expensive and b) he doesn’t drink alcohol.

We came to the following conclusion. One lime juice will cost him LKR 190 ++. Two 25ml of Vodka will cost him LKR 95 x 2 ++. So, the guys who wanted to have a shot (including yours truly) went for two shots.

Question: Is it okay to order alcohol if someone else – whether friend, manager, client etc – foots the bill? I believe what we did is okay given the calculation. Another shot would not have been okay.

Cash awards

The following caught my eye “Thirteen individuals and team awards will be presented to over 50 winners who will also receive cash prizes amounting to Rs.5 million in total” in the Daily Mirror. That works to about LKR 100,000 on average per person!

Most companies would generally give some sort of a trophy, but very rarely, cash…