Andy Haldane, Occupy and What YOU can do about it

I’m a big fan of Andy Haldane. He is a ranking member of the Bank Of England, and a key member of the BOE financial stability committee. Over the weekend he gave a speech in London, which many regard as the first official “salute” to the Occupy Movement. Haldane has a unique writing style, he is very lucid, clear and very plainspoken for a central banker. His speeches are a delight to read! I strongly recommend reading the whole thing here. This speech has caused a firestorm in financial circles, see all the reactions here. A few choice quotes from the speech which inspired me.

Continue reading

What is your personal capital structure?

If you ever talk to MBA’s (especially those into finance) you will hear them wax eloquent about a company’s capital structure. Capital structure is nothing but how a firm finances itself. Firms need money to operate. How do they get that money? They have a couple of choices – just rely on the profit they generate, issue shares to investors (issue equity) or borrow money from investors (issue debt). The choices that a firm makes and the mix of self financing vs equity vs debt is what is termed as the capital structure of the firm. Having a structure formalizes things, makes company profitability easy to analyze, brings predictability.
Continue reading

Buying a house? Don’t fall for the myths

Myth 1: Interest and taxes are deductible. You are getting paid by the government to own a house

Lets walk through an example. You make $100K a year. Pay $6K in real estate taxes and $10K in mortgage interest. There are two types of deductions available when you file your tax returns, a standard deduction and itemized deduction. For 2011 the standard deduction is $11,900. Assuming you did not buy a house your taxable income = $100K – $11.9K = $88.1K. At a marginal tax rate of 35% you will owe $30.8K in taxes. So effectively you paid $30.8K out of your pocket. Now assume you took the itemized deduction and deducted the entire taxes+interest. So taxable income = $100K-$16K=$84K. At 35% tax rate, tax = $29.4K. So great right, you paid less tax, so less out of pocket?

Continue reading