Archive for January, 2010

Invitation to a Mortgage Party

January 26th, 2010

Everyone is invited to come and watch

This is going to be the party of the year, the biggest bash in memory. It’s a Mortgage Interest Party. At this affair I am going to demonstrate how the bank calculates mortgage interest. The manager of the mortgage bank will be present and he will confirm that the bank is not my friend.

My start-up mortgage

We were newly-weds when we saw the cottage. It had a red tile roof, wooden windows, one bedroom and a living-room-kitchen. The price was $4,000 and I never had a bean. I got on my knees in the mortgage bank and I was granted a mortgage of $3,800. I took a job as a night clerk at the motel to raise the rest of the money and a cash advance.  The cottage was ours, but it belonged to the bank.

Construction mortgage

Our first son was born a year later and I applied for a mortgage extension to add a room. Back to the motel to raise the missing dollars. Our son had his own room. I owed the bank close to $5,000. A year later another son arrived and again I was knocking on the manager’s door at the mortgage bank to raise funds to add another room and again I returned to the motel.

Major construction mortgage

In 1969 we decided to add a proper living room and remodel the kitchen. The bank hemmed and hawed for all of 2 minutes, told us what loyal and reliable customers we were and gave us a mortgage which was almost double that which we already had. All in all, I now owed the bank about $16,000. The 10 years of payments I had made, had made a dent in the interest, but the account was now so confused that I could no longer understand it. I think the bank had the same problem. The house is great and is very comfortable and we are enjoying it immensely. We applied for an extension to the mortgage to put down a pool.

A son leaves home

1979 and our eldest is off into the world to seek his fortune. I convert his room into my writing studio. Mortgage remains healthy, interest rates are up.

Another son leaves home.

Mortgage is static. I convert the new spare room into a painting studio. Interest rates up again.

We sell the house

It’s 1989 and we sold the house and bought this smashing apartment on the 45th floor of the new downtown tower block. Ocean and airport views, tangled traffic views on all 4 sides. Mortgage reduced. Interest rate on mortgage balance goes up again.

2009. Mortgage blossoms.

The letter from the bank was a surprise to me. “You now owe $120,000. Please call in at the bank and talk to us about this.”  How did this happen? And then it hit me – the interest rates and the interest calculations. There is no such thing as simple interest. Come to the party – you’ll see!

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How to redesign the world

January 25th, 2010

Were in a mess, right? Let’s start over

The company is called “Better Place”, and that’s exactly what they have set out to do – to transform the world into a better place. Their plan is to create vast networks of charge spots to power electric cars – and heavy venture capital money is pouring in. Just today they received $350 million from HSBC who are leading the new round of financing, contributing $125 million in exchange for a 10 percent stake in Better Place. That gives Better Place a market value of $1.25 billion.

How it all started

It all started when one man, talking in a think tank, said, “Oil is finished. It may still be coming out of the ground but the world doesn’t want it any more.” One thing led to another and the idea of forming an electric grid was raised, and from there on the ideas grew wings, took off and flew. Then the talk was about cars, hybrids, plug-in hybrids, batteries and finally electrics.

The financing

The idea just grew and grew. “It could be a game-changer in its sector the way Google and Microsoft were in theirs,” said Anthony Bernbaum, global head of special opportunities for HSBC. Before that happens, though, Better Place and its backers will have to persuade consumers to move away from the internal-combustion engines that characterized motor vehicles for more than a century, while also winning the support of major automakers.

It’s a tall order

Even with the new funds, that’s a tall order. So far, only Renault has publicly endorsed Better Place’s plan, agreeing to supply cars with easy-to-swap batteries and working closely with the company to reach its 2011 commercial debut. Regardless, industry experts say huge fleets of electric cars are likely to hit the road in the coming decade.

The plan

Under Better Place’s plan, consumers would buy electric vehicles made by the big automakers but get the batteries from Better Place and pay a fee according to the distance they drive. The blueprint calls for thousands of conventional charge points, as well as switching stations where a robotic device could replace a battery in less time than it takes to fill a tank of gas. These stations are needed because batteries have a range of only about 100 miles, or 160 kilometers, and recharging takes up to five hours. Changing batteries en route would make long journeys more convenient.

More money

Better Place will most likely require billions more in financing. This investment is an important step for the company and its chief, Shai Agassi, an Israeli-American software executive who founded the company in 2007. “Better Place is a huge experiment in how you sell and fuel vehicles, and these investors are becoming convinced this will make money,” said Rod Lache, an analyst at Deutsche Bank. “It is a financial validation. Now we need to see technical validation and consumer validation.”

Imagine

Can you imagine a world of silent, pollution-free electric cars?

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See Serena play tennis

January 24th, 2010

Did you notice any temper outbursts or tantrums?

Last Tuesday Serena Williams played tennis like a dream. There were no outbursts and she swiftly and professionally demolished her overmatched opponent, Urszula Radwanska, in straight sets. After the match, Serena questioned the size of the fine given to her for threatening to shove a ball down a line judge’s throat last year at the U.S. Open. “A $92,000 fine is just too severe!”

No excuses

Williams made no excuses for her bad behavior. She said she was trying to turn the incident into a positive by raising money for charities, including the victims of the earthquake in Haiti. But still, she said, “Ninety-two thousand dollars is a lot of money to fine someone,” she said. “I always said what I did wasn’t right, but I turned that around and I’m actually raising $92,000 for my school in Africa.”

What actually happened?

Williams was charged with a point penalty on match point after yelling at a line judge for a calling a foot fault on her previous serve. The ruling gave Kim Clijsters a victory in their semifinal match, which had been delayed 32 hours because of rain. After the line judge called the foot fault, Williams stared her down before screaming at her. After a few seconds, Serena turned around to serve, thought better of it and resumed the badgering. The chair umpire then called the line judge to ask what Serena had said, rules officials were summoned, a brief summit occurred at the net and it was determined that Serena would be assessed a point penalty for a conduct violation. The point gave Clijsters the match.

Sheer tension

The whole incident can be blamed on sheer tension. The weeks of training, the muscles and brain at full stretch close to snapping point, the match, the play and the rain. Then came the foot fault call. It was a terrible call. It cannot be made at the end of any match, let alone in the semifinals of the U.S. Open. That’s when Serena really crossed the line.

Worse

From there is got worse. There were multiple profanities, more threats and a lot of pointing. Serena was soon defending herself against accusations that she had threatened to kill the line judge. Even John McEnroe said it was a bit much.

$92,000

Ninety-two thousand dollars is a lot of money. It’s true that Serena can afford it – to date her winnings on the tennis court amount to $28.5 million and at age 29 she still has a few years of good tennis ahead of her. She also has won more Grand Slam titles than any other active female player and has won more career prize money than any other female athlete in history

Pay up

So pay up with a smile, Serena, and write off the $92,000 as a business expense. See if the income tax people will recognize this as a legitimate expense incurred while earning.

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