US Debt Downgraded

 China just kicked the U.S. in the proverbial nuts. I hate to say it but we had it coming.

Last month China played the U.S. into leaving it off its list of “currency manipulators.” To show just how grateful they were, yesterday China unveiled its first report on the debt risks of 50 countries. And guess who was ranked below China?

The U.S. of A.! In fact our government debt was knocked down from the best in the world to a pitiful 13th place.

Was it self-serving? No doubt about it. But it’s the truth.  The only thing that’s surprising is that it took this long.

I saw this day coming. I’ve already talked a great deal about the U.S.’s runaway debt with you. Many will say it’s not a problem now. It’s in the future. To them I say the future is now.

The report was a warning to all investors: THE U.S.  government debt market is NOT the safe haven you think it is. The Dagong Credit Rating Company, a professional rating agency in China, says US debt is more risky than Singapore’s, New Zealand’s and Norway’s.

But this is China talking...you know, the county that executes a couple of dishonest businessmen a year in the futile effort to tamp down corruption and bribe-taking.

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Can you believe a Chinese credit rating agency?

Or would you rather rely on Moody's, Fitch and S&P? These are the same head-in-the sand agencies that slapped triple-A ratings on subprime mortgage loans. They continue to rate US government debt AAA. Despite the deplorable state of our fiscal situation.

Me? I'm on board with Dagong. And I’m not the only one. In a recent survey of 440 executives from around the world commissioned by Royal Bank of Canada's capital markets unit.... 40% said they expect debt issued from companies will be considered safer than government debt.

Corporates safer than governments? I never thought I’d write those words. But think about it. Would you rather lend your money to a bankrupt organization (the US government) or a company with a strong balance sheet (like J&J for example)? I know where I’d rather invest. You need to take a look at corporate bonds.
More on that later.

Meantime, Dagong was founded 16 years ago to rate Chinese corporate debt. It is privately owned. But Dagong made its announcement on Sunday at the headquarters of the Xinhua News Agency. This is the ruling Communist Party's main propaganda outlet.

Make no mistake. The downgrade of US government debt was made with tacit approval from the Chinese government. Consider it an admonition from our biggest creditor to get our fiscal house in order.
Will we? Not with the pandering politicians we currently have in Washington DC.

One nation under debt

China’s concerns are legitimate. Consider…

Our national debt currently stands at $14 trillion. But $14 trillion is just for starters. According to the Federal Reserve we have another $2.5 trillion in state and local debt. Mostly municipal bonds. And according to Institutional Investor magazine nearly every state's pension fund is on the verge of running out of money. A federal bailout is all but inevitable. So tack on another $3 trillion.

But things really get ugly when you add in the government's obligations under Social Security and Medicare. The government doesn’t even take these obligations into account.  They should. Right now those entitlement programs consume around 14% of tax revenues.

In just 10 years these programs will consume almost 1/3 of revenues.  And if things don't change by 2030 it will be close to half. To meet these obligations the US government would have to have $106 trillion on hand right now. How much do we have? Not a penny.


So add on another $106 trillion unfunded liability. So while everyone thinks about our debt as $14 trillion.  The real number is more like nine times that amount.

Consider the words of the former Fed Chairman Alan Greenspan in a recent essay “The federal government is saddled with commitments for the next three decades it will be unable to meet.”

China gets it. Greenspan gets it. 40% of executives around the world get it.

So it’s come down to this. Lined up on one side are global executives and China deeply worried about the debt hole we’re digging. On the other side is the US government (with its deeply indebted European fellow-travelers) still believing that government spending is a good thing. 

And don’t expect this credit downgrade to change the government’s tune. They’ll call the Dagong downgrade politically motivated. They’ll continue to insist the only way out of this hole is to dig it deeper…more stimulus. 

But the handwriting is on the wall. Interest rates will move up.  Maybe not tomorrow or next month. But the stage has been set. Inflation will be making a big comeback.

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What to do now

Can you take advantage of the growing confidence in corporate versus government debt? Sure. Add corporates to your portfolio. Stick to short maturities and don’t consider anything less than investment grade.
If you’d like help selecting the right bonds I highly recommend Steve McDonalds Bond Trader service.

Finding the best corporate bonds is what Steve does best. He already has an impressive winning percentage of over 97%. Click here to find out how Steve can get you off the stock market rollercoaster and into the new “safe haven” of corporate bonds.

Source: Investors Daily Edge

Protecting bondholders vital; Ball in the Court for Pesaka Astana and other defendants

Protecting bondholders vital

Plain Speaking - By Yap Leng Kuen

THE “landmark’’ judgment handed by the High Court that the adviser and arranger of bonds are just as liable as the issuer for losses suffered by bondholders is significant in the development of the local bond market.

The judgement by Justice Datuk Mary Lim, based on a RM149mil lawsuit filed by 10 local financial institutions against issuer Pesaka Astana (M) Sdn Bhd, is an old case for which the oral judgment came out in early July.

In the light of recent corporate scandals, it is a timely reminder that high priority should also be placed on the investors, without whom there will be no bond market.

“In most emerging countries, the issuer side is normally regarded to be more crucial in ensuring the success of the bond market,” said an industry player. Corporates will be asked to issue more bonds, while details such as structure and size will be scrutinised.

However, to ensure continued demand and confidence in the market, investor protection is also vital to drum in the message of a high standard of care.

A high degree of investor protection and other favourable factors have led Malaysia’s bond market to grow by leaps and bounds since the markets faced its major stress test in the Asian financial crisis of 1997/98.
“When we get the buy side going, the issuers will come in droves,” said the industry player.

“We do not want the bond market to go in the same way as the equity market where in so many cases, we see that minority shareholders are not protected. This judgment is certainly critical and provides comfort to bondholders that at the end of the day, investor protection is still granted in this market.”

Already, the smaller issues are struggling in the sense that investors with risk averse appetite are not attracted to these bonds.

A case like this where the company had defaulted in September 2005 on RM140mil worth of Islamic debt securities issued in April 2004, dampens the sentiment even more.

No longer can an arranger just collect the fees and leave the buyer to fend for himself under the “buyer beware” kind of environment. If something goes wrong, he may get a joint suit from the parties involved and not just the bondholders.

“We can also have a situation where during an economic downturn, investors may suddenly decide to sue the arrangers and other parties that have money,” said another industry player.

“Big arrangers may find this worrying as it becomes their responsibility to prove that they are not liable.”
Industry watchers want to see if this represents a blanket judgment which will then have major implications on parties like trustees and rating agencies.

They will have to be responsible throughout the life of the bond. 
Of course, there are possibilities of appeal and the decision could well be uplifted, varied or even reversed. That is yet to be seen.

Senior business editor Yap Leng Kuen believes that the point has been made and market players have heard it loud and clear.
For latest Bursa Malaysia indices, charts and other information click here

Ball in the court for Pesaka Astana and other defendants

By FINTAN NG
fintan@thestar.com.my

PETALING JAYA: Now that the High Court has ruled in favour of bondholders in the suit brought against Pesaka Astana (M) Sdn Bhd as well as the arranger and trustee of the bond issuance, it is up to these three defendants how they want to respond to the judgment.

According to a source, the ball is now “at their side of the court”.

He said it was now up to Pesaka Astana, KAF Discounts Bhd and Mayban Trustees Bhd on how they want to divide the payment of the RM149mil sought by the 10 bondholders, who filed the suit in 2005.

Pesaka Astana supplies fire-fighting and military vehicles to the Defence Ministry.

The Singapore Business Times had, on July 2, carried a story which said the judgment would “radically raise the bar on standards governing private debt issues in Malaysia” as the arranger and trustee were just as liable for losses suffered by the bondholders.

High Court Justice Datuk Mary Lim, in a verbal judgment, had said the plaintiffs, which included CIMB Bank Bhd, had depended on the information memorandum provided by KAF to make informed investment decisions.

She said the information was in the memorandum and “therefore it is KAF’s liability in the event of any misstatement therein.’’

The newspaper said the suit underscored a newly-found ruthlessness in Malaysian financial litigation as at least two of the litigants on both sides of the suit were government-linked companies.

Although Pesaka Astana and related companies had entered into a consent judgment in favour of the bondholders back in 2008, KAF and Mayban Trustees had chosen to go to trial.

KAF treasury head Manimakudam Karuppiah told StarBiz the company was reviewing the case and would decide on its next course of action soon.

“However, despite the judgment, there is no impact on the bank as we’re well-capitalised with shareholders’ fund close to RM1bil,” he added.

Manimakudam said the company had also made full provisions to absorb the penalty and that business had not been affected.

“We were also recently rated AA by Malaysian Rating Corp Bhd,” he said.

Mayban Trustees, which the bondholders argued had failed to exercise the necessary care and due diligence expected of a trustee, said in a statement last week that it was “actively considering the next course of action”.

It said the judgment “has no impact to the business operations of the company” and that it had in place “a strong team of professionals with priority chiefly on protecting the interest of all stakeholders and upholding best standards of service and management practice.”

IT gender pay gap getting worse

Skills Survey 2009: Female techies not pocketing the biggest bonuses either...

The IT gender pay gap is getting worse, according to results from the 2009 silicon.com Skills Survey.

More than a third (35 per cent) of female IT workers responding to this year's survey said they were on the bottom rung of the tech pay ladder, earning less than £25k, compared to just under a third of women (32 per cent) last year. And only 14 per cent of male IT workers are in the lowest pay bracket this year, down from 20 per cent in 2008.

A slightly larger proportion of women than men also take home the second lowest pay packet, of between £25,001 to £40k: 27.5 per cent of women versus 25.5 per cent of men. However when it comes to earnings of more than £40,001, men consistently dominate - and in the highest pay brackets the proportion of men to women is more than double.


Image credit: Natasha Lomas/silicon.com Nearly a quarter (23 per cent) of male respondents reported earning £40,001 to £55k this year, compared to less than a fifth (17.5 per cent) of female respondents; while 17 per cent of male respondents reported earning £55,001 to £70k, versus just 12.5 per cent of women. In the top two earnings brackets there is a significant hike in the proportion of men versus women: 15 per cent of male respondents reported earning £70,001 to £110k this year, compared to just five per cent of women; while 5.5 per cent of men claimed to pocket £110,001+, only 2.5 per cent of women did.

When it comes to bonuses, while a larger proportion of female techies reported getting a bonus this year than male techies (42.5 per cent of women versus 35 per cent of men) - a change on last year when the sexes were equally likely to get extra cash - men tended to take home bigger bonuses than women.

The majority of female bonuses this year fall in the less-than-£5k category: 65 per cent of female respondents, versus 47 per cent of men.

For bigger bonuses men were the clear winners: no female IT workers responding to the survey reported receiving a bonus of more than £20,001, yet 10 per cent of male respondents took home the biggest bucks - including one per cent that reported getting a bonus of more than £100k. And while 43 per cent of men reported a bonus of between £5,001 and £20k, only 35 per cent of women did so.

In April this year the government published the Equality Bill which includes measures to strengthen the law on pay equality in the public sector. According to the latest figures from the Office for National Statistics, women still earn on average 22 per cent less per hour than men - a marginal improvement on last year when the gap stood at 22.5 per cent.

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Women in IT: Tech has an image problem

Is the UK tech industry ageist?

• IT skills shortage squashed by recession?
• Recession hitting low paid IT jobs
• Pay for IT chiefs weathers the storm

There are 4 comments. Join the discussion

1. 
   

   1. anonymous

   Statistics. All this proves is that the women spend more time filling in questionaires whilst the men ignore them as they are not very interested. I constantly see more and more females being promoted up the ladder to balance out but a lot are promoted above thier ability and then make a mess of things making it more difficult for women to shine in the future. Promotions should be on talent alone and no other reason and stats like these should be complied properly.
   
   
   • 4 December 2009 10:41
   • Add comment
2. 
   

   2. anonymous

   While I don't necessarily agree with the previous poster, these stats prove nothing. We don't know the ages of the respondents, how many women choose to leave the profession early to do other things (leaving perhaps more in junior posts), or even if it was a statistically fair sample.
   
   For example we have few female techies but several female ex techies in senior positions
   
   So a good start a debate, but there is nothing here that can be relied upon to provide any real information.
   
   
3. 
   

   3. blogger123

   Most statistics are made up.
   
   
4. 
   

   4. NLondon

   Latest figures from the Office for National Statistics show women still earn on average 22 per cent less per hour than men.

Online con

Beware the online con

By SEREAN LAU and CHRISTINA TAN
newsdesk@thestar.com.my

PETALING JAYA: It is important for women to check the background of a person they meet over Internet social networking websites to avoid being cheated.

“You need to check the background of the person to know whether the person is genuine or just a sweet talker. Whatever is posted by the man should be vetted thoroughly like calling up a company to see if he really works there,” said Wanita MCA Cupid Space project executor Peggy Lim (pic).

She also cautioned women not to rush into making a commitment.

“You need at least eight months to know a person. There is no need to rush into things,” she added.

“Feelings are a huge emotional trigger and for a woman, it is important to control these feelings when the courtship has only been going on for a short while.”

She said that among the reasons that women were scammed by online Casanovas was due to loneliness and desperation as they were afraid they would not be able to find a companion and accepted “any man who fancies them”

“The essential tools to sustain a relationship are patience and to earn the trust needed,” she said.

In June, a 47-year-old housewife said that she lost her savings and money she borrowed from her family and friends totalling RM1.2mil to a con man that she befriended on the Internet.

The man had claimed to be a Briton.

Meanwhile, MCA Public Services and Complaints Department head Datuk Michael Chong said he received complaints from 18 women on cheating scams with losses amounting to more than RM2.4mil since 2007.

He urged women to be wary of such con men.

Chong said the complaints that he received had a similar modus operandi – the men would get to know the women via Internet and send them expensive gifts before demanding for money.

Chong added that most of the victims were single mothers, divorcees and unmarried women.

“The con men also introduced themselves as businessmen, sons of senior politicians and professionals like engineers,” he said.

Chong said he believed the men involved in the scam were foreigners although some may have had the help of locals.


Related Story:

They virtually fleece the lonely and the desperate

The dark truth about a sweet-talking Casanova

By ONG HAN SEAN
hansean@thestar.com.my

KUALA LUMPUR: He is neither good looking nor young, but this sweet-talking Casanova has managed to cheat at least seven women of nearly RM400,000.
The 41-year-old Singaporean, known as Dennis Lim, has a habit of preying on women through the social networking website, ahmoi.com.

 

That’s him!: Chong and Qi Qi checking out a picture of Lim at the department chief’s office in Kuala Lumpur yesterday.

 

One of his victims, Qi Qi, lost RM294,662 within the seven months of their “friendship.”

“I was not really attracted to him. He was really aggressive and he made the first move online,” said the 34-year-old businesswoman from Penang, who sought the help of MCA Public Services and Complaints Department head Datuk Michael Chong at his office yesterday.

She said Lim claimed to be a factory manager and knew how to take advantage of her weakness.
“He used sob stories to get my sympathy.

“For instance, he claimed his stepmother was admitted into ICU; that his ex-boss had delayed his business reimbursements and that he had met with a road accident before Chinese New Year.

“I felt sorry for him and wanted to help,” she said, adding that she allowed Lim to use her credit cards when he visited her in Penang in October last year.

Qi Qi started getting suspicious in March and lodged two police reports in Penang and another two in Singapore.

She later traced Lim’s caller history from a sub-line she started for him, and found six other women in Malaysia whom Lim had cheated for money and sex.

“His modus operandi is to get acquainted with lonely, single women online and then slowly work his way into their pockets with his sob stories,” Qi Qi said, adding that the victims had refused to make police reports against Lim.

Chong urged the other victims to come forward so that he could assist them.
“I will take this case to the Malaysian Interpol and relevant authorities,” he said.

He also reminded women to be wary of meeting strangers online.

Go for PSD scholarship

AMPANG: Those who have yet to apply for a Public Service Department scholarship despite scoring 9A+ or more in their SPM examination will not be left out, said Tan Sri Muhyiddin Yassin.

The Deputy Prime Minister said these students could still apply for it, in view of Prime Minister Datuk Seri Najib Tun Razak’s assurance that all students who scored 9A+ or better would be granted PSD scholarships for local or overseas studies irrespective of race.

“They can come forward and we will take them into account,” he told reporters yesterday after opening the Ampang Umno division meeting here.

Najib, who made the announcement on Saturday, had described the move as “historical”.

Muhyiddin, who is also Education Minister, said it showed that the Government had no qualms rewarding students based on meritocracy, adding that it would not be a problem to source for the additional funding.

“The Prime Minister’s statement is a happy one for all sides,” he said, adding that a big portion of those in the list announced by the PSD had already received their scholarship.

The Government had previously said that it might withdraw PSD scholarships for overseas studies gradually. That plan drew criticism from certain quarters. 

All top scorers to get PSD grants

KUALA LUMPUR: All students who score 9A+ or more will now receive Public Service Department scholarship regardless of their race, said Prime Minister Datuk Seri Najib Tun Razak.

“We have achieved one thing that we have never done in history. Every student who scores 9A+, irrespective of his or her ethnic background, will get a scholarship from the department.

“It doesn’t matter if they are Malay, Chinese, Indian, Kadazan, Iban or others. If they score 9A+, they will get the scholarship whether for local or overseas studies.

“This is to show that 1Malaysia is not just a slogan,” he said when opening the MIC annual general assembly at Putra World Trade Centre here yesterday.

His announcement received thunderous applause and a standing ovation from the hundreds of MIC delegates attending the assembly.

Others present included MCA president Datuk Seri Dr Chua Soi Lek and Gerakan president Tan Sri Dr Koh Tsu Koon

Najib also said 2,304 of 2,499 Indian students who qualified for entry into public universities were given places. A total of 4,541 Indian students applied to enter public universities this year.

“This is a clear manifestation of the Government’s effort to help the Indian community,” he said.
Students are now graded according to A+, A, A-, B+, B, C+, C, D, E and G. Previously, the grades were from 1A to 9G.

In March, Education director-general Tan Sri Alimuddin Mohd Dom explained that the highest possible grade under this system was an A+ which indicates a score of more than 90% in a subject.

A total of 214 students from government schools and another 41 students, who were either from private schools or private candidates, obtained A+ in all subjects taken.

A total of 1,500 scholarships have been awarded to top SPM scorers under the PSD’s Overseas Degree Programme to pursue their studies at universities abroad this year.

MCA vice-president: 9A+ grants in line with 1Malaysia

Tue, Jul 13, 2010 The Star/Asia News Network

KUALA LUMPUR: The announcement that Public Service Department scholarships will be awarded to all students who score 9A+ or higher regardless of their race is in line with the 1Malaysia concept, said MCA vice-president Datuk Seri Dr Ng Yen Yen. She said such a move was unprecedented in the country?s history and a positive move forward for all Malaysians. This decision means that those who qualify  will enjoy the scholarships. This is something that has never been done before in our history. ?It shows that the 1Malaysia concept advocated by the Prime Minister is not just a slogan, she said here yesterday. Prime Minister Datuk Seri Najib Tun Razak had announced, during the MIC general assembly on Saturday that these succesful students would receive PSD scholarships to pursue their studies locally or overseas, regardless of their race. -The Star/Asia News Network

Up Close and Personal with Atul Bhargava - MD Intel M'sia

A rafting trip to the Grand Canyon is what Atul Bhargava hopes to do when he turns 50. One has happened (he turned 50 recently) but the other, not quite – yet.

But that’s really by choice. Atul is not ready to visit the Grand Canyon yet but hopes to do it next year with his family.

This year there are too many things happening – his daughter has exams and soon after will head to the Oregon Health and Science University in the United States for an internship. As such, Atul would rather wait another year to accomplish his grand trip.

Even so, turning 50 was no less auspicious. His sister, niece and her husband arrived from India to celebrate the day with him. “To me, family comes first,” says the managing director of Intel Malaysia, who has been in the country for some eight years.

A typical Sunday in the life of Atul involves playing tennis with his two daughters and looking forward to dinner – his wife’s cooking.

Family man

He is clearly a family man. “My youngest daughter recently went for a trip to Sabah and I was the only male parent who signed up to go with her. It was a parent/child programme. In fact I missed an important business meeting in Costa Rica to be with her.

“My daughter spoke to my boss and asked if I could go to Sabah with the children and people asked me if it was the right decision. On hindsight, a lot of people would not remember if I was present at the meeting but my daughter will remember that I was with her in Sabah. That’s the difference the trip made to her,” he says.

Atul hails from Benares in India. It is a holy city and famous for saris. But he did not stay long enough to enjoy the colours of Benares.

He studied in Dehli and later moved to Kanpur to study engineering. As soon as he finished, Atul, like many other young aspiring boys from India, applied to go to the United States.

He got it and the next thing he knew he arrived in the land of milk and honey, with only US$1,000 and two luggage bags.

He enrolled into Clemson University for a Masters programme. To support himself, he worked part time, correcting exam papers and doing research.

Being used to the Indian style of marking papers, he had to loosen up his marking style.

In the US, the approach to creativity and innovation and the process taught him to look at “multiple view points” and how to apply and learn instead of purely learning.

He got paid US$600 a month, which though a meagre amount, kept him going till he finished his Masters. “You just learn to budget and prioritise,” he says.

After finishing his Masters, he stayed back in the US and joined Intel. But after a while, he yearned to return to his homeland.

He joined a small semiconductor company in India with the intent of learning more about the business.
Sometime around this point, at the age of 27, he got married to an electrical engineering graduate.

“It was an arranged marriage but in the US, I said it was a blind date as people there were surprised to hear about arranged marriages,” he says. Soon after he called his ex-boss at Intel to inquire if he could rejoin the company. Knowing his expertise, he was hired via the phone. He landed back in the US but this time not alone – he was accompanied by his wife.

She was employed by Intel as well but in a different department. “The good thing is that when we moved, Intel made sure that both spouses move together and that makes it easy for us. They are supportive and it is a great place to work,” he says.

But Atul had bigger dreams and ambitions and wanted to lead and not be led. He told his boss that he wanted to go back to school to continue his studies. Again, it helped as Intel believes in nurturing talent. So lucky for him, he got paid while studying.

That lifted him professionally and job offers came his way but he would not move as the “kind of freedom and privileges” he got at Intel kept him with the giant chip maker.

Turning point

At 37, it marked the turning point of his career. At Intel there is a mentor system where people can call upon their mentors to discuss their career path. “It is good to have a few mentors,” he says.

His mentor advised him that if he were to “go for his next dream he needed to improve in certain areas” and that gave him an idea of the direction he needed take.

“I believe you have to have passion in your work. That’s important. Love your work and you can achieve a lot in your life,” says Atul.

That’s what he tries to inculcate in his eldest daughter, who is deciding whether to study medicine or something else.

This happens to be Atul’s second posting to Malaysia. His first was in 1989. “At some point in our lives we will go back to the US but this (Malaysia) country has a mix of east and west, the food is great, the environment is great, working conditions are good and my children also like it here,” he says.

His work style is to allow everyone to be creative and be leaders at what they do. Intel has various programmes where it works with schools by introducing technology and provides research grants.

To have a knowledge- and innovative-based society, Atul believes that involvement has to begin from the early years and that is why Intel is providing computer schemes to some schools.

Atul has travelled extensively and has been to 35 countries. Apart from the Grand Canyon, the other things on his to-do-list include an African safari in Tanzania because of its unmatched wildlife.

By B.K. SIDHU
bksidhu@thestar.com.my

New versus second-hand car

WHEN it comes to purchasing a car, one is often confronted with one main decision – whether to buy a brand new or second-hand car.

Each one has its own pull-and-push factors but ultimately, the potential buyer needs to decide what best suits his needs. How much is the potential buyer willing to spend? Is the buyer facing budget constraints? Is the buyer stretching the finances all for the sake of a brand new wheel?

Clearly, if you’ve got a limited or tight budget, then purchasing a used vehicle would be a preferred option. However, even if it cuts your cost by half compared to buying a new car, used vehicles are not risk-free.

Driving a new car gives you more peace of mind.

 

First, you won’t really know the extent of the car’s wear and tear. The appearance of the car is rarely a good gauge, as a neat-looking, 10-year-old jalopy could just be firing on one-and-a half cylinders, be up for a transmission overhaul and be a ticking time bomb on wheels.

As such, a used vehicle may require higher maintenance and expensive repairs compared with a new one. What’s more, such repairs won’t be covered by warranty.

Apart from being costlier than its old-aged counter part, owners of new cars can relish in the fact that their vehicles are unlikely to unexpectedly break down in the middle of nowhere for no apparent reason, says Kay Vee Auto car salesman Johnson Low of Petaling Jaya.

“A new car is covered by warranty, so even if you have problems within the (warranty) period, it can be fixed without any additional costs because its their (manufacturers/distributors) responsibility.”

Low noted that many luxury cars especially, offered vehicles with warranties that extended to as long as five years.

“Also, new cars won’t need new parts for a long time. A used car on the other hand may need a lot of things that need changing.”

Low also pointed out that in the case of a break down for new vehicles, many car manufacturers offered towing assistance.

“Basically, driving a new car gives you more peace of mind compared with a used one. Furthermore, one also tends to look good driving a brand new vehicle that just hit the market rather than one that’s been defunct for years,” he says.

Another advantage of a newer car is that it would command a slightly better resale value versus an older model,” Low adds.

Buying a used car

The immediate benefit of buying a used car is that it’s cheaper than a brand new one. Furthermore, a used car also depreciates a lot lesser than a new one.

“New cars lose about 30% to 50% of their value within the first three to four years, at which point the depreciation starts to slow down,” says Used Autos Sdn Bhd owner Peter Wong, a Segamat-based used car dealer.

“In the case of used cars, the previous owner would have absorbed the largest portion of the depreciation cycle. By the time you purchase a used car, nearly all of the costs of owning and operating the car would have been reduced,” he adds.

Jeremy Yeoh, a Kuala Lumpur-based used car dealer says that owning a used car also means lower financing costs, reduced registration and license fees as well as insurance premiums.

According to him, cheaper, fuel efficient cars tend to have better resale value, such as Perodua Kelisa, Kancil and Toyota Vios models.

“Each year, there are new drivers coming onto our roads, and these are mostly students who are often incomeless; it’s their parents who buy them their first cars, mostly used cars that aren’t too expensive.”
Yeoh adds that many people with multiple cars tend to go for used models as an alternate or second household vehicle.

By EUGENE MAHALINGAM
eugenicz@thestar.com.my

A roof over our heads: Should we buy or rent?

PERSONALLY speaking, I have been faced with this question – to buy or rent a house – many times in my life. While I haven’t quite found a clear answer to that, I have decided to go with both. I have bought a house (or rather acquired one through financing) but am renting it out while I live in a rented premise with my family.

It is a known fact (if not compounded by our parents, and uncles and aunties) that one should, if they can, own a house. Generally speaking, renting somehow has some negative connotations. Ideally, we should buy a property early in our lives to take advantage of the longer loan financing period and if we can, try to settle the financing early.

While there may be no straight forward answer here, there are several pertinent questions we need to ask ourselves. Where do we see ourselves, five, 10, or 30 years down the road?

First, let us exclude investors from our category as they would naturally fall under the ‘buy’ status, and let us delve into the lives of the average man-on-the-street manifested in these four individuals – Robroy, Rizal, Rowena and Rossindra, who face a similar dilemma.

Robroy is 35 years old, married with two children, and works as an senior accountant. He works for a multinational company and therefore is required to travel, and at times is posted overseas for a few years. He also has chalked up some credit card debts from all the travelling, and have been delinquent in payments during his absence in Malaysia. Most recently, he was posted to New Zealand and is now considering migration.

Rizal is 30 years old, married with two wives and six children and is a businessman who owns several restaurants. His income is good, but it fluctuates, and he currently has some savings which he plans to invest. His big family helps him runs the business.

Rowena, is a 28 year old care-free person, whom after graduation could not hold a steady job, but is very happy with part-time jobs that give her the freedom to travel as she loves travelling. She has a boyfriend and plans to get married in a year or two.

Rossindra is 25 years old; she is a social science university graduate who has decided to dedicate her life helping the needy and healing the world. She is currently working under one of the Unesco projects in Myanmar. She gets paid pretty well, and with food and lodging fully provided at her workplace in Myammar, she saves almost all her salary. She recently took over the rental tenancy of her parents who live in a rented house, and is considering alternative options.

Of these four individuals, who do you think should buy a house or rent? The following represents my take, which of course, is open for discussion.

Robroy should rent, mainly because of his work commitment. His work requires overseas posting, which includes his family, especially since he is considering migrating to New Zealand. Furthermore, he has been delinquent in his credit card payments, and this may not go well for his loan financing if he wants to buy.

Rizal should buy, mainly because the nature of his income is uncertain and he has amassed some savings, which should aid in his down payment for a house. He had originally wanted to buy a house in cash but given the size of his family, he decided to buy a bungalow for which he has settled 50% of the payment while the remainder is financed through a loan. As he rents his restaurant outlets and the returns from his business is used to settle the rent, he is confident that buying a house is a much better option for him.

On the other hand, Rowena, quite clearly falls under the rent category. First, she does not have the financial ability and second, she has not quite decided what she wants to do in life. Furthermore, her part-time jobs may not provide her with a good credit standing with the banks. Her boyfriend whom she intends to marry happens to be rich.

So, naturally, if things go as planned, she may be able to solve, to some extent, her financial issues.
Rossindra, on the other hand is in a real predicament. While her position and work do not necessitate her to rent or buy a house, she is undertaking the obligation to pay rent for the house her parents stay in. She is considering the option of buying a small house and naturally, her parents are overjoyed to finally live in their own house.

Buying a house is usually, for many, a once-in-a-lifetime decision. So don’t rush into it. Take your time evaluating the possible scenarios and outcomes and of course, make sure you choose a suitable property. Whatever it is, you must try to avoid putting significant pressure on your financial status.

COMMENT 
By RAYMOND ROY TIRUCHELVAM

● The writer, a business planner with SABIC Group of Companies says: I would rather my parents choose my house than choose my wife.