Comments on: The CDO shuffle A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: hsvkitty Wed, 01 Sep 2010 22:31:51 +0000 Yes Danny Black, there was greed and demand, which is why they were rebundled and why so many mortgages changed hands and are difficult to trace. The high yield/high risk is like crack in the finance world. I don;t deny that.

I see CDOs as a fantasy bet. One which was continued to be kept afloat by fluffing it up with fake ratings. It wasn’t just existing mortgages, it was subprime… and when they dried up the brokers went out to coerce anyone who could be duped into buying one.

I would think that being 25% of US mortgages were ‘unconventional’ that the subprime mill was a great place to play such high finace lottery. Being mortgage brokers were selling mortgages to people with no little or no credit and the banks were quite aware AND those who were shorting were quite aware which banks and lenders were allowing such mortgages to go through … and those mortgages ended up in an AAA rated CDO packages … and people like Paulson were allowed to pad the CDO package he was about to short himself… etc… i would say there were lots of instances where insider trades and shorts with insider knowledge were more then a possibility. The kind of money made from other people’s money is just too good to pass up.

Make a product so complex and backed by third party independents like Paulson, who isn’t independent at all as he helped package the CDO and is going short and that’s how you can design a product to fail. Should I have said fall short of implied expectations? It gives a whole new meaning to calculated risk. Pass the bonuses please.

That the further watered down CDOs which were still left in someone’s hands were now a hot potato didn’t stop the mill after they were found to be as worthless as those who had faked their value KNEW them to be… it just became the hot potato with bonuses given to those who were able to rid of them, kept the demand high as well as the ratings.

The hot potato time bomb..CDO shuffle… watered wine …call it what you will, but it was still repackaged junk, no matter the ratings. 2/wsj-mortgage-hot-potatoes.html

By: Danny_Black Sat, 28 Aug 2010 18:32:50 +0000 hswkitty, except that is simply not the case. There was plenty of demand in 2006 and it only started heading south in 2007 with the collapse in demand only happening around April that year. The whole reason that synthetics existed was because there wasn’t enough supply of underlying bonds and by definition synthetics cannot have caused “more dodgy mortgages” to be issued as they are bets on EXISTING mortgages.

Read the article again and look at the meagre facts they provide – we are talking about investments that came to a grand total of 107billion USD – a quick look at the losses the banks took shows this is a drop in the market. LEH alone was short 150billion when the dust cleared. They took a sample of **structured finance synthetic** CDO – ie CDO whose mandate was to invest in structured finance – and shock horror discovered they invested in CDOs and then shock horror given the small number of eligible CDOs out there discovered some bought slices of each other. You’ll also notice that this is not a case of “banks” doing it rather almost exclusively it was Merrill aka the gimps of the business. Oh and they didn’t coerce banks into doing anything, the people who the article implies were coerced were the CDO managers – who didn’t need much coercing.

It is not a matter of getting quotes, it is a matter of crunching the numbers and showing how this could possibly be significant. They didn’t bother doing this.

I work in this industry, I would LOVE to know how you design a product to fail. Given you seem to think this is easy, I suggest you apply to work for a prop desk at any bank and help them make that risk free money.

By: hsvkitty Sat, 28 Aug 2010 16:50:34 +0000 danny Black, perhaps you are trying to tell us you think this is all quite alright … rather like doing God’s work or because ‘everyone else was doing it.’ If it is a weak argument, perhaps you would like to tell us why?

What I got from reading is financial institutions were selling watered down wine and calling it champagne and the whole financial industry was in collusion. This is a known fact, so where is the misleading spin?

When they were left with too much water, they coerced banks into buying and threatened to stop giving them business if they didn’t. We can now switch the the hot potato analogy, except the more they traded back and forth the hot potato, the more they got in transaction fees, bonuses and and insurance payouts as they were designed to fail etc.

Are you upset that there are no names behind the those who were willing to speak, albeit anonymously? Tell me which of the bankers, who might take the heat for the whole industry(ala Fabulous fab) if this all comes to a head, did you expect to identify themselves?

By: Danny_Black Sat, 28 Aug 2010 12:51:48 +0000 Hot on the heels of an expose of how assuming lognormal returns gives you log normal returns, we have that investments whose mandates include structured financial products invests in structured financial products. Whats next? Maybe we could see parts of Citibank owning shares in BoA and vice versa.

If I wanted to read pathetically weak arguments that don’t even have cursory evidence to back them up combined with wildly misleading conclusions with a faux moral outrage spin, I’d be one of the two people on the planet reading the NYT and Gretchen Morgensen.

By: hsvkitty Fri, 27 Aug 2010 19:46:49 +0000 ay/web/2008/10/03/whiteboard_crisis_expl ainer_uncorking_cdos/

Sorry, but instead of pasting the post was entered for some reason.

This info was all much appreciated Felix.

By: hsvkitty Fri, 27 Aug 2010 19:42:59 +0000 Thank you!

And uncorking CDO’s was entertaining as well as educational.

By: McGriffen Fri, 27 Aug 2010 16:09:37 +0000 Remarkable details. Even down to the CDO manager working near the Tampa airport..priceless.

I stand by my previous comment made prior, on an unrelated topic:
That is false demand for product, and created a false signal for spreads and structured products.

By: Woltmann Fri, 27 Aug 2010 14:45:19 +0000 We will pay the price ad infinitum and ad nauseum of not temporarily nationalizing most of them.

By: Uncle_Billy Fri, 27 Aug 2010 08:59:33 +0000 Bravo, Sandlers. Bravo Atlantic Misanthropies.