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    (Original post by Econ4m1t)
    yes but no1 really knows whats in an actual CDO ..its just bunched up sub prime debt and high risk junk bonds..and people are starting to realise this as a lot more CDO's are defaulting

    CDO's are ****ed - that stuff is going into the gutter - look at bear stearns - they got completely owned by CDO's
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    (Original post by Econ4m1t)
    yes but no1 really knows whats in an actual CDO ..its just bunched up sub prime debt and high risk junk bonds..and people are starting to realise this as a lot more CDO's are defaulting
    Do you actually have your own opinions or do you simply do ctrl+c ctrl+v from bloomberg markets (which, no disrespect, is the financial equivalent of the sun, so...way to go!).
    And btw. spreads have been at historically tight levels, similarly to the virtually non-present rates of default (in the past yr).

    CDO - http://en.wikipedia.org/wiki/Collate...ebt_obligation

    Google is your friend.
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    (Original post by szeles)
    Do you actually have your own opinions or do you simply do ctrl+c ctrl+v from bloomberg markets (which, no disrespect, is the financial equivalent of the sun, so...way to go!).
    And btw. spreads have been at historically tight levels, similarly to the virtually non-present rates of default (in the past yr).

    CDO - http://en.wikipedia.org/wiki/Collate...ebt_obligation

    Google is your friend.

    CDO Losses May Be $52 Billion, Credit Suisse Says (Update4)
    http://www.bloomberg.com/apps/news?p...S50&refer=home

    Certainly not dead, but not kicking by any means.

    And bear stearns got totally owned by CDO's - they will find new risk options, but people have been burned badly on the subprime market.
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    With all due respect, $52bn is not that much money compared to the size of the collateralized subprime market. We're looking at loss rates of less than a year's worth of issuance, which in itself will in the majority represent the equity and mezz (senior and supersenior are paradoxically quite difficult to sell). Compared to the losses sustained in the equity markets during turns in the cycle, $52bn is nothing. Losses in the trillions of dollars are not unthinkable during an equity downturn. Nobody says "equity is ******" when a stock market downturn happens.

    Everyone who buys a CDO knows it's effectively full of ****. That's the entire point, diversify out the risk and make your play on the extent of defaults. One may say that subprime mortgages are yesterday, or high yield debt is yesterday, but CDO will always be with us, simply because it's too useful a derivative as shown by the number of things that it has been applied to (pretty much everything that can be traded).
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    (Original post by szeles)
    Do you actually have your own opinions or do you simply do ctrl+c ctrl+v from bloomberg markets (which, no disrespect, is the financial equivalent of the sun, so...way to go!).
    And btw. spreads have been at historically tight levels, similarly to the virtually non-present rates of default (in the past yr).

    CDO - http://en.wikipedia.org/wiki/Collate...ebt_obligation

    Google is your friend.

    haha are you really that stupid?
    my previous post started off with "I reckon..."
    and i thought why not add a few sources in so i dont get questioned by total pillaks on every opinion i make..

    and regards to ur spreads comment..credit is ****ed at the moment.. spreads are widening..well for the current current time anyway..because of uncertainty over sub prime
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    If anything, what will kill off credit is rising interest rates. At 4%, 250bps of spread is good, at 6%, it's not really worth the risk
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    (Original post by kahler_potential)
    With all due respect, $52bn is not that much money compared to the size of the collateralized subprime market. We're looking at loss rates of less than a year's worth of issuance, which in itself will in the majority represent the equity and mezz (senior and supersenior are paradoxically quite difficult to sell). Compared to the losses sustained in the equity markets during turns in the cycle, $52bn is nothing. Losses in the trillions of dollars are not unthinkable during an equity downturn. Nobody says "equity is ******" when a stock market downturn happens.

    Everyone who buys a CDO knows it's effectively full of ****. That's the entire point, diversify out the risk and make your play on the extent of defaults. One may say that subprime mortgages are yesterday, or high yield debt is yesterday, but CDO will always be with us, simply because it's too useful a derivative as shown by the number of things that it has been applied to (pretty much everything that can be traded).

    meh, it's not substantial, but we still don't really don't know the extent of losses b/c CDO's are just hard to value - I think the risk make up will have to change and people will be gun shy for a while.
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    (Original post by Econ4m1t)
    haha are you really that stupid?
    my previous post started off with "I reckon..."
    and i thought why not add a few sources in so i dont get questioned by total pillaks on every opinion i make..

    and regards to ur spreads comment..credit is ****ed at the moment.. spreads are widening..well for the current current time anyway..because of uncertainty over sub prime
    Funny that your ideas exactly match the article entitled "Toxic waste" in the recent bloomberg magazine (yes, that's what I read on the tube...).
    Just to add some value: If you construct a CDO (or, for that matter, a CDO2) with crappy HY components, then you'll always see a fair amount of defaults. On the other hand, you can also put together a pure investment grade CDO, but you'll end up with a much lower spread. That's the payoff. You get a wider spread for taking on greater credit risk (i.e. you, the investor, go long in credit risk).
    But all this talk about not knowing what entities CDOs contain is just plain BS. IBs do bespoke CDOs, where investors do know about the contents of the asset.
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    (Original post by szeles)
    Funny that your ideas exactly match the article entitled "Toxic waste" in the recent bloomberg magazine (yes, that's what I read on the tube...).
    Just to add some value: If you construct a CDO (or, for that matter, a CDO2) with crappy HY components, then you'll always see a fair amount of defaults. On the other hand, you can also put together a pure investment grade CDO, but you'll end up with a much lower spread. That's the payoff. You get a wider spread for taking on greater credit risk (i.e. you, the investor, go long in credit risk).
    But all this talk about not knowing what entities CDOs contain is just plain BS. IBs do bespoke CDOs, where investors do know about the contents of the asset.
    there is no way of knowing whats in a CDO..some are cubed.. their soo full of ****.. bit like u really...bt thats besides the point...investors use useless credit ratings from the 3 main ratings companies to decide whether to invest or not
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    Bespoke CDO. That means that whatever is in it, the client has chosen or at least agreed to if the bank has been asked to pick the portfolio for target yield say. In any case, the pitchbook of a CDO will contain all of the reference obligations.
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    (Original post by Econ4m1t)
    there is no way of knowing whats in a CDO..some are cubed.. their soo full of ****.. bit like u really...bt thats besides the point...investors use useless credit ratings from the 3 main ratings companies to decide whether to invest or not
    Awesome reasoning - way to go, mate...

    (Original post by kahler_potential)
    Bespoke CDO. That means that whatever is in it, the client has chosen or at least agreed to if the bank has been asked to pick the portfolio for target yield say. In any case, the pitchbook of a CDO will contain all of the reference obligations.
    Correct, I've spent half my day stress-testing one.
 
 
 
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