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07-09-2009, 05:43 AM
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#1
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Recycles dryer sheets
Join Date: Feb 2006
Posts: 223
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Turning S**t into Money
Here we go again Saw this article in Bloomberg about Morgan Stanley turning crap CDO's into AAA rated investments for the short attention spanned 'players" in banking and insurance industry.
From the article:
Code:
‘Make Magic’
The strategy is increasingly being used for commercial mortgage debt.
Standard & Poor’s said on June 26 that it may lower the rankings on
$235.2 billion of bonds backed by loans on properties such as office
buildings and shopping malls. Banks have issued about $2 billion of
the debt in the last three weeks, according to Barclays Capital. That
compares with $5.8 billion of similar offerings in all of 2008, Credit
Suisse Group data show.
“Somebody does something and it seems to make magic, and the
other guy says ‘Hey, let’s do that, too,’” Raynes said.
Morgan Stanley Plans to Turn Downgraded Loan CDO Into AAA Bonds - Bloomberg.com
__________________
I don't mind coming to w**k,
but that eight hour wait to go home is just bulls**t!
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07-09-2009, 08:24 AM
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#2
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Thinks s/he gets paid by the post
Join Date: May 2006
Location: Where the stars at night are big and bright
Posts: 2,847
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I'm going to go get another cup of coffee and read this again. It's not making much sense given recent events. Didn't we already try this once?
Quote:
A lot of banks and insurers “cannot buy anything but AAA,” said Sylvain Raynes, a principal at R&R Consulting in New York and co-author of “Elements of Structured Finance,” which is due to be published in November by Oxford University Press. “You’re manufacturing AAA out of not AAA, therefore allowing those people who have AAA written on their forehead to buy.”
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__________________
There is no pleasure in having nothing to do; the fun is having lots to do and not doing it. - Andrew Jackson
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07-09-2009, 08:34 AM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2008
Location: East Nowhere, 43N Latitude, NY
Posts: 9,037
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Maybe it's a game of "playing chicken" with the SEC?
I freely admit that I really don't understand this CDO stuff, but it's pretty obvious even to me it makes no sense.
__________________
"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
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07-09-2009, 09:07 AM
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#4
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Thinks s/he gets paid by the post
Join Date: May 2006
Location: Where the stars at night are big and bright
Posts: 2,847
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Quote:
Originally Posted by freebird5825
I freely admit that I really don't understand this CDO stuff, but it's pretty obvious even to me it makes no sense.
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There was a good explanation on Netflix I watched sometime back, but can't remember the name at the moment. But here's a good 5 minute explanation.
The coffee is not working this morning because I'm just not understanding how this is any different than just reconfiguring the CDO a little to make the same assets AAA by MS magical powers. Did they add collateral, or reduce the underperforming assets, or just rejigger the tranches while increasing their take on the deal?
__________________
There is no pleasure in having nothing to do; the fun is having lots to do and not doing it. - Andrew Jackson
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07-09-2009, 09:28 AM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2008
Location: East Nowhere, 43N Latitude, NY
Posts: 9,037
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Quote:
Originally Posted by Leonidas
There was a good explanation on Netflix I watched sometime back, but can't remember the name at the moment. But here's a good 5 minute explanation...
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That was excellent. I understand the concept. TY
Using the same analogy of the champagne glasses, "upgrading" the lower quality "glasses" on the bottom rung to look like the better quality ones on the top rung is akin to pulling a glass from the bottom of the stack.
Glass breaking as the pile collapses.
GIGO.
__________________
"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
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