Michael:
I did not even know anything about CDOs before
I read the Partnoy book.
Welcome to the real world of finance!
For those of you who are interested in CDOs, that is,
Collateralized Debt Obligations, here is a good
article:
http://www.stanford.edu/~duffie/ddng.pdf
Parts of it are
Duffie shows the sophisticated math behind these derivatives. Partnoy
shows that the purchasers don't have the foggiest notion of what they are
buying; they only see a high rate of return
---
Michael Perelman
Economics Department
California State University
Chico, CA 95929
Tel. 530-898-5321
Michael:
Partnoy shows that the purchasers don't have
the foggiest notion of what they are buying;
they only see a high rate of return
This is the main idea. If they knew what they were
buying, would they buy them in the first place, at
least, at the price they are buying?
CMOs
Yes, but the victims are likely to be pension funds and public agencies.
On Thu, Dec 25, 2003 at 12:12:58PM -0800, Sabri Oncu wrote:
And we will see what will happen to CDOs. They seem to
be bigger than CMOs though. CMOs were an American
thing. CDOs are global. I bet there are many disasters
Michael:
Yes, but the victims are likely to be pension
funds and public agencies.
Quite likely. But nowadays I don't follow the
financial markets as closely as I used to, so I am not
certain who exactly will the victims be.
Who are the main purchasers of these CDOs, does anyone
know?
If
Portnoy wrote me to say that insurance companies were the purchasers of
much of the Enron generation of CDOs. I assume that they have wised up.
The WSJ article I referenced, suggested that Asians are now buying the
junk. They might think that if it is all gussied up with math, it must be
I did not even know anything about CDOs before I read the Partnoy book.
Look at the American Express note.
Portanger, Erik. 2003. Parmalat's Fallout May Be Wide Due to Tangled
Investment Web, Exposure to Collateralized Debt Could Take Months to
Resolve. Wall Street Journal (23 December).
As with
