Back to the topic. My understanding is that the Bear fund ran into trouble because it was forced to sell relatively illiquid paper to meet redemptions. My question is what kind of lockup did the fund have? It seems more than a little foolish to be highly leveraged in stuff you might not be able to dump easily and allow monthly redemptions? What's the story?
CDOs are so complicated that a lot of people that hold them, do not even know what they are worth. Imagine it for a second, you have a huge porfolio and have no clue what it is worth. I guess those higher yield paying trenches are risky after all. Interesting times are ahead.
It's the leverage. Brookstreet used retail as a sponge, and at even 50% margin, they wiped out 3000 accounts. Read the WSJ this weekend. CDO's owned CDo's, owned CDO's. What 's the leverage? 10:1? More like 20 or 30. You may only yield 1% onassets, but with the leverage, you outperform - until. this is the one, IMHO. Remember, it only takes a swoon to wipe you out on margin. It can snap back, but you won't.
I read this article over the weekend, very interesting. This has been know for a while though. Try to read some parers by Frank Portnoy (authour of FIASCO). He used to work for Morgan Stanley, and has been warning about CDOs risks for a while.
Thought a boring fuck type, like atticus, would know how to spell interbreeding. Pitty you didn't spot the joke... Clever, atticus... Yeh, sure.