October 24th, 2007


What is that CDO worth?

What is that CDO worth? That question is at the heart of the market problems we're currently facing.

And, as it turns out, there is a way to find out what the "Collateralized Debt Obligation" that people invested in should be worth, after plugging in a few numbers.

The problem, though, is that any good market maker will take that, say, "It's a reasonable guess, but are you BUYING at that price, or SELLING at that price?" And there is where the rubber meets the road: these are now sold in a market which is unsure enough to treat estimates as ceilings.

After reading the Wikipedia article referenced above, the question will occur to some of you: why not invest in things that you understand, instead?
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The latest report from Transparency International on corruption is out. Some of you will note with dismay that the US, while comfortably in the top half, isn't up with Canada, England, or Australia, and are wondering why. Well, there are two things you should keep in mind: first, there are a lot of people with more power and fewer checks (the FBI is nominally tasked with investigating government corruption, and I'll give you one guess as to who funds them). Second, there are businesses that depend on government cooperation to make a profit, and therefore have every incentive to grease the wheels, and too few people to watch them.

Result? There is still a mess there. It is worth cleaning up.