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Collateralised Debt Obligations

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I work with complex programming problems everyday, which involve analysing human behavoir and what they are most likely to do at any given time. CDO's arent very complex, in fact a third rate programmer could factor that the entire system they are based on is flawed.

Here is how I came to the conclusion :

1. You have £1,000,000 to lend.

2. You add that money to a pot of money £99,000,000 say a pension fund.

3. You lend that money to all good risk.

5. But there isnt enough good risk to maxmise a return.

6. You lend to the medium risk, but theres not enough of them either to maximse a return.

7. You lend to the sub prime, but know that a large percentage will default.

8. Increase lending rate to subside defaults.

9. You know the economy of that country will not allow all of the people you lend to default as this will cause a meltdown.

10. Lend the money and then resell the debt at a profit to another lender.

11. When the number of defaults increase, stop lending money to other banks, causing a credit crisis.

12. Central banks step in to try and resolve situation.

13. Post write downs, but still retain property as it is impossible to sell.

14. Hold on to land. You know own a lot of land and property, while the central banks reduce interest rates allowing you to aquire funding to start the system again.

15. Result, the banks have lent other peoples money to those who had no chance of paying it back and thus you own the land, you will not sell. Every once in a while you need to remind the people running the country that you run the economy, so you post write downs to enable low interest rates, so you can gain future investment to aquire more land and property when people start to go bankrupt.

16. Banks own land, huge amounts of it, they not only control money supply but land too. System Perfect.

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Guest mattsta1964
I work with complex programming problems everyday, which involve analysing human behavoir and what they are most likely to do at any given time. CDO's arent very complex, in fact a third rate programmer could factor that the entire system they are based on is flawed.

Here is how I came to the conclusion :

1. You have £1,000,000 to lend.

2. You add that money to a pot of money £99,000,000 say a pension fund.

3. You lend that money to all good risk.

5. But there isnt enough good risk to maxmise a return.

6. You lend to the medium risk, but theres not enough of them either to maximse a return.

7. You lend to the sub prime, but know that a large percentage will default.

8. Increase lending rate to subside defaults.

9. You know the economy of that country will not allow all of the people you lend to default as this will cause a meltdown.

10. Lend the money and then resell the debt at a profit to another lender.

11. When the number of defaults increase, stop lending money to other banks, causing a credit crisis.

12. Central banks step in to try and resolve situation.

13. Post write downs, but still retain property as it is impossible to sell.

14. Hold on to land. You know own a lot of land and property, while the central banks reduce interest rates allowing you to aquire funding to start the system again.

15. Result, the banks have lent other peoples money to those who had no chance of paying it back and thus you own the land, you will not sell. Every once in a while you need to remind the people running the country that you run the economy, so you post write downs to enable low interest rates, so you can gain future investment to aquire more land and property when people start to go bankrupt.

16. Banks own land, huge amounts of it, they not only control money supply but land too. System Perfect.

Something like that

Next time round, people will probably be more wary of property, thus the new buzz word for the next bubble will be alternative energy. When that collapses, they'll find the next 'new thing'.............and so on.

Dstars posted an excellent article yesterday on the madness of the system. There must always be another 'new thing' around the corner to maintain the bubble/collapse econo0mic model.

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I work with complex programming problems everyday, which involve analysing human behavoir and what they are most likely to do at any given time. CDO's arent very complex, in fact a third rate programmer could factor that the entire system they are based on is flawed.

Here is how I came to the conclusion :

1. You have £1,000,000 to lend.

2. You add that money to a pot of money £99,000,000 say a pension fund.

3. You lend that money to all good risk.

5. But there isnt enough good risk to maxmise a return.

6. You lend to the medium risk, but theres not enough of them either to maximse a return.

7. You lend to the sub prime, but know that a large percentage will default.

8. Increase lending rate to subside defaults.

9. You know the economy of that country will not allow all of the people you lend to default as this will cause a meltdown.

10. Lend the money and then resell the debt at a profit to another lender.

11. When the number of defaults increase, stop lending money to other banks, causing a credit crisis.

12. Central banks step in to try and resolve situation.

13. Post write downs, but still retain property as it is impossible to sell.

14. Hold on to land. You know own a lot of land and property, while the central banks reduce interest rates allowing you to aquire funding to start the system again.

15. Result, the banks have lent other peoples money to those who had no chance of paying it back and thus you own the land, you will not sell. Every once in a while you need to remind the people running the country that you run the economy, so you post write downs to enable low interest rates, so you can gain future investment to aquire more land and property when people start to go bankrupt.

16. Banks own land, huge amounts of it, they not only control money supply but land too. System Perfect.

I'm impressed that you fully understand CDOs and their shortcomings. Would it be possible to post on here the model limitations and how you would improve them?

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So to sum up.

1) I have a bucket full of shit.

2) I pour two pints of cream on top.

3)

a) If I am a banker, I now believe I have a bucket of cream.

or

b) If I am not a banker, I think I have just wasted some good cream.

Edited by microbe

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So to sum up.

1) I have a bucket full of shit.

2) I pour two pints of cream on top.

3)

a) If I am a banker, I now believe I have sell a bucket of "guaranteed not to be shitty cos my mate Manny Line says it's all right" cream to some poor fool greedy ******* who wants money for nothing who likes cream. and hasn't heard the phrase "If something looks too good to be true, it probably is".

or

b) If I am not a banker, I think I have just wasted some good cream.

Hi microbe, excellent stuff. I had a couple of goes at taking it to the next level. :)

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Nothing wrong with a CDO per se, just when that particular CDO is a load of crap bundled up together is it bad.

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Hi microbe, excellent stuff. I had a couple of goes at taking it to the next level. :)

Ah, thanks, now I see where I was not getting the full flavour of the cream. :rolleyes:

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  • 292 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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