Wednesday, July 11, 2007

It’s not just the hedge funds that are buying the junk

The Posion in Your Pension

"Bear Stearns Cos., the fifth-largest U.S. securities firm, is hawking the riskiest portions of collateralized debt obligations to public pension funds. At a sales presentation of the bank’s CDOs to 50 public pension fund managers in a Las Vegas hotel ballroom, Jean Fleischhacker, Bear Stearns senior managing director, tells fund managers they can get a 20 percent annual return from the bottom level of a CDO."

Posted by monty @ 11:11 AM (486 views)
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2 thoughts on “It’s not just the hedge funds that are buying the junk

  • Fantastic term that – Toxic Debt. Interestingly, this was researched and written before the Bear Stearns fund blowup. A real quotable quote from my favourite CDO saleslady in reference to bundling a CDO along with a US treasury:-

    “Principal protection is guaranteed,” Fleisch-hacker says. “It’s AAA since you’re buying a U.S. Treasury.” IF THERE ARE NO DEFAULTS, this method of investing in CDO equity would return 9.3 percent annually, she says.

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  • Isn’t that brilliant? They have tapped into your pension fund to inflate the house you want beyond your reach. They have had their fee for doing so and are off. You are left with no home and no pension. And they (probably) didn’t even break the law! What a society! Democracy! Capitalism! Brilliant! – just brilliant!

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