wakeup call

The Microwave Society's Answer to the Economy Is Half Baked

The problem with CDOs is not the underlying paper. The problem with CDOs is that the discount reflected a potential perception of possible market problems. If you look at the CDO valuations in relation to the actual portfolio performance you will see discounts that are no relection of actual performance. To remove this anomaly from the analysis take away mark to market accounting then deal with actual loans that do go bad. A bad loan is fixable since there is something tangible behind it. A CDO is a synthetic and difficult or impossible o fix.