tmmcnay

Why Yield Spreads Aren't the Same as Credit Risk

Very well written. Articles like this wake up my disaster neurons related to losses I suffered from the Whoops nuclear power plant episode many years ago. I purchased those bonds through Nuveen, a broker then thought to be impeccable as to safety. The default on those bonds to my mind was due to political risk abetted by the courts. I still believe that due diligence was done as to the legitimacy of those bonds.

Luxury Watches and the WSJ

Hi Felix, Congratulations on writing very entertaining articles about the BS that goes on in the world. On a personal note I will tell you that the idea of bidding on your own product is widespread; in my case when i went to buy a bull for my cattle breeding program I noticed that the animals all seemed to go to the same buyers, only finding out later that these buyers were the suppliers to the auction.

U.S. Treasury Signals the Derivatives Mess Is Far From Over

"Hundreds of trillions"? I doubt that. One thing to keep in mind is that at the bottom of this mess is a piece of real property which sets a floor. As the REIT debacle in the past showed those with the most patience came out OK. The DOT COM bust though was a complete bust because there was nothing of value, zilch, nada! I've not yet heard that mortgages were written on phantom property. As you've noted the issue slowing the recovery is that the "smartest guys in the room" won't 'fess up.

What Went Wrong in the CDO Market

This is the best rigorous description I have yet seen to explain what has been going on in the subprime market. I would add that it comes down to The Greater Fool Theory in that there was no recourse payment embedded in the system if the defaults exceeded a certain level. I remember that in the car business if I took a bum to the bank to get a loan to buy one of my cars and the bank said i had to guarantee the loan then the bum walked. Not so in subprime. If the loan could be passed along then whoever ended with the loan took 100% of the risk, so let me add the Hot Potato Theory and the Musical Chair Theory to complete the story.

Options Trader: Plays on Dow Components

Hi Philip, Please add a more complete description of the option to your articles i.e. a call or a put. Since 2002 i have good luck writing LEAP puts on good companies and am slowly increasing the amount committed at each downturn. Your article on the Dow options has my intense interest because of the quality of the companies but with the option not being fully identified I can't follow your strategy.

Lessons from My Son's iPhone Purchase

Carl is exactly right on all counts and his story is another woeful tale of corporate bigwigs who are too isolated from their customers to do right. I hope readers will remember the AOL horror show when the company took in millions of subscribers money only for the subscribers to have no service. The issue got so bad that a judge had to step in and order the company to fix the problem.

How Low Will Housing Go?

Affordability does not have the same effect over the whole range of home prices. I don't believe that a an 80,000 home overpriced in today's market to 100,000 is going to suffer the same decline in market value as a 500,000 home overpriced to 700,000.