That’s because when your only tool is a hammer, every problem tends to look like a nail.

Also, there are plenty of downtown bars that stay open late.

The FT was reporting that some groups of CDO’s were now valued at as little as 5% of their original mark. I don’t understand how something backed by loans could lose that much value unless 95% of the loans default, rates we are nowhere near. Then add in the fact that they were talking about the highly rated tranches. Those should return higher than the default rate because they’re first in line! Sometimes it seems to me that we might be in an inverse bubble.

Tanta wrote a post at Calculated Risk about CDOs back in 2007 called “Leverage, Ratings and Forced Unwind”.
A CDO isn´t backed directly by loans, it´s backed by Asset-Backed-Securities. And the main problems seem to be that CDOs consists mostly of BBB to BB ABS bonds. The more risky tranches of an ABS. And that the whole thing is leveraged. So a 5% loss in the underlying ABS bonds for example can result in a 20% write-down in a CDO.

Smut Clyde said,

Imagine my consternation one night to reach the Portland branch of the Rogue Brewery people at 10.15, only to discover that it closed at 10.

Ever been to Canberra?

That’s all well and good, except that these companies *profited from* and *traded on* the illusory high values of the CDOs in question. Now they want to be insulated from the illusory *low values* of the selfsame CDOs. It’s a perfect example of the ‘privatize profits, socialize losses’ meme that has taken hold of America’s collective mind of late.

Live by the illusory values, die by the illusory values. If you don’t want to die that way, then IMO the government can swoop in and buy you out for pennies on the dollar. Otherwise, choke and die, market boys. Let’s all recall that the personal bankruptcy laws were largely gutted just in the last two years, so I’d say that sauce for the personal bankruptcy goose is some nommy-nom-nom sauce for the corporate bankruptcy gander.

Did you say Jute?

I dunno. Are there people who even pretend to be regulators? It all smells like uninhibited marketeering to me.

It’s less alternative medicine and more batshit crazy medicine, but there’s always the Association of American Physicians and Surgeons and their journal JPandS, which is basically wingnut doctors’ answer to them high-falutin’ “researchers” what with their “peer review”. It’s basically a clearinghouse that’ll publish anything that meets its orthodoxy, no matter how crazy or incorrect, including a fair number of articles that have nothing to do with medicine; they like publishing regular articles on global warming denialism, for example.

You always have to use judgement to determine fair value. What this new guidance about is the amount and sorts of judgement that can be used to determine whether or not a given trade is “distressed” and whether a given market is “inactive”. This in turn determines what level in the fair value hierarchy a given asset falls into, based on the type of inputs used to value it. Even using more judgement and fewer observable market inputs, the assets will still technically be accounted at “fair value”.

“The FT was reporting that some groups of CDO’s were now valued at as little as 5% of their original mark. I don’t understand how something backed by loans could lose that much value unless 95% of the loans default, rates we are nowhere near. Then add in the fact that they were talking about the highly rated tranches. Those should return higher than the default rate because they’re first in line!”

Again, to be precise, the FT reported that some CDO liquidations were realising 5% of the original value, which isn’t quite the same. That said, plenty of originally AAA tranches of mezzanine CDOs are and/or should be marked at 5% or less. You have to remember that CDOs (of ABS) parcel other securities, not mortgages directly. So you can (and typically did) have a senior CDO tranche where the underlying assets are all BBB or BB tranches of mortgage backed securities, which will be totally wiped out if loss rates (defaults x recovery rates) exceed, say, 15%. The reasoning was that the underlying mortgages and/or securities were geographically diversified, and that nationwide housing downturns were unknown since the depression, so that the CDO itself benefitted from diversification. Some of the underlying securities might default if, say, California had a downturn, but the idea was they wouldn’t all default because you wouldn’t have a nationwide downturn. Big mistake, obviously. So a lot of CDOs are facing defaults in all their underlying securities, and next to no recoveries.

A further complication – within CDOs of ABS, there are “mezzanine” CDOs (where the underlyings were typically BBB and BB tranches) and “mezzanine” CDOs where the underlyings were AA and A tranches. In the latter case, the diversification argument stands up slightly better, so they will see much lower loss rates on average. This is one of the reasons why you see such divergence in CDO valuations. Not the only reason – there’s still a lot of jiggery-pokery going on with valuations, albeit a lot less than six or 12 months ago.

I’m afraid it’s bullshit all the way down. You’ve been allowed to do it because you are such rapacious consumers. It’s how the thing was set up. Other people do the making, you do the buying. That’s all there is.

Countries willing to try should keep it secret so he isn’t tipped off ahead of time on his rubber-chicken-goulash-speaking-to-yahoos circuit.

If you must have thin people, I suggest moving to a third world country. In case you haven’t noticed, most of us are lard-asses.