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Friday, February 13, 2009
The final version of the $787.2 billion economic-stimulus plan was approved Friday afternoon by the House, and was headed for likely passage in the Senate later in the evening.
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Friday, February 13, 2009
Big banks are saying they'll halt foreclosures on some types of mortgages.
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Friday, February 13, 2009
This week in business news: stimulus makes its way through both houses of Congress, bank CEOs, credit card companies grilled, Madoff civil suit settlement.
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Friday, February 13, 2009
There will be something economic for everyone in the upcoming week with speeches from no fewer than six Federal Reserve officials and release of the minutes of the January Federal Open Market Committee meeting and key data reports on housing and inflation.
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Friday, February 13, 2009
The folks inside the Beltway are tone deaf about their own greed and avarice
Insurance
- Congress Readies Final Vote on $790B Stimulus Bill
- G7 Powers Head to Rome as Crisis Rages
- Read the Text of the Stimulus Bill
- Sources: U.S. Eyes Home Loan Subsidies in Rescue Plan
- Lawmakers Grill Credit-Card Industry Officials
- JP Morgan Faces Congress: Echoes of Dec. 1912
- Economic Stimulus Package on Track for Final Votes
- Foreclosures Fall from December to January
- Nadel's Attorney Trying to Get Him Out of Detainment
- U.S Trade Deficit Shrinks 4% in December
Blog List
Retirement
- International Finance Corporation Discloses Intention to Finance Lydian
- International Finance Corporation Discloses Intention to Finance Lydian
- Global Law Firm Clifford Chance Plays Key Role in Financing of Historic Multi-Billion Dollar Expansion of Panama Canal
- Mindoro Announces Proposed IFC Investment
- BHP Billiton to Build Replacement Concentrator at World's Largest Copper Mine, an Industrial Info News Alert
- BPZ Announces Signing of Mandate Letter for $200 Million Senior Debt
- Suntech Completes Investment in Nitol Solar
- Halogen Software Achieves 23 Quarters of Year-over-Year Growth With Best Ever Quarter
- Beacon Power Closes $5 Million Loan for Plant Expansion
- Ad hoc: Constantia Duropack becomes the single largest shareholder in Croatia-based Belisce d.d.
FOX Translator
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Welcome to the major leagues of debt. Collateralized debt obligations, almost always referred to as a CDOs, are horrendously
complicated deals that often leave anyone without a MBA wondering what was put into these CDOs.
The first thing to
understand about bonds, (aka debt) is that bonds are often backed by something else. Think about your home mortgage. If you
don't pay your mortgage, the bank can take the house. You end up homeless, and the bank sells the house to pay off the rest
of that mortgage. There is something "backing" that mortgage; something lender can fall back on, if you don't pay your bills
like a good human being. That's called collateral.
CDOs are one flavor of an entire sector of investing called structured
finance, and they are also backed. CDOs, in the simplest concept, are just bonds backed by something else. In most cases,
a CDO is backed by a collection of various types of debt. CDOs can be home mortgages, or other types of debt like credit cards,
auto loans, and personal loans. Most of these types of debt are usually considered a bit more risky and they don't have the
backing that a home loan does. So, if you think it through, you can imagine that CDOs are usually considered a risky investment.
To take a step further, understand that CDOs have multiple flavors within each CDO. These flavors are called tranches. If you've taken French, you might recognize the word, it means "slice" or "portion." Each slice of that CDO you invest in is a little different and carries different amounts of risk.
You could invest in the lowest risk tranche of the CDO, which would
provide you lower risk. But, you don't get a good return on that investment. Or, you can be the heroic adventurer of bonds
and invest in the lowest-grade tranche of the CDO. You'll make an amazing return, but if the economy even looks at you wrong,
you might lose the entire investment.
CDOs aren¿t easy, and are almost always invested in by mutual funds, insurance
companies and hedge funds. As an individual investor, you will probably not come across a CDO you can participate in.