Guest comment - Synthetic CDOs were good for everybody

By Joe Carroll

Despite their years of success, Joe Carroll doesn’t expect a resurgence in synthetics

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Comment by: Jay Mani. Posted 9 years ago [2010-06-07 17:24:21]

Yeah! Guns don't kill people.

Comment by: Anonymous. Posted 9 years ago [2010-06-03 23:51:05]

Sounds like a "guns don't kill people, people kill people" argument

Comment by: Anonymous. Posted 9 years ago [2010-06-03 14:37:17]

Bravo!! to the above "Guest Comment"; synthetic or cash CDO is a "technology" that can be applied to any cash flow (good or bad). Fundamentally, with this technology risk is nether created nor destroyed, it simply gets redistributed. It is absolutely imparative to try to understand the landscape of this risk. But no, it was too "complex", so investors rather trusted the rating agencies. The rating agencies simply gave ratings based on averages. One of the greatest gift to investors is their despise for complexities. By going to the extra mile to understand the risk or the underlying cash flow, investors would have avoided the crisis. Just like any investment, one has to do their homework .. So don't blame the technology!!!!!

Comment by: Anonymous. Posted 9 years ago [2010-06-02 23:32:06]

This is the panglossian view of the products. Where the rubber hit the road, there was extreme adverse selection resulting in many portfolios containing all 2 or 3 Icelandic banks, WaMu, Lehman, CIT, Syncora and AMBAC which was enough to sink the deals. You can blame investors for not doing their due diligence sufficiently well all you like, but the real issue was that the main rationale for the products was to line the pockets of arrangers and the customisation was done to maximise the return for dealers not minimise the risk for investors. The product will only come back once a mechanism has been created that doesn't require the investor to be smarter than the the arranger to do well