I have to point out this morning’s NPR Planet Money podcast. It was just too good. There’s three segments and the last two are awesome.
The second piece has some guy trying to explain why we can’t just take all the crappy mortgages out of these big CDOs and call it a day. Well, it turns out that a lot of these CDOs have a collection of utterly disconnected things such as “income from a specific Friday night flight on Korean Airlines between Tokyo and Seoul” and “royalties from David Bowie’s songs” but more importantly things like “the mortgage for your office building” and “the mortgage for the cell phone tower your phone used this morning”. That’s one of the reasons why this toxic subprime debt is effecting things completely unrelated, like friday night flights out of Tokyo.
The last piece is talking with some bond and paper traders. The guy mentions how he has a client who had to buy treasury notes that day and ended up only getting 1 basis point for his trouble. That’s 1/100th of 1%. That’s a 1 cent return for $100. He also mentioned that some notes cleared this week for 0, the equivalent of hiding it under your mattress.