I think Lone Star truly believed that those assets were worth more than $6.7 billion, since if the S.P.E fails to get back more than $6.7 billion after selling out all the assets the major victims will be Lone Star themselves. and I don't think Lone Star guys are naive enough not to take it into consideration. They don't want to lose their $1.7billion. maybe they just lacked cash.
@mavisrain Here's a crazy idea for you to wrap your head around. You ever tried to ask yourself what if Lone Star was just one of the hundred subsidiaries Merill Lynch can bring into existence at any point in time with the snap of a finger? Mind boggling huh?
Anyone care to bet that the commission for this deal was paid using the $30 BILLION notional value. I bet the criminal Bankers gave themselves a $30 MILLION bonus on this deal.
I live in Japan..The economy crash here in US is exactly what happened in Japan..House prices and even condos went up enormously, real states boom 25 years ago lots of people got rich and then bubble economy..,houses went down less than 50 %.Japan went to crisis.Didnt you americans had not learned anything from Japan that this worst case scenario might happen to you?
@wmanger You should check out the Chinese real estate market. The same exact thing that happened in Japan and the US is happening in China now, too. Plus I feel like the European crisis right now is also based on real estate crash.
only thing i doubt is...... if CDMO's are based on houses..... and banks dont get enough money by selling these houses....... it means banks overvalued the houses at the time it gave a loan on them..... HOW IS THIS POSSIBLE? that banks(who include intelligent ppl sometimes), overvalue any thing.... (or how can cost of houses drop down, coz in real life... houses aint cheap....). I guess involves corruption of few employees of the bank....... plz answer..........
Dude, you rock!! With this live-on case, all the previous lectures culminated so well. Please take up some more of these so called real life cases and explain it to us. When you took this case, it seemed so obvious, which otherwise is some crap to me n i don't care abt it. Keep up the gr8 work. you are truly inspiratonal.
Wow, these assets are SUPER TOXIC GARBAGE. I wouldn't touch them with a 50 foot pole. The banks are already zombies, government needs to run away from them fast! But I guess the zombie banks already devoured the brains of the elect in Washington. Now they want the taxpayers brains.
e.g. A 5m notional call option on a share trading @ 100 with strike 5000 will be worth almost 0. So you buy 100.000 Options with Notional 5m for almost 0. Notional is just some kind of contract size.
This is astounding ! How can the auditors let this happen ? By the way, did you notice that Paulson changed his mind about TARP this week, stating that the "facts had changed" ? The U.S. will no longer be buying ABS/CDOs but instead will recapitalize banks. Probably watched your videos.
this asset originally valued at 30.6 billion was marked as a "super senior" CDO; super senior CDOs would be the absolute bottom safest section of the "traunch". so, considering that a "super senior" CDO was written down from an original value of 30.6 billion to 1.6 this would mean the equity and mezzanine CDOs must be worth nothing. not one cent.
Just like the end of the socialism in Hungary and all those countries. All 4sale for all prices. It is fun to see the same happening here and from here in the US. It is just as unbeliveble as it was when the russians left Hungary. The revolution (I hope bloodless) strats soon. I mean kicking some real american ass by other stronger younger americans. You may call it generation shift...or .....
"...asset this fund shared with us which was interesting: an Option ARM security priced at 22 cents on the dollar. Assume that default rates rise from 12% to 82% over 3 years, and that recoveries on foreclosure fall from 50 cents on the dollar to 25.... At 22 cents on the dollar, the manager believes that such an investment could return 25%-30%. Similar dislocations exist with prices for non-conforming prime loans.
Google this! Who is Lone Star? And why are they buying toxic paper? This smells like George Bush and Family are all over this. Their fingerprints are not only on this this company but also on Merrill Lynch. Lol, so this is the real reason for the bailout. It's to boost the price of these CDO's.
I think Lone Star truly believed that those assets were worth more than $6.7 billion, since if the S.P.E fails to get back more than $6.7 billion after selling out all the assets the major victims will be Lone Star themselves. and I don't think Lone Star guys are naive enough not to take it into consideration. They don't want to lose their $1.7billion. maybe they just lacked cash.
mavisrain 7 months ago
@mavisrain Here's a crazy idea for you to wrap your head around. You ever tried to ask yourself what if Lone Star was just one of the hundred subsidiaries Merill Lynch can bring into existence at any point in time with the snap of a finger? Mind boggling huh?
bkzfinest07 2 months ago
I dont understand completely. If the assets are worth nothing (if they default) wont meryll lynch be out 5 billion that they loaned?
sundancekid122 7 months ago
Does anyone know where Sal got this article?
falleruen 9 months ago
The Mighty Khan = Legend!
MatDerKater 1 year ago
Anyone care to bet that the commission for this deal was paid using the $30 BILLION notional value. I bet the criminal Bankers gave themselves a $30 MILLION bonus on this deal.
FPVFLIGHTSCHOOL 1 year ago
That is legendary..haha
arlenschmidt 1 year ago
Excellent!!
dmokhtar 1 year ago
I live in Japan..The economy crash here in US is exactly what happened in Japan..House prices and even condos went up enormously, real states boom 25 years ago lots of people got rich and then bubble economy..,houses went down less than 50 %.Japan went to crisis.Didnt you americans had not learned anything from Japan that this worst case scenario might happen to you?
wmanger 1 year ago
@wmanger You should check out the Chinese real estate market. The same exact thing that happened in Japan and the US is happening in China now, too. Plus I feel like the European crisis right now is also based on real estate crash.
*shakes head* It seems that people never learn.
Acerola211 2 months ago
This entire evolution, is BANK FRAUD. All BANKERS are CRIMINALS.
Reality is that DERIVATIVES ARE CRIMINAL.
Arrest ALL Bankers!
centurion180ad 1 year ago
Love it!!
Are you planning on doing micro or macro videos?
Like utility preferences and IS/LM curves?
That'd be awesome, I love your videos.
tatoontube 2 years ago
Ohmigod!
bharati1986 2 years ago
only thing i doubt is...... if CDMO's are based on houses..... and banks dont get enough money by selling these houses....... it means banks overvalued the houses at the time it gave a loan on them..... HOW IS THIS POSSIBLE? that banks(who include intelligent ppl sometimes), overvalue any thing.... (or how can cost of houses drop down, coz in real life... houses aint cheap....). I guess involves corruption of few employees of the bank....... plz answer..........
pagalmadman1 2 years ago
Ingenious presentation!!!
abab676 2 years ago 6
Dude, you rock!! With this live-on case, all the previous lectures culminated so well. Please take up some more of these so called real life cases and explain it to us. When you took this case, it seemed so obvious, which otherwise is some crap to me n i don't care abt it. Keep up the gr8 work. you are truly inspiratonal.
clovermintblue 2 years ago 9
lol, its such a scam. this is unbelievable.
mekaview 2 years ago
So Merrill Lynch makes money of the interest for that sold asset, where it would not have in the past?
You failed to mention the interest on the loan.
JLZesbaugh 2 years ago
TI-85! Sweet memories...until I got the TI-89!
siggyboss 2 years ago
Wow, these assets are SUPER TOXIC GARBAGE. I wouldn't touch them with a 50 foot pole. The banks are already zombies, government needs to run away from them fast! But I guess the zombie banks already devoured the brains of the elect in Washington. Now they want the taxpayers brains.
draggeddownthehole 2 years ago
@draggeddownthehole Ha ha good analogy!
Acerola211 2 months ago
Wow... So crazy....!
(Love your little lectures. they are really helpful!)
chna1 3 years ago
This has been flagged as spam show
great vid
i need someone smart to keep me entertained fj
DANNYRABONE 3 years ago
Hi, Don´t confuse Notional with Price.
e.g. A 5m notional call option on a share trading @ 100 with strike 5000 will be worth almost 0. So you buy 100.000 Options with Notional 5m for almost 0. Notional is just some kind of contract size.
Btw I appreciate your videos pretty much.
BngoBob 3 years ago
This is astounding ! How can the auditors let this happen ? By the way, did you notice that Paulson changed his mind about TARP this week, stating that the "facts had changed" ? The U.S. will no longer be buying ABS/CDOs but instead will recapitalize banks. Probably watched your videos.
cvalmart 3 years ago
this asset originally valued at 30.6 billion was marked as a "super senior" CDO; super senior CDOs would be the absolute bottom safest section of the "traunch". so, considering that a "super senior" CDO was written down from an original value of 30.6 billion to 1.6 this would mean the equity and mezzanine CDOs must be worth nothing. not one cent.
oblonsky 3 years ago
wow.. i wish there are more real life example like this presentation.. it is really an eye-opener!
rayendra2002 3 years ago
This is crazy!
wmacorlando 3 years ago
Just like the end of the socialism in Hungary and all those countries. All 4sale for all prices. It is fun to see the same happening here and from here in the US. It is just as unbeliveble as it was when the russians left Hungary. The revolution (I hope bloodless) strats soon. I mean kicking some real american ass by other stronger younger americans. You may call it generation shift...or .....
Misuci 3 years ago
Notional amount is the original value of the asset underlying the derivative at inception of the contract.
It is not a hypothetical "notion" of the recent value of the asset or the derivative.
cbot141 3 years ago
J.P.Morgan anaylsis:
"...asset this fund shared with us which was interesting: an Option ARM security priced at 22 cents on the dollar. Assume that default rates rise from 12% to 82% over 3 years, and that recoveries on foreclosure fall from 50 cents on the dollar to 25.... At 22 cents on the dollar, the manager believes that such an investment could return 25%-30%. Similar dislocations exist with prices for non-conforming prime loans.
cbot141 3 years ago
Quote from the Lone Star Site
"Its general partner is a Bermuda-based entity headquartered in Hamilton.
"
carlfinkle 3 years ago
Very creative!
riversonthemoon 3 years ago
Google this! Who is Lone Star? And why are they buying toxic paper? This smells like George Bush and Family are all over this. Their fingerprints are not only on this this company but also on Merrill Lynch. Lol, so this is the real reason for the bailout. It's to boost the price of these CDO's.
pongman 3 years ago
unbeliveable
gambuzo 3 years ago