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ELI5 would be appreciated here for those of us who aren’t stock investors to understand this.
by aetherspawn 8y ago
ELI5 would be appreciated here for those of us who aren’t stock investors to understand this.
- kgwgk 8y agohttps://www.zerohedge.com/s3/files/inline-images/CLO%20for%20dummies.jpg https://www.zerohedge.com/s3/files/inline-images/CLO%20for%2... Debt from multiple issuers is pooled and sold by pieces to investors with different risk profiles. The more risky layers will be the first touched if there are problems, but pay better in the best case. High risk (variation in expected returns), high (expected) return. The idea is the "good" part of product (the AAA layer) is very safe... according to the model. But it may not be so safe after all if things don't go as expected.
- grey-area 8y agoThe 2018 crisis was caused by CDOs - packaged mortgage debt which is going to default, mixed and dressed up as very safe debt, then sold on to some poor sucker (including you in your pension). https://www.youtube.com/watch?v=xbiDrzTd8fE https://www.youtube.com/watch?v=xbiDrzTd8fE The article is saying that people are buying CLOs - packaged corporate debt which is going to default, mixed and dressed up as very safe debt, then sold on to some poor sucker (including you in your pension). TLDR: History repeats itself, first as tragedy, then as farce.