Ahrenl
join:2004-10-26
North Andover, MA | reply to Ulmo
Re: Oh no, here it comes .... It's whatever debt they purchase. There's very little "undercollateralized debt", as you put it, that hasn't already been written off, as there wasn't a whole lot of it to begin with. Regardless, buying it at less than the hold-to-maturity value (especially if it is properly written off) protects the investor from this.
The biggest problem is with ALL debt regardless of it's creditworthiness. This being priced at implied default rates implying 2 of every 3 americans will file bankruptcy is what is sinking financial firms. Generally banks, insurance companies, and other related firms will hold large amounts of debt (assets is what is usually called) that is deemed very safe, and still is. But when half the buyers in that market are vaporized, and those that are left have their capital drastically haircut, there is no where for the price of these assets to go but down, as there are NO buyers. |
