Beautifully explained. A very important point that Paddy made that I don't hear very often is that the AIG collateral call payouts are bound to be paid back assuming some of these bonds mature or can be renegotiated. I say Paddy for Treasury Communications Liason. Somebody needs to help Timmy G, Benny B and The Politicians understand some of these intricacies.
Now if AIG was allowed to go bankrupt, all those insurance contracts could have been eleminated and the collateral returned to AIG. This would have put all the risk back onto the purchasers of the securities as it should have always been.
The government/insurance regulators has some liability for allowing AIG to write these CDOs when it did not have the resources to back them up. Curious why AIG was not required to minimize some risk by buying secondary insurance? For most homeowners policies, insurers will buy secondary coverage in case the losses become excessive due to a major hurricane hit. Would think regulators would require the same for insuring CDOs.
Thanks for making this easy to understand Paddy. I would never be able to understand this stuff watching CNBC but you simplify the concepts for everyday guys and gals like us on the whiteboard. Thanks and keep up the great videos.
This is how the debt bubble will burst. There is currently over 1 trillion in corporate debt outstanding that is currently rated BBB that is very risky debt Corporate America is currently in the process of revisiting the 2007 and 2008 financial crisis and doing it with corporate bonds. The next crash in the market place is going to make 2007/ 2008 look like a walk in the park. the yield curve in US Treasuries is currently inverted. Historically it has alys been a very reliable indicator of a recession. the yield curve in US Treasuries is currently inverted to the point that a 6-month treasury yields 1.81% while a 10 yr treasury note yields 1.65% and a 20yr Treasury note yields 1.93% a 30 yr Treasury note yields currently only 2.11% This distorts the market. Why would anyone tie up their money for 10 or 20 years when they can get a nearly equal or better yield for 6months. The bond market is in danger of collapse and the Fed is pumping money into the system to hold it up with the danger that if you print enough money you eventually debase the currency, Zimbabwe a case in point. How long the Fed can keep the bubble inflated is the question. How you prepare for the coming crash is a question I haven't found an answer for. Everyone will feel the pain. Meanwhile, Democrats are promising more free stuff when the government can't keep up with its current obligations, thus a current government deficit of 1.07 trillion. If Democrats have their way they will bankrupt the government and those previously considered risk free US treasuries will become very risky. Many pensioners are going to find out that their pension funds have gone bust. California pension funds I suspect are the most highly leveraged.
Honestly, all of your videos are brilliant, so informative and plain speaking
Beautifully explained.
A very important point that Paddy made that I don't hear very often is that the AIG collateral call payouts are bound to be paid back assuming some of these bonds mature or can be renegotiated.
I say Paddy for Treasury Communications Liason. Somebody needs to help Timmy G, Benny B and The Politicians understand some of these intricacies.
The value of the $5M GM bonds can always increase, but the insurance fee has got to be less than $500K/year too in order to make any money.
Now if AIG was allowed to go bankrupt, all those insurance contracts could have been eleminated and the collateral returned to AIG. This would have put all the risk back onto the purchasers of the securities as it should have always been.
The government/insurance regulators has some liability for allowing AIG to write these CDOs when it did not have the resources to back them up. Curious why AIG was not required to minimize some risk by buying secondary insurance?
For most homeowners policies, insurers will buy secondary coverage in case the losses become excessive due to a major hurricane hit. Would think regulators would require the same for insuring CDOs.
Thanks for making this easy to understand Paddy. I would never be able to understand this stuff watching CNBC but you simplify the concepts for everyday guys and gals like us on the whiteboard. Thanks and keep up the great videos.
Nice explanation.. an 8 year old could understand that.. good job.
Explanation is easily understandable as it is made in simple terms with a good and relevant example
very good explanation
It's easy to understand even for a Chinese listener as me.👏
excellent
I'M SORRY, i CAN'T HELP IT, BUT YOUR UNCLE SAM LOOKS LIKE DR TEETH FROM ELECTRIC MAYHEM!!! OTHERWISE WONDERFUL VIDEO.
This is how the debt bubble will burst. There is currently over 1 trillion in corporate debt outstanding that is currently rated BBB that is very risky debt Corporate America is currently in the process of revisiting the 2007 and 2008 financial crisis and doing it with corporate bonds. The next crash in the market place is going to make 2007/ 2008 look like a walk in the park. the yield curve in US Treasuries is currently inverted. Historically it has alys been a very reliable indicator of a recession. the yield curve in US Treasuries is currently inverted to the point that a 6-month treasury yields 1.81% while a 10 yr treasury note yields 1.65% and a 20yr Treasury note yields 1.93% a 30 yr Treasury note yields currently only 2.11% This distorts the market. Why would anyone tie up their money for 10 or 20 years when they can get a nearly equal or better yield for 6months. The bond market is in danger of collapse and the Fed is pumping money into the system to hold it up with the danger that if you print enough money you eventually debase the currency, Zimbabwe a case in point. How long the Fed can keep the bubble inflated is the question. How you prepare for the coming crash is a question I haven't found an answer for. Everyone will feel the pain. Meanwhile, Democrats are promising more free stuff when the government can't keep up with its current obligations, thus a current government deficit of 1.07 trillion. If Democrats have their way
they will bankrupt the government and those previously considered risk free US treasuries will become very risky. Many pensioners are going to find out that their pension funds have gone bust. California pension funds I suspect are the most highly leveraged.
You’r comment is very relevant to this day, as i try to seek ways of haven to make and save money
if you're watching this and you're a NP student revising for SOP exam, like this. (: