Saturday, April 24, 2010

Owning A Toxic Asset

NPR Money bought a toxic asset, just to see what it was like. They named it, and are following it through its, probably short, life.
Really fun site to play around on. Check it out: http://www.npr.org/templates/story/story.php?storyId=124587240
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6 comments:

  1. Noah OesterleApril 24, 2010 at 3:47 PM

    I am astonished that people are still investing in mortgage backed securities. I listened to the NPR story about the New Jersey Carpenter's Union attempting a lawsuit against RBS. This seems silly to me, as the story points out, it is more of a lawsuit against the British government (84% stakeholder). Investors should be aware of the risks they are taking and understand the vehicle they are investing in. When it fails, suing should not work. If it did, risk would not exist. Warren Buffett never invests in anything he doesn't understand, and neither should we.

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  2. k06rl01April 25, 2010 at 3:13 PM

    This is a pretty cool experiment. It is crazy that their toxic asset has 2,000 mortages packaged into one investment vehicle. That is a large number of homeowners to trust making their payments, it is interesting to see how they are actually affected by the foreclosing of houses in the investment and how the value decreases when the foreclosed houses are sold at a loss. It is pretty easy to see how these investments could take a significant hit when a large portion of the investment is made up of risky sub-prime mortgages.

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  3. Ben MinkoffApril 25, 2010 at 3:15 PM

    It is quite shocking to see people are still investing in mortgage back securities. It looks like people still haven't learned any lessons. It definitely shows that people don't fully know what they are investing in and that trend needs to stop.

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  4. KelseyApril 25, 2010 at 8:27 PM

    I agree w/ Ben on some level. I feel like the mortgage backed securities are different now because of how hard it is to get a mortgage so they aren't quite as risky as when it was there were mortgages given off stated income.

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  5. Jared AndrzejewskiApril 27, 2010 at 10:02 AM

    It is very interesting to see this on a small level just to gauge what happened when everything went south. It was like everyone was paying in just to lose money and this shows how unreliable they were. It looks like they will lose about half of their money.

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  6. BryanApril 27, 2010 at 7:19 PM

    I agree with Kelsey and although it is surprising to see continued investment in mortgage-backed securities it is not as risky seeing as these are no longer being pooled on such a large scale. Considering this particular site and the video I think its cool that they are following the toxic asset and I think they should do more simulations of other transparent securities to see what happens. Maybe strong data on these securities can give us better knowledge of how to use them or not use them at all....

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