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Welcome to the major leagues of debt. Collateralized debt obligations, almost always referred to as a CDOs, are horrendously
complicated deals that often leave anyone without a MBA wondering what was put into these CDOs.
The first thing to
understand about bonds, (aka debt) is that bonds are often backed by something else. Think about your home mortgage. If you
don't pay your mortgage, the bank can take the house. You end up homeless, and the bank sells the house to pay off the rest
of that mortgage. There is something "backing" that mortgage; something lender can fall back on, if you don't pay your bills
like a good human being. That's called collateral.
CDOs are one flavor of an entire sector of investing called structured
finance, and they are also backed. CDOs, in the simplest concept, are just bonds backed by something else. In most cases,
a CDO is backed by a collection of various types of debt. CDOs can be home mortgages, or other types of debt like credit cards,
auto loans, and personal loans. Most of these types of debt are usually considered a bit more risky and they don't have the
backing that a home loan does. So, if you think it through, you can imagine that CDOs are usually considered a risky investment.
To take a step further, understand that CDOs have multiple flavors within each CDO. These flavors are called tranches. If you've taken French, you might recognize the word, it means "slice" or "portion." Each slice of that CDO you invest in is a little different and carries different amounts of risk.
You could invest in the lowest risk tranche of the CDO, which would
provide you lower risk. But, you don't get a good return on that investment. Or, you can be the heroic adventurer of bonds
and invest in the lowest-grade tranche of the CDO. You'll make an amazing return, but if the economy even looks at you wrong,
you might lose the entire investment.
CDOs aren¿t easy, and are almost always invested in by mutual funds, insurance
companies and hedge funds. As an individual investor, you will probably not come across a CDO you can participate in.
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Wednesday, July 09, 2008
AARP: Senate Does the Right Thing on Medicare Bill Second Time Around
Comtex
WASHINGTON, July 9, 2008 /PRNewswire via COMTEX/ ----WASHINGTON, July 9 /PRNewswire-USNewswire/ -- Bill Novelli, AARP's Chief Executive Officer, issued the following statement on today's vote by the Senate to pass the Medicare Improvements for Patients and Providers Act of 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20070209/NYF043LOGO )
"They say that life doesn't give you second chances. The Senate got a big one this week, and AARP applauds the bipartisan majority of Senators who voted to pass a bill that would protect and improve Medicare for the 44 million Americans who depend on it. This bill would allow people in Medicare to maintain access to their doctors, improve benefits for low-income, prevention, and mental health programs, and boost quality through national e-prescribing.
"Today's vote -- which came less than two weeks after a similar effort fell one vote short -- mirrored the broad support with which the House of Representatives earlier passed this bill. This shows what can happen when leaders in Washington break through partisan gridlock.
"We hope the President recognizes the overwhelming bipartisan support that passed this bill in both chambers of Congress and signs it into law."
AARP is a nonprofit, nonpartisan membership organization that helps people 50+ have independence, choice and control in ways that are beneficial and affordable to them and society as a whole. AARP does not endorse candidates for public office or make contributions to either political campaigns or candidates. We produce AARP The Magazine, the definitive voice for 50+ Americans and the world's largest-circulation magazine with over 34 million readers; AARP Bulletin, the go-to daily news source for AARP's 39 million members and Americans 50+; AARP Segunda Juventud, the only bilingual U.S. publication dedicated exclusively to the 50+ Hispanic community; and our website, AARP.org. AARP Foundation is an affiliated charity that provides security, protection, and empowerment to older persons in need with support from thousands of volunteers, donors, and sponsors. We have staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.
SOURCE AARP
http://www.aarp.org
Copyright (C) 2008 PR Newswire. All rights reserved
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