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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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Friday, July 11, 2008
Activists Converge on McCain HQ to Protest Campaign's Ties to Buyout Industry
Comtex
ARLINGTON, Va., July 11, 2008 /PRNewswire-USNewswire via COMTEX/ ----Protest Part of Global Day of Action to Take Back the Economy
Activists concerned about the ties between Sen. John McCain and the private equity buyout industry will converge on his northern Virginia headquarters Thursday, July 17, at 11 a.m.
Protestors, noting that Sen. McCain's self-proclaimed favorite band is Abba, plan on serenading the campaign staff with the Loophole King, a parody of Abba's classic hit the Dancing Queen. An SEIU online video promoting the day of action and featuring Godzilla taking on McCain for his links to the industry can be viewed at www.July17action.org.
WHO: The "Behind the Buyouts" Singers
WHEN: Thursday, July 17, 11:15 a.m. EDT
WHERE: John McCain for President Headquarters
1235 S. Clark St.
Arlington, Va.
Sen. John McCain's ties to the buyout industry run deep. KKR (Kohlberg Kravis Roberts & Co.) CEO Henry Kravis, one of the wealthiest men in America, and his wife have given more than $71,000 to McCain's campaign and to McCain-aligned PACs. Kravis is the founding father of the buyout industry, and one of the campaign's major fund-raising bundlers. The campaign has several other private equity lobbyists serving in strategic campaign positions, including Ken Mehlman who lobbied against closing the carried interest tax loophole, Brian Ballard who advocated for troubled KKR Financial, and John Green who represented both private equity and big mortgage lenders.
The action is one of hundreds that will be taking place in cities around the globe, including Tokyo, Paris, Hong Kong, New York City, Chicago, and Menlo Park, Calif., the location of KKR's West Coast headquarters. The events are organized by leading progressive groups such as SEIU, MoveOn, Avazz, and activists from 25 countries taking aim at the special perks and tax loopholes on which buyout firms depend to make billions of dollars.
For a complete list of actions or more information about the campaign, go to www.july17action.org.
With 2 million members, SEIU is the fastest-growing union in North America. Focused on uniting workers in three sectors to improve their lives and the services they provide, SEIU is the largest healthcare union, including hospitals, nursing homes, and home care; the largest property services union, including building cleaning and security; and the second-largest public employee union.
Paid for by SEIU COPE. SEIUCOPE.ORG.
Not authorized by any candidate or candidate's committee.
SOURCE Service Employees International Union
http://www.july17action.org/
Copyright (C) 2008 PR Newswire. All rights reserved
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