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 02, 2008

BAE Systems, Lockheed Martin Team to Offer U.S. Navy 5-Inch Precision Guided Munitions

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MINNEAPOLIS, Jul 02, 2008 (BUSINESS WIRE) ----BAE Systems and Lockheed Martin are teaming to develop long-range guided munitions for the U.S. Navy. The new 5-inch, precision-guided Extended Range Munition (ERM) will address the current void in affordable and reliable long-range naval surface fire support.

The 5-inch ERM builds on BAE Systems/Lockheed Martin's success with the Navy's 155-mm Long-Range Land Attack Projectile (LRLAP) program. The LRLAP has the capability to precisely engage targets at ranges in excess of 72 nautical miles, delivering lethal force in support of military operations ashore with minimal collateral damage. Much of the proven technology used with the LRLAP program is being applied to the 5-inch ERM program.

"This is a strong team that has already demonstrated the ability to produce precision munitions capable of achieving unprecedented range and accuracy requirements enabling extended range fire support from today's surface combatant fleet," said Dennis Morris, president of BAE Systems' Armament Systems.

"Our combined experience on artillery systems and precision munitions creates the best possible team to bring the warfighters a reliable and affordable solution for long-range naval surface fire support," said Rick Edwards, vice president of Tactical Missiles/Combat Maneuver Systems for Lockheed Martin Missiles and Fire Control.

The 5-inch ERM is a further expansion of BAE Systems' growing precision guided munitions portfolio, which also includes the Mk 295 57-mm munition used with the Mk 110 Naval Gun System.

About BAE Systems

BAE Systems is the premier global defense and aerospace company delivering a full range of products and services for air, land and naval forces, as well as advanced electronics, information technology solutions and customer support services. With 97,500 employees worldwide, BAE Systems' sales exceeded GBP 15.7 billion (US $31.4 billion) in 2007.

About Lockheed Martin

Headquartered in Bethesda, Md., Lockheed Martin employs about 140,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. The Corporation reported 2007 sales of $41.9 billion.

SOURCE: BAE Systems

BAE Systems Mike Teegardin, +1 763 572 6666 Mobile: +1 612 597 0947 michael.teegardin@baesystems.com
   or BAE Systems Greg Caires, +1 703 907 8261 Mobile: +1 703 967 8630 greg.caires@baesystems.com or Lockheed Martin Heather
   Kelly, +1 407 356 5351 heather.kelly@lmco.com www.baesystems.com www.lockheedmartin.com