Friday, May 15, 2009

Chapter 5 & 6, World's financial mess, as explained by Phua Chu Kang

It's just hard to be satisfied.... on from before =)

Chapter Five: Now, Everyone Can Be Rich!?

So, all the deals are now in place and the cash started to flow!

Strange thing does happen when you have such a huge system running - from the year 2001 to 2006, the real estate market in US was at a super boom!
Everyone was buying houses and make a lot of money!

So, they were right about becoming a real estate tycoon without having to come out with a single cent!

So, from house owners to banks to investment banks to hedge fund all making money!

Damn solid!

However, the investment bankers were not too happy when they see the hedge fund was making so much money from the CDO without having to do any donkey work. So, they got jealous and they themselves also invest in CDO!

It is something like Ahloong themselves go borrow from another Ah Loong!

When that happened, the hedge fund managers see that the CDO was in such hot demand, they also became greedy and they pledge the CDO to banks so they can borrow more money to invest in more CDO and everyone just become richer and richer!

Chapter Six: Let's Insured Everything!

When the Investment Bankers see that the CDOs merry-go-round becoming so big round just like the Eye On Malaysia like that, they also got panic already.

So, to play safe, they call the insurance company and tell the insurance company that they want to buy insurance for their CDOs!

Even though the insurance companies are generally greedy motherfuckers, they also not sorhai one.

They study the track record of the CDOs and they charge the Investment Banks a heavy premium for it and give this type of policy an even more power name called Credit Default Swap (CDS)!

Since the hosuing market was ok, and everyone was still enjoying huge profit, the Insurance Companies too made very good money from these CDS in the last few years because they just sit there and collect premium without paying out anything!

That's WIN WIN SITUATION - just like what your teacher taught you in school!


Owwwww...exam coming..3 days =S

But will still update the rest, don't worry be happy =D

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