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1,125,000,300 = The Number Of Pages Needed To Be Read For Every CDO Squared Purchase

Tyler Durden's picture




 

One of Zero Hedge's all time favorite charts is the following, which demonstrates the full breadth of Wall Street "complexity" ingenuity, and highlights the incremental layering upon layering of hollow synthetic securities in the form of "leverage" that allowed the housing boom to explode to unprecedented levels, and to create artificial money flooding the shadow banking system which among other things was used to pad ridiculous banker bonuses over the past decade.

Today, Citi's Matt King has taken a humorous approach on this topic, and has concluded that in order for investors in a CDO2 to have a complete understanding of all the nuances in their investment (based on filed information), they would need to read precisely 1,125,000,300 pages worth of information for every CDO2 purchased to be aware of everything that was being acquired. And this even ignores the fact that recent robosigning revelations may have rendered the entire reading process moot as the entire RMBS foundation may have been built upon a complete sham.

Has anyone ever done this? Of course not. In fact, buysiders would be lucky if anyone even read 1 page when they bought something. This is precisely the reason why Goldman et al relied on the "sophisticated investor" myth to peddle toxic products which eventually imploded and nearly took down the financial system with them. It also explains why everyone relied in the rating agencies which were nothing more than an aggregator of group think, allowing this 1 billion plus pages to be trickled down into a simple phrase, most usually AAA.

We now know how Wall Street's laziness ended up impacting the entire world, and with tens of trillions of dollars pledged by global central bankers to prop up the collapse of the shadow system, and effectively being the sole and only reason for the existence of QE1, 2, etc, the most simple explanation of what quantitative easing is simply Ben Bernanke's way to atone, using taxpayer money, for the laziness of aan entire generation, which confused staring at a Bloomberg screen with work, and assumed that gargantuan pay offs are an equitable trade off for making the worst and most uninformed bet in history.

Instead of hiring an army of RoboSigners, BofA et al should have instead hired millions of RoboReaders. Perhaps then, and only then, would someone know just how far up the creek we are currently, with absolutely no paddles.

 

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Thu, 11/11/2010 - 16:34 | 720250 Turd Ferguson
Turd Ferguson's picture


Sorry to be Mr Spam junkboy but, for all interested, here's the URL of the official Turd Ferguson Metals Report. I promise to only do this once (as opposed to GrandSuperCycle).

http://tfmetalsreport.blogspot.com/

Thu, 11/11/2010 - 16:41 | 720262 DocLogo
DocLogo's picture

always appreciate your commentary, Turd. Will check it out.

Thu, 11/11/2010 - 18:24 | 720494 Fish Gone Bad
Fish Gone Bad's picture

Those pages are for trading, not for reading.

Thu, 11/11/2010 - 17:00 | 720326 Questionmark
Questionmark's picture

I'll be checking it daily.

Thu, 11/11/2010 - 17:27 | 720390 CheapKUNGFU
CheapKUNGFU's picture

Ah, Turd, you just dont like Grand Puper Pop-sicle cause he is wrong mostly...

I traded dead against his FX calls for months (mostly by accident) and I think my tools are better than his...

No E-WAVES, just a 12 year (tested) hands on scalping method in FX, I dont care what the larger trend is... in and out quick like my last booty call...

 

CKF

 

EDIT:

PS I think you are a pretty smart turd!

Thu, 11/11/2010 - 17:41 | 720411 Spalding_Smailes
Spalding_Smailes's picture

GrandSuperCycle

 

Has made me ten grand ... ?1?@?# ????

Thu, 11/11/2010 - 17:58 | 720439 LongSoupLine
LongSoupLine's picture

Thanks Turd.  Check out GBG..I started accumulating in April.

Thu, 11/11/2010 - 18:00 | 720442 Jendrzejczyk
Jendrzejczyk's picture

Already bookmarked it Spammy. (thanks for your views)

Thu, 11/11/2010 - 18:06 | 720453 Gold Man Sucks
Gold Man Sucks's picture

You are very welcome Turd.

Thu, 11/11/2010 - 18:13 | 720476 fuu
fuu's picture

Awesome!

Fri, 11/12/2010 - 10:07 | 721723 AGoldhamster
AGoldhamster's picture

is there a way to get comment privilges at turds blog - without providing my telefon number for google friend connect or ordering a blog I don't need. To be just a wordpress user obviously is not enough.

For google: these "censored" will never get my tel#

Thu, 11/11/2010 - 16:35 | 720252 SheepDog-One
SheepDog-One's picture

Can't the HTF bots just be assigned to read the 1,125,000,300 pages on weekends? Or would that anger them?

Thu, 11/11/2010 - 16:41 | 720263 Astute Investor
Thu, 11/11/2010 - 16:43 | 720271 Milton Waddams
Milton Waddams's picture

tl;dr

Thu, 11/11/2010 - 17:15 | 720358 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Oh, stop being so pessimistic. For every problem, there's a solution.

Bring on the Robo-Readers.

http://en.wikipedia.org/wiki/Speed_reading

http://www.youtube.com/watch?v=1nMP4U8JQDo

If someone can find the SNL skit on Evelyn Woodski Slow Reading ...

 

Thu, 11/11/2010 - 17:16 | 720363 DonutBoy
DonutBoy's picture

Yeah - cute.  It would have taken some balls to publish this when Citi was creating this shit.  Kind of trivial pursuit now.

 

Thu, 11/11/2010 - 17:21 | 720374 Kangaroo
Kangaroo's picture

 rating agencies which were nothing more than an aggregator of group think

 

That is just brilliant, captures all that is wrong with the banking system.

 

Well maybe not all, but the crux. 

Thu, 11/11/2010 - 17:24 | 720384 LaoTzu
LaoTzu's picture

Does this math add up?

Wouldn't the correct equation be [1] + [4] * ( [2] +( [3] * [5] ) )

Giving the slightly less daunting figure of 3,787,800 pages ....

Let's say an analyst can read 60 pgs/hr and a structured products team has 10 members working 100 hour weeks. Or 60,000 pages a week.

Could be done in slightly over a year?

 

 

 

Thu, 11/11/2010 - 17:53 | 720433 RECISION
RECISION's picture

hahaha   :-)

Aren't numbers fun...

Thu, 11/11/2010 - 18:25 | 720435 RECISION
RECISION's picture

<delete>

Thu, 11/11/2010 - 17:26 | 720388 cdskiller
cdskiller's picture

Wait a second. Wall Street wasn't lazy. They were driving 150 miles an hour down the Pacific Coast Highway without brakes. All they did was take out massive amounts of insurance in the form of CDS contracts and the rights to politician's rectums. And Helicopter Ben's move won't prop up the bad bets of investors in CDO2's any more than an insert will prop up a guy whose prostate surgery went horribly, horribly wrong. That is to say, at some point, the poor schmuck will want to take a pee without hitting himself in the face.

Having said that, I would like to apologize for the above analogies, which have caused a bit of vomit to come up in the back of my throat...

The ability to speed read is not the only thing that would have been required. Comprehension of existing law would also have helped.

Thu, 11/11/2010 - 17:28 | 720393 Misean
Misean's picture

"This is precisely the reason why Goldman et al relied on the "sophisticated investor" myth to peddle toxic products..."

Akin to arguing that you need to understand the assembly of every screw and component that goes into a car...

Thu, 11/11/2010 - 17:51 | 720427 Tyler Durden
Tyler Durden's picture

If the car came with the disclosure on page 1,149,000,000 of the operating manual that the brake did not operate, would it be bought?

Thu, 11/11/2010 - 18:04 | 720449 LongSoupLine
LongSoupLine's picture

nice analogy.

Thu, 11/11/2010 - 18:46 | 720539 TheMonetaryRed
TheMonetaryRed's picture

+AAA

BTW, it seems the first mention of this estimate comes from Andrew Haldane of the BofE

www.bankofengland.co.uk/publications/speeches/2009/speech386.pdf

Thu, 11/11/2010 - 19:14 | 720605 the rookie cynic
the rookie cynic's picture

Not to mention the footnotes.

Thu, 11/11/2010 - 17:29 | 720397 LaoTzu
LaoTzu's picture

I'm pretty certain the author made a mathematical error.  Why would you multiply pages by pages? ( [2] and [3]) .  Then the units would be pages^2.

Thu, 11/11/2010 - 17:31 | 720399 Fraud-Esq
Fraud-Esq's picture

Bonds, baby, bonds...

Masters of the Universe, big margins, control fraud, bullshit wins. 

Thu, 11/11/2010 - 18:37 | 720519 TheMonetaryRed
TheMonetaryRed's picture

+1,125,000,300

Thu, 11/11/2010 - 18:06 | 720454 Fix It Again Timmy
Fix It Again Timmy's picture

Bonds have more fun...

Thu, 11/11/2010 - 18:15 | 720482 mr_fro2000
mr_fro2000's picture

The page number total is actually UNDERSTATED given that it doesn't include the ridiculously thick Indentures, which  MUST be read if you really want to understand the CDOs...

Thu, 11/11/2010 - 18:18 | 720486 Joe44oz
Joe44oz's picture

"Do we admit that control over the economy in the past decade was ceded to a small
group of rapacious criminals who to this day are engaged in a mind-numbing campaign of theft on a global scale? Or do we pretend that, minus a few bumps in the road that have mostly been smoothed out, the clean-hands capitalism of Adam Smith still rules the day in America? In other words, do people need to know the real version, in all its majestic whorebotchery, or can we get away with some bullshit cover story? " -- Matt Taibbi

Thu, 11/11/2010 - 18:36 | 720518 TheMonetaryRed
TheMonetaryRed's picture

Or, do we maybe admit that maybe the "clean-hands capitalism of Adam Smith" wasn't so clean, either?

 

 

Nah. Gold to $1700.

Thu, 11/11/2010 - 18:39 | 720526 Joe44oz
Joe44oz's picture

Who is Adam Smith?

I just wanted to see the word "whorebotchery" posted here :-)

Thu, 11/11/2010 - 18:49 | 720545 TheMonetaryRed
TheMonetaryRed's picture

I agree wholeheartedly.

Whorebotchery

Nice.

 

Thu, 11/11/2010 - 18:33 | 720514 trav7777
trav7777's picture

How many angels can dance on a pinhead?

When I was describing CDO^2 to the TF morons, nobody seemed amazed that you could take equity tranches, which I related to my kids as "Tiny Tim's" share of the poor family's food, and pile up a BUNCH of Tiny Tim shares all over town and then somehow turn that into a AAA rated product (the superseniors of this CDO2).  My kids on the other hand were quite puzzled because anything that takes that long to explain has to be complete bullshit.

Fri, 11/12/2010 - 09:33 | 721665 gillimus
gillimus's picture

anything that takes that long to explain has to be complete bullshit.

 

I want a t-shirt with this printed on it in all caps.

Thu, 11/11/2010 - 18:33 | 720515 TheMonetaryRed
TheMonetaryRed's picture

Wait, but I thought the private sector was supposed to reduce bureaucracy!

It doesn't really work that way?

LOL

Gold to $1700.....maybe.

Thu, 11/11/2010 - 19:39 | 720659 M.B. Drapier
M.B. Drapier's picture

Remember the Vanity Fair profile of Michael Burry, which suggested that one of his most important advantages as an investor was his Asbergers-powered ability to actually sit down and read through 130-page prospectuses?

Sat, 11/13/2010 - 10:04 | 724617 Dismal Scientist
Dismal Scientist's picture

Indeed, he was early onto the issue, when prospectuses were still only 130 pages. It would have taken Rainman like qualities to keep up with the CDO^2

Fri, 11/12/2010 - 04:24 | 721487 ThreeTrees
ThreeTrees's picture

"Leverage," Bitchez.

Fri, 11/12/2010 - 12:36 | 722246 barthezz
barthezz's picture

here is the link to the original article by Haldane... see page 17 and 37 for the table.

 

http://www.bankofengland.co.uk/publications/speeches/2009/speech386.pdf

Sat, 11/13/2010 - 05:38 | 724403 sub Z
sub Z's picture

Wall Street knew and insiders flew - Tyler 182

http://www.youtube.com/watch?v=1_t44siFyb4

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