On Tue, 10 Feb 2009 23:18:15 GMT, Zombie of Woodstock
wrote:

Did I ever tell you about my broker who wanted me to join a CDO hedge
fund in 2004?

So I looked through the prospectus, lot of legal mumbo jumbo and then
the numbers - I'm pretty good with numbers - they were talking 20 to 1
leverage factors with returns in the 15/20% range per annum.

37 pages of agreements on packaging the security, monies obtained,
leverages/averages and every other type of X-ages you can name.

Something didn't look right, so I got out the old scientific
calculator and made my own calculations based on their assumptions
over time.

It never came out the same twice. In theory, one parameter change
shouldn't affect all other parameters to the extend I was finding to
be true.

The upshot was while they were claiming 20 to 1, it was closer to 30
to 1 - it was the only way the math would work they way they claimed.

No freakin' wonder we got into that mortgage mess.


One of Warren Buffet's favorite sayings is to never invest in anything
that can not be easily understood.