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Showing posts from September, 2007

Anatomy of a 'Structured' disaster

The financial world seems to be coming a full circle. While the global markets are busy trying to adjust to the problems triggered by the sub-prime meltdown in the US, data on the economic front threatened to spoil the recovery party. Suddenly, everyone is worried about 'risks', which they thought had been effectively 'diversified' away. The very financial innovation (Structured Products) that made investors happy till recently has suddenly turned their worst enemy.
And, as usual, turmoil in the markets leads to a round of scapegoating and finger pointing. The scapegoat ranged from rating agencies to the structured products themselves. In this post, I put investor behavior under the scanner. We will see the extent to which man - greedy as he already is - can stretch himself for that extra penny. I look at the whats-n-whys of 'Structured Products', the resulting collapse, and end with a commentary on investor thinking. 

'Structured' to perfection?
Problem s…