Beware the Return of Synthetic CDOs

You have to be kidding me. That was my reaction today to the story headed "One of Wall Street's Riskiest Bets Returns," about the return of synthetic collateralized debt obligations.

You may not know what these pieces of paper are, but these abstruse financially engineered bonds are created to meet the demand from fund managers who want to reach for yield to get a better return for their investors. In the peak year of 2007, right when housing was about to plummet in value, The Wall Street Journal reminds us that $634 billion in synthetic mortgage CDOs were created, and they were at the heart of the entire financial fallout of the Great Recession....565 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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