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Bond Fund Investors May Be in for Shock
"The rating agencies just completely missed the boat in their methodology for rating these things," said Janet Tavakoli, president of Tavakoli Structured Finance, a Chicago consulting firm.
Are you saying that I put an abnormal brain into a seven and a half foot long, fifty-four inch wide gorilla? - Dr. Frederick Frankenstein, Young Frankenstein, 1974
About 80 percent of debt in bonds backed by subprime loans is rated triple-A, the same rating on virtually risk-free U.S. Treasury bonds, experts say.
For what we are about to see next, we must enter quietly into the realm of genius. - Dr. Frederick Frankenstein, Young Frankenstein, 1974
If that seems shocking, there are bonds backed by delinquent credit card accounts -- one of the riskiest forms of debt -- in which up to 40 percent of the accounts in the security are rated triple-A, says Drexel University finance professor Joseph Mason.
Yes! It's all written down in the notes! Now tie off the kites and hurry down as fast as you can! - Dr. Frederick Frankenstein, Young Frankenstein, 1974
Huge losses "won't be the norm" for most mutual funds, predicts Paul Herbert, a senior mutual fund analyst with research firm Morningstar Inc. However, he does expect losses in investment-grade rated bonds backed by the worst-performing mortgages.
Abby Normal? - Dr. Frederick Frankenstein, Young Frankenstein, 1974
"Nobody was looking at the fundamentals," says Christopher Thornberg, a principal with Beacon Economics in Los Angeles and an adviser to Lahde's fund. "This was a brave new world," Thornberg says.
For as long as I can remember people have hated me. They looked at my face and my body and they ran away in horror. In my loneliness I decided that if I could not inspire love, which is my deepest hope, I would instead cause fear. - The Monster, Young Frankenstein, 1974
"The rating agencies just completely missed the boat in their methodology for rating these things," said Janet Tavakoli, president of Tavakoli Structured Finance, a Chicago consulting firm.
Are you saying that I put an abnormal brain into a seven and a half foot long, fifty-four inch wide gorilla? - Dr. Frederick Frankenstein, Young Frankenstein, 1974
About 80 percent of debt in bonds backed by subprime loans is rated triple-A, the same rating on virtually risk-free U.S. Treasury bonds, experts say.
For what we are about to see next, we must enter quietly into the realm of genius. - Dr. Frederick Frankenstein, Young Frankenstein, 1974
If that seems shocking, there are bonds backed by delinquent credit card accounts -- one of the riskiest forms of debt -- in which up to 40 percent of the accounts in the security are rated triple-A, says Drexel University finance professor Joseph Mason.
Yes! It's all written down in the notes! Now tie off the kites and hurry down as fast as you can! - Dr. Frederick Frankenstein, Young Frankenstein, 1974
Huge losses "won't be the norm" for most mutual funds, predicts Paul Herbert, a senior mutual fund analyst with research firm Morningstar Inc. However, he does expect losses in investment-grade rated bonds backed by the worst-performing mortgages.
Abby Normal? - Dr. Frederick Frankenstein, Young Frankenstein, 1974
"Nobody was looking at the fundamentals," says Christopher Thornberg, a principal with Beacon Economics in Los Angeles and an adviser to Lahde's fund. "This was a brave new world," Thornberg says.
For as long as I can remember people have hated me. They looked at my face and my body and they ran away in horror. In my loneliness I decided that if I could not inspire love, which is my deepest hope, I would instead cause fear. - The Monster, Young Frankenstein, 1974
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