by Bill McBride on 3/12/2010 11:30:00 AM
Friday, March 12, 2010
Finally, we find a beautiful, totally toxic asset at what [Wit Solberg, a former Wall Street trader] thinks is a good price: $36,000. Back in the bubble, somebody paid $2.7 million for this thing. We buy a piece from Solberg for $1,000. It's going to be our encyclopedia of the financial crisis.Listen to the podcast - it is pretty funny!
What Our Toxic Asset Looks Like
Our toxic asset has 2,000 mortgages, many of them in hard-hit states like California, Arizona and Florida. A lot of the people in our bond are really struggling. Almost half are behind on their mortgage payments, and 15 percent of the homes are already in foreclosure.
At some point those homes will be taken over and sold for a loss. Every time that happens, the bond shrinks. Eventually, our part of the bond will disappear entirely.
Until then, we get a little money every month from people paying off their mortgages. We just got a check for $141. If it goes to Thanksgiving, we could double our money.
By the way, we bought the asset with our own money. Any proceeds will go to charity. If we lose money, we take the loss.
Posted by Bill McBride on 3/12/2010 11:30:00 AM