CDO: Wicked Invention That Got Bankers in Trouble

The Subprime Financial Crisis Explained Simply Part 1 @ Yahoo! Video

Have you heard of CDO? Hardly anybody knows CDO unless a seasoned investor.
But if you read articles on business lately, you may stumble upon this word. CDO stands for collateralized debt obligation. It's a very tricky invention that allows bankers to make money off of bad loans. A CDO package is created by packaging high risk loans — mortgages given to people with low income and bad credit — and good loans together into a high interest investment package so that banks can sell the CDO package to gullible investors or another bank. This way, banks can get rid of risky baggage off their books and make money at the same time.

CDO's are supposed to guarantee earnings even if some of the loans go bad. But in the past year, most of the mortgages that make up CDO's went default. Malfunctioning CDO's are the main reason why many big banks have crumbled.

Here's a nice presentation of CDO by portfolio.com.

What's a C.D.O.? Business Interactive Features - Diagrams - Illustrations

My Take on the Financial Bubble: Energy Cold War

I've been hearing news about subprime mortgage crisis and skyrocketing gas price. I knew critical events were happening when I heard Aloha airline going broke and people losing their jobs and homes. But honestly, it wasn't until a few weeks ago that I realized how serious the situation was. In the last few days, major financial institutions like Lehman Bros, Merrill Lynch, Washington Mutual and AIG have hopelessly failed. Now, the government is rolling out a whopping $700 billion bailout plan to save the financial market.

Being a regular joe, it's not like I can fly to Washington and have a say about the $700B bailout plan. Maybe the bailout will save us from going further into economic crisis.

What's the cause of this financial bubble? Some say it's the subprime lending. Frankly, I don't see a problem with lending money to low-income people with credit problems. People should all get equal opportunities in buying new homes whether they have good credit or not.

I think the housing bubble began to surface when crude oil price started to rise. Rising gas price resulted in rise in food prices, too. Climbing costs of living was too much for people to handle, so they couldn't pay their mortgages any more. That's how this housing bubble started.

Who's to blame for price of oil? @ Yahoo! Video

The more I think about it, the clearer things become. It was all about the oil, or more generally, the energy resources.

As the world population increases, the natural resources become more and more scarce. Among the most precious natural resources is the fossil fuel such as oil and natural gas. In fact, the world events are moving around the context of energy resources. The recent Russian-Georgian conflict, Iran standoff, Iraq war and Afghanistan war were all motivated by the need for control of energy resources.

Now, nations are beginning to weaponize their natural resources. Russia has long since seized oil and natural gas companies under government control. And the recent Russian conflict with Georgia was believed to be motivated by Russian interests in the underground natural gas pipeline through the conflict territory.

The soaring gas price across the globe may be the work of natural resource weaponization. OPEC kept tight control of oil supply and drove up the price of crude oil across the globe to the United States. The majority of OPEC members are Arab nations. Maybe the Arabs were so threatened by the establishment of Americanized liberal democratic nation in their midst that they covertly designed a counter attack of soaring oil price and delivered it to the US, thus dealing a fatal blow to the US economy.

The world is now entering a new era of cold war, and this war revolves around one goal. That goal is to capture the most of ever so scarce sources of energy.

Who's to Blame for Economic Downfall?

When a natural disaster strikes, we have no one to blame but God or Mother Nature. Yet, when the economy goes bad, there surely is someone to blame because economy is totally a human affair. Now that the US economy is freefalling and possibly heading for the second Great Depression, many bright minds are asking themselves: How did the economy arrive at this mess? Who's responsible for this economic downfall?

Who Killed the Economy? @ Yahoo! Video

An ongoing poll by Portpolio.com allows people to play a blame game in which they pick the culprit "who's most responsible for the current economic crisis." More than 20,000 people have participated in this poll. Some of the candidates are as follows:

Alan Greenspan

Former Chairman of Federal Reserve, Alan Greenspan was once revered by everyone in Academia as economic genius, but now no one seems to hesitate pointing finger at him as the chief culprit of US economic doom. Overly supportive of easing lending standards and keeping low-interest rates too long, he's in part responsible for the current subprime debacle.

All the time, his low-rate, cheap-money mantra fooled low-income people with second-rate credit into believing that he was looking out for them, but all along, he was kissing up to greedy mortgage lenders, creating financial monsters doomed to self-destruction.

Now, we've seen continous collapses of financial institutions: American Home Mortgage, Countrywide Financial, Bear Stearns, IndyMac, Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch, AIG and Washington Mutual. It all started with overly deregulated policies of Alan Greenspan. Talk about free market. It led to market failure.

President Bush

Mr. President must have got bad grades in Economics in college. Or, is it simply that he was ill-advised by his advisors? Obviously, his priorities were not on U.S. Economy, but rather on War against Terrorism. His mind was so occupied with wars in Iraq and Afghanistan and with threats from the so-called axis of evil — Iran and North Korea — that he failed to notice the early signs of failing domestic economy. He kept using the same stimulus gimmicks and rate cuts to keep the economy alive and the Republicans in power. Now that the economy is crashing, his 700 billion dollar rescue plan may be too late, too costly for already suffering people.

Moody's and S&P

These ratings agencies gave too rosy credit ratings for shaky financial companies. Their misleading ratings for failing investment bankers have left the market unprepared for the coming turmoil. When it all came, it was too late for many investors and bankers. People put too much faith in these ratings agencies. And now we suffer.

Hedge Funds

Those who invest in hedge funds are a select group of greedy wealthy investors who engage in short selling of risky investments for quick and big money. Their short selling activities have resulted in roller coaster ride of the stock market. Those reckless hedge fund managers wanted quick profits and made all the odd, risky investments that, when the market began to crumble, had dire effects on the financial market. The recent crackdown on short selling in Wall Street should give a good lesson to those greedy risk-takers.

Angelo Mozilo

Cofounder of Countrywide Financial and IndyMac, he let Countrywide hand out mortgages like play money. Countrywide, like many other mortgage lenders, doled out easy money to subprime home buyers without income or job verification. But by 2007 Countrywide was struggling with rising rates. Countrywide's collapse and subsequent bailout by Bank of America was a prelude to the current financial market meltdown.

OPEC

Some don't seem able to make connection between soaring oil price and the current financial crisis. My understanding is that high oil price has caused several airline bankruptcies, inflation and rising costs of living. The soaring gas price and inflation have put so much burden on people that they couldn't pay their mortgages any more. That's how the housing bubble started. People blame OPEC for keeping oil supply tight and driving oil price high. But I disagree. I believe the high gas price is the result of speculatory investing. Who are the real conspirators, Arab nations plotting against infidels or greedy Wall Street speculators? Anyway, it's time to invest in the development of alternative energy resources.

Fannie and Freddie

These government-subsidized, publically traded mortgage companies made too many bad loans on home mortgages with taxpayer's money. When the real estate values slid, their poor management has caused loss of consumer confidence in the housing market and caused their stock prices to hit the bottom. Government bailout of these companies would only cost taxpayers plenty money.

National Association of Realtors

This group of crooks ripped millions of home buyers with fraudulent real estate appraisals and relentlessly put out misleading positive outlooks on the real estate market even as it began to plummet. If they had been honest with home buyers, people wouldn't have bought those townhouses in Naples, Florida or Phoenix and later go default on bad loans.

China

When we get trouble, we blame it on our trade partner. But if you think about it, which country in the world has the greatest demand for the globe's natural resources and caused oil price to skyrocket? Not only that, China continues to give US trade deficit and keeps piling in our dollars. All this weakened our economy and contributed to the current crisis. China must stop exporting poisoned food. It's time we find a new trade partner who knows what moral and ethics truly mean. How about India, Mexico or Brazil?

After all, I believe everyone is both a participant and a victim of this economic debacle that stemmed from greed. And we all have to share the pain for a long time.

Forbes: How To Build A Killer Small Business Web Site

Forbes published an introductory article on building a small business web site. It gives some good tips such as:

• Provide detailed information on your products and service. Create a good catalog with an easy-to-use search function. Let people know what you are specialized in.
  
• When choosing a domain name for your site, go with direct names that are easy to remember.
• Design your site with easy navigation in mind.
• Establish credibility with your business personnel's background, accomplishments and head shots.
• Respectable client list and glowing testimonials can be smart marketing tools.
• Use graphics and Flash sparingly and only go for the highest quality.
  

That's not so hard to figure out on our own. But this article also gives insight on Search Engine Optimization. As you know, people use Google or Yahoo! Search to find what they want everyday. So making your site show up at the top of the search results can be critical of your business success. Search Engine Optimization techniques given by this article include:

• Select 50 to 100 keywords most relevant to your products, services and target audience and stuff your web pages with as many of them as reasonably possible. Go to Google AdWords to see which keywords are related to each other.
• Also include Zip code, city and region with your keywords.
• Placement on online local business directory can be helpful. Suggestion includes Yahoo! Local, Yelp.com, Craig's List and Insiderpages.
• Attach meta tags that include your top 20 keywords in order of importance.
  

Occasionally test your site design with tools like Web Trax or Offermatica.com . These tools measure click throughs.

Video clips: Economy and Election

Economist Shiller talks about the current problems affecting the US economy. He suggests some solutions such as improving risk management infrastructure and house equity insurance. He speaks in difficult economic lingo but I think it's worth watching because he's a renowned economist.

Robert Shiller on Solutions for the U.S. Economy @ Yahoo! Video

Here's another interesting Tech Ticker clip. Suddenly, the presidential candidates' wealth takes center stage. Does it really matter how rich the candidates are? You decide with your vote. They seem to be bashing McCain and his wife for their excessive wealth.

The Presidential Race and the Economy @ Yahoo! Video

Now this funny video is by one of Sarah Palin impersonators. Republican VP candidate Sarah Palin is quite popular recently and giving Republican camp some boost. Hope you find it funny.

See more Gina Gershon videos at Funny or Die