interview with a hedge fund manager

really interesting interview with the manager of a large hedge fund, covering the current state of the dollar, the subprime mortgage crisis, etc…

n+1: So the Moody’s ratings were like [taking for granted] the water running…

HFM [hedge fund manager]: Exactly. Triple-A is triple-A. But there were people who made a ton of money in the sub-prime crisis because they looked at the collateral that underlay a lot of these CDOs [collateralized debt obligations] and commercial paper programs that were highly rated and they said, “Wait a second. What’s underlying this are loans that have been made to people who really shouldn’t own houses—they’re not financially prepared to own houses. The underwriting standards are materially worse than they’ve been in previous years; the amount of construction that’s going on in particular markets is just totally out of proportion with the sort of household formation that’s going on; the rating agencies are kind of asleep at the switch…”

he’s frank and I thought it was pretty eye-opening, at least for a west-coast liberal-arts college student with no exposure to the financial world.

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