- Thanksgiving. Made a pork center cut loin, glazed with maple honey. Made scratch roasted garlic sauce. Called family.
- NFL, world cup, chess.
- ISDA = international swaps and derivatives association. The ability to participate in much larger deals.
- Curated contacts.google.com. Merged all suggestions. Added details. Deleted junk contacts. Deleted labels. Added birthdays so they’d show up in gcal.
- Lots of private work.
- Baking powder is alkaline. Add it to the dry rub. Increases the skin’s pH, allowing proteins to break down easily, making skin more brown/crispy. Baking soda does the same thing, but adds a weird flavor.
- Upgraded to ios 16.1.1.
- Watched the big short for the first time in a while. Summary below.
- Mortgage-backed securities. MBS. Like bonds. Like any other securitization process (think equity in companies). Act as the intermediary between borrower and lender. Wrap a bunch of mortgages (loans) into an MBS instrument and sell it. The buyer acts as the lender (investor) and the seller takes a small cut. The end user is the homeowner, paying interest as expected.
- This is a type of CDO, collateralized debt obligation. There’s MBS, ABS (asset-backed), etc. There’s also CBO (bond), CLO (loan), etc.
- There are tranches of credit ratings. A scale of risk. AAA -> AA -> A -> BBB -> BB -> B -> CCC etc. AAA is the lowest risk. Risk increases down the scale (but so can return, of course).
- There’s allegedly some bad incentivization in the ratings market too. You could get a higher grade by working directly with the agency (paying…).
- MBSs started as high quality (in the As).
- MBS returns were great, but it’s a finite market. There are only so many houses and people with enough money to pay mortgages safely.
- So lenders started dipping into the less-reliable bucket. Subprime lending. Giving home loans to people with bad credit. A bubble that feels fine now and bites later.
- These risky mortgages started bleeding into the MBS, causing the majority of mortgages in bonds to be in the Bs (way lower quality).
- That, plus many had adjustable rates that would begin trigging in 07.
- CDS is insurance for a loan. They’ve existed since the early 1990s. The buyer is usually the lender. They pay extra. As expected. They’re getting insurance. The seller is usually a bank who prices the risk of default. If the borrowers of the loans default, the seller of the CDS pays the buyer. The bank pays the lender. It’s a hedge. Without this, the default means the lender loses. With this, they pay a little extra for the insurance.
- But CDSs can apply to any risky investment. Michael Burry wanted to short the housing market (due to the above), so he went around to a ton of different banks and bought CDSs from them. He gets paid if mortgages (borrowers) default. It costs him extra money to buy these. In his case, it’s an investment, not an insurance policy. It’s a little weird, that’s why it was a new use case; basically buying an insurance policy on someone else as a potential payday (since he wasn’t the lender doing a hedge). The banks just expected to get paid an expected premium by selling these instruments, since the likelihood of default was perceptibly low.