The Credit Crunch, as told by Dr. Suess

The following has ben pinging round the inter-tubes for weeks . . . The author is Cameron Crise of Fortis Investments in London:



Broker Joe!

Show me some flow

I need the dough!

I’m Broker Joe!






That Broker Joe!

That Broker Joe!

I do not like

That Broker Joe!






Would you buy my CDO?

I do not like them, Broker Joe
I do not like your CDO!

Would you like it here or there?
I would not like it here or there
I would not like it anywhere
I do not like your CDO
I do not like it, Broker Joe



Would you like to sell some yen?
I do not want to sell the yen
The big fat tail just kills my zen

If you don’t sell now, then when?

I will not sell it here or there
I will not sell it anywhere
I do not like your CDO
I do not like it, Broker Joe

Our SIV has had a few rough knocks
Get in now, you sly old fox!



I am slyer than a fox
And I don’t think you have the docs
That you must have if you foreclose
And so a judge will thumb his nose
At you, your SIV, and CDO


Who owns the mortgage?
I don’t know
And you don’t either, Broker Joe

I would not know it here or there
I would not know it anywhere
I will not buy your CDO
I will not buy it, Broker Joe!


We have some hedge funds who are long
Those guys are smart! They can’t be wrong!


5Some funds are long and some are not
The ones who are, are feeling caught
The short ones make a lot of sense
And they are up lots of percents
No SIV, no yen


Not now, not then
Not here, not there
I would not touch it anywhere
I will not buy your CDO
I will not buy it, Broker Joe!



But you can trust the agencies

They’ve rated this stuff Triple-B!
This tranche is still investment grade
You buy it here, your year is made!

8The agencies have been asleep
Their ratings are just like ‘Bo Peep
That is, they’re from a fairy tale
As fiction goes, they’re off the scale



 And I do not believe them, Joe
And so your tranche is a no-go
You think at 50 it’s a do
Until it falls to twenty-two

I do not like your CDO,
I will not buy it, Broker Joe!



Have you met our in-house quant?
He’ll model anything you want!



10Except, that is, transactions costs
No thanks, I do not want the loss
From any quant’s sexy black box
Or mortgages unbacked by docs
Or mindless buys of kiwi-yen
Or ABX headed to 10

Or any other credit turd


I’ve spoken, Joe, so hear the word
I do not like your CDO,
I will not buy it, Broker Joe!



What must I do, What must I do
What must I do to trade with you?


Perhaps you should avoid the drink
And use your brain sometimes to think
And not assume what’s gone before
Will follow on, and thus ignore
That circumstances sometimes change
And things that once seemed awfully strange
Can swiftly become commonplace
And then vanish once more, sans trace.
In short, you’ll have to look ahead
To win your future daily bread
In your head you have two eyes,
Use them, please, to analyze
And then you’ll see your business grow


I see! I see! I start to think
12That all of my ideas stink
That CDO is mark-to-myth
The model’s written by a Sith
I’ll call my custies on the phone
And say “hey leave the yen alone!”
I’ll leave it to the black-box nerds
To buy up all the subprime turds!
I’ll say “you’re welcome”, “thanks”, and “please”
And just ignore the agencies
And as for our beleaguered SIV

The guy who runs it is a spiv
I’d stay away if I were youYes, that’s the wisest thing to do!
It’s been a quite eventful year
Weak hands have been found out, I fear
At bonus time they’ll feel the pinch
And find they’re working for the Grinch
(that begs the question: which is worse?
That bonus cheque, or all this verse?)



But now, at last, the race is run
Both year and verse are almost done
I hope your holidays are great
I’ll see you in 2008!



Download 2007_xmas_cdo.pdf

Category: Credit, Derivatives

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A Different Kind of Music List: Best of 2007

It’s that time of year again! Following our successful outings the past three years, I’m at it again. Here’s our Different Kind of Top 10 Music List for 2007. If you missed prior versions (2006 and 2005 and 2004), here’s the deal: There are a gazillion Best of Lists out there (and one list to…Read More

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Move over CDs: DVDs, Concerts also slump

We have been documenting the slow death of CDs over the past 7 years. This year brought the first slowing sales in that other shiny polycarbonate disc, the DVD.

In a recent report, Alliance Bernstein Research observed that through early December, DVD sales
were down 4.1% YTD
, including a 2.1% decline in Q4.
Bernstein cited data from Nielsen VideoScan.

DVD sales were flat in 2006,pulling in the same ~$16 billion as 2005. Total home video revenues — including both sales and rentals — looks like they will hit ~$23 billion in 2007. That’s a $ billion shy of 2006 revenues.

These are only minor drops, but what makes them significant is that, no matter how you measure it, 2007 is the first negative year-over-year sales growth since DVDs came to market.

I suspect that the usual attention scarcity — which have been hurting CD sales — are also be impacting DVDs. And DRM certainly isn’t helping (What do you mean I can’t watch this DVD on my iPod?). However, DVD buyers are also wrestling with the additional factor of the latest format war.

Speaking personally, I’ve throttled back on my DVD purchases, as I await the winner of the HD/Blu Ray battle. Whatever DVDs I buy these days are disposable/rental priced (i.e., $5.99). The various HD formats are much pricier, and until that fight gets resolved, I, like many consumers, are buying less (Do I want this in HD? Gee, I better wait). Who wants to get stuck (again) with another extinct format?

There may be other macro factors at play: namely, an over-extended consumer. That showed up in not just DVD and CD sales, but in concert ticket revenue, also. 

PoliceDespite several big "reunion" tours — the Police, Van Halen and Genesis — the total North American concert industry posted its slowest year since 2004. According to Pollstar, the top 20 tours generated $996 million, down 15.6% percent from 2006 totals. The 2004 total was $951.1 million, when Prince and Madonna were touring. Perhaps a long tail effect is spreading less revenue to more bands.   

Here’s the specifics on revenue and ticket prices:

Top 20 Selling Tours of 2007 (Millions)

1. The Police  $ 131.9
2. Kenny Chesney $ 71.1 
3.  Justin Timberlake $ 70.6 
4. Celine Dion $ 65.3 
5.  Van Halen $ 56.7 
6. Tim McGraw
and Faith Hill 
$ 52.3
7. Rod Stewart $ 49 
8.  Genesis $ 47.6
9.  Josh Groban $ 43 
10.   Rascal Flatts $ 41.5 
11.   Dave Matthews Band  $ 41.1
12. Billy Joel $ 39.1 
  13.  Roger Waters  $ 38.3
14. Bruce Springsteen
& The E Street Band 
$ 38.2
15.  Hanna Montana
/ Miley Cyrus 
$ 36
16.   Elton John $ 35.7 
17. Jimmy Buffett  $ 35.6 
18.    Barry Manilow $ 34.8
19.  Toby Keith $ 34.3 
20.   Maná $ 33.9

(Based on total dollar volume of tickets sold)

Source: Pollstar


An interesting side note: The average price of concert tickets (sold through StubHub’s secondary market)  in 2007 was $117 — a price decrease of $28 per ticket compared to 2006. Note that these are not face value, but secondary (scalped) tickets.

Highest Average Ticket Price of 2007

1. Celine Dion $ 347
2. Elton John $ 260 
3.  Hannah Montana  $ 257
4. Eric Clapton $ 253 
5.  Bon Jovi  $ 239 
6. Bruce Springsteen $ 226
7. Van Halen $ 217 
8.  Genesis $ 210
9.  The Police  $ 209 
10. Michael Buble  $ 195

(For tours that sold over 3,000 total tickets)

Source: CNN Money, Stubhub


You something unusual is occurring in the economy when consumers pull back on their entertainment spending . . .



CDs Are Dying. Are DVDs Next?
Eric Savitz
Tech Trader Daily, December 21, 2007, 2:36 pm

Big media sees reversal of fortune
Georg Szalai
Hollywood Reporter,
Dec 11, 2007

December 4, 2007

The Police Lock Top 2007 Tours Spot
Wednesday, Dec 26, 2007 1:02PM

U.S. concert business slumps despite reunion tours
Dean Goodman
Reuters, Sun Dec 23, 2007 12:44pm EST

2007 StubHub Concert Ticket Annual Report 2007
December 05, 2007: 06:12 PM EST

The Life Cycle of a CD or DVD

Category: Digital Media, Music, Video