On structured finance, securitization, and disaster in the making...

I read this well-written article on Bloomberg that pretty much sums up some good background, main figures, and the undoing of the financial markets at the hands of structured finance, securitization, the "new technology" of shifting risk off-balance-sheet, and the undoing of all these, as we know it now. Oftentimes, it's good to take a rear-mirror look at things in a larger scheme, in order to appreciate and hopefully better avoid the next disaster(s).

I remember quite some years back, one of my friends (let's call her BW) in Australia was on her way into a non-traditional (ie. not through the Wall Street or Greenwich route) finance career at Andersen Consulting which had since folded into Accenture. At one point, she mentioned to me that she wanted to do "structured finance." The term was new to me, and I never prodded her on what she knows (that is, IF she knows what it means, which I have my doubts) on the subject.

Fast forward to maybe 11 years back, when I was preparing to move to America in 1997, she was moving back to Hong Kong. Her proclamation at the time was, she wants to get into the Shanghai stock market and the A shares. Even at the time, her claim had not sat very well with me. The rough ride in that Exchange since then, and the significant lack of transparency on all A share listing companies, all contribute and reaffirm my belief that she doesn't actually know much about the subject matters she's talking about.

In a way, it's not unlike most of those finance types discussed in the Bloomberg article, of the fools who would follow leads from some pioneering folks in inventing new ways to package and sell debts, and even more new ways to hide those debts and associated risks, here we have BW who would quote the investment vehicles from some alphabet soup as the flavor of the day, and take her plunge to accentuate bubbles.