Monday, January 26, 2009

A Conversation with My Attorney from T-Billz


I have an idea.

NYC in the 20th century became the financial capitol of the world.  Long live NY.

I just saw an article which said that we replaced Vegas as #1 in marriage licenses.

What we need to do is combine those spheres.

The bonds of matrimony offer short term benefits (gifts etc.) in the guise of long term security.  The reality though is that for far too many bondholders depreciation is substantial.  At the same time, the already insanely high make-whole price (50% joint-assets in most cases) often shows a significant increase in its real dollar value over the term of the bond.  So therefore under the current regime, a bond holder either pays an extortionate make-whole price, or waits out the indefinite maturity period at a possible much greater loss.

This perfect storm makes marital bonds a risky and depressing instrument to own at all, let alone hold to maturity.  More importantly, these inefficiencies tie up valuable productive energy which spills over and negatively impacts the "real" economy.

What is needed is a secondary market- where existing bonds can be rationally and efficiently priced and traded.

This would allow new capital to enter the market, and would facilitate the sale of distressed assets.  A liquid, transparent secondary market would also allow for swaps and similar instruments to be brought out of the black market (creating potentially huge revenue streams for underwriters).

The possibility also would arise that an institutional party could offer marital bond mutual funds, which would allow less sophisticated "main street" investors to eliminate the volatility risk that burdens individual contracts.  If tranched effectively and not over-regulated, it's possible that risk of default on marital bonds can be virtually eliminated in the future...

What do you think?  Am I billionaire yet?should I start lobbying Obama to get some bailout seed capital? Can't wait to sell this idea and start my next venture...



Clever indeed, but how does the investor profit off of this, and more importantly, wouldn't the savvy individual opt out of the process altogether and into whatever the flesh trade version of a money-stuffed mattress is?  (stuffed honey on a mattress?) Is there ever going to be a positive ROI?




With all due respect, no one buys new issues for their coupon.

The Medici financed wars, we've added sports stadiums.  Marital bonds are for whatever reason valued by society.  Civic-minded grown ups and idealistic youngsters buy them.  Let's hope they have other revenue streams.  The point is the new issues market exists.  The secondary market would basically be insurance that there will be a buyer when the owner is motivated to sell.  That 3% coupon looks a lot more attractive 20 cents on the dollar (there's your Bernie Madoff 15% return right there!). Kind of like how the girls all get prettier at closing time.

Totally agree that a savvy investor should diversify with prostitutes (equity) and porn (derivatives).  But bonds are key for growth, especially in emerging markets.

Don't you want to be the first to securitize a gaggle of Russian brides?



I'm taking my general approach to life which is avoidance of any real investment in favor of the low risk low return option of undiversified squandering.


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