Here is a telling quote on the collateralized debt obligation (CDO) market, circa 2005 from a profile of Merrill Lynch’s then-rocking CDO team:
“If you polled a hundred capital markets participants about IBM, most people are going to have some opinion of it. But if you went to the same group and asked them about an Ameriquest or Countrywide triple-B mortgage security, very few people are going to have any idea of how to analyze it,” says Norell. This complexity is what adds yield to ABS CDO products, he says, because demand is limited to a small pool of very specialized investors.
And there you have it. If only more people had been paying attention.