Finally, someone has found a good use for toxic assets. Planet Money, a program on NPR in the United States, has decided there is no better way to follow the financial crisis than to own a tiny piece of it. So it’s paid US$1,000 for a slice of a collateralized debt obligation (CDO). Planet Money’s new pet toxic asset holds a piece of 2,000 mortgages in California, Arizona, Florida and other hard-hit states.
About half the mortgages are behind on their mortgage payments and 15% of the homes are already in foreclosure. Back in the bubble years the CDO fetched US$2.7 million. These days the whole shebang went for US$36,000.
If nothing else, owning a piece of the U.S. housing disaster introduces a certain sporting element into watching the evening news. Every month, the program stands to collect a tiny bit of cash from people paying off their mortgages. But as losses mount, its pet toxic asset could die. On the other hand, if its pet toxic asset can make it to November, the program doubles its money.
How long can it be before some entrepreneur decides that what we all need is one of these things? We can already hear the boasts: “Mine’s more toxic than yours!”
Freelance business journalist Ian McGugan blogs for the Financial Post.