So pieces of paper rated AAA by the credit rating agencies (implying virtually no risk of default loss) and sold for a 100 cents on the dollar (or more) are now worth a nickel — a 95% haircut. Something like $150 billion in the stuff was issued in the last two years of the bubble alone. Another $300 billion in slightly higher quality AAA-rated debt is probably worth 35-40 cents — at best.
As the FT notes, this kind of thing doesn't exactly inspire investor confidence:
I would hazard a guess that this is easily the worst outcome for any assets that have ever carried a "triple A" stamp. No wonder so many investors are now so utterly cynical about anything that bankers or rating agencies might say these days.
Which in turn suggests that sooner or later Milo Minderbinder and company are going to have to go back to the drawing board and figure out a better way to dispose of Big Shitpile than coating it in chocolate.
Billmon: Chocolate Covered Cotton: An Update
