Thread by @KailashConcepts

1/7 Must read article by @kayewiggins @FinancialTimes on how the #volatilitylaundering complex has built & sold a pile of CDOs (they changed the "D" to an "F")

on.ft.com/3GP1wkN

2/7 Since there is no disclosure or reporting it’s tough to tell where the bodies are.

The article explains how "CFOs introduce another layer of leverage" in a PE pyramid built on debt.

Which might be suboptimal....

3/7 As @hkuppy's killer thread explains how the debt itself in these structures may be comically mismarked

https://twitter.com/hkuppy/status/1583079931122094080

4/7 We have written a fair bit on how post the GFC, regulators put the banks under very tight capital controls....

...which moved the debt to these opaque, private & unregulated pools.

While rating agencies have given CFOs "good credit ratings" so far...

5/7 We think it is just a matter of time before the heads of pensions start to want their money back and we learn the prevalence & consequences of what may well be the kernel of the next GFC

As the article explains, regulators are just waking up to the risks. But....

6/7 ...the article must be read to be believed, as the industry, desperate for cash, is ADDING complexity to these instrument.

Money + complexity do not frequently mix well, particularly when there is a byzantine stack of leverage involved…

7/7 In schemes like these, those who redeem last end-up getting an unfortunate & wholly avoidable lesson in baggies.....

We've provided a link to this instructional video for those unfamiliar with financial history: