The below mentioned piece of wisdom arrived in my inbox yesterday. Appears to be one of the many profound pieces of wisdom on the subprime mess. It makes good reading; although can't decipher how to give credit to the originator of this masterpiece.

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HOW THE CDO MARKET WORKS

Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each.

The villagers seeing there were many monkeys around, went out to the forest, and started catching them.

The man bought thousands at $10 and as supply started to diminish, the villagers stopped their effort.

He further announced that he would now buy at $20. This renewed the efforts of the villagers and they started catching monkeys again.

Soon the supply diminished even further and people started going back to their farms.

The offer increased to $25 each and the supply of monkeys became so limited that it was an effort to even sight a monkey, let alone catch it!

The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now buy on his behalf.

In the absence of the man, the assistant told the villagers. "Look at all these monkeys in the big cage the man has collected. I will sell them to you at $35 each and when the man returns from the city, you can sell them to him for $50 each."

The villagers rounded up and scraped their combined savings and bought all the monkeys.

Well, after that,they never saw the man nor his assistant, only monkeys everywhere!

Now you have a better understanding of how the Collateralised Debt Obligations market works.!!!