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October 17th, 2008, 8:14 am | By Lunch is for Wimps | Published in LUNCH IS FOR WIMPS | Comments on this postComments Off

OK, that headline may be slightly misleading. There are plenty of jobs that the credit crunch has given us – but they largely involve clasping your hands and smiling in a disarming veneer of politeness as you recite “I’m sorry you’re application for a —- has been denied due to the credit crunch”, while trying to remember to fill in the blanks.

Either that or you could work in the government, which requires a knowledge of buying stuff without any knowledge about what you’re buying. That doesn’t sound too hard. But for the balls-out, old school banker there’s only one job left: distressed debt.

But, wait – that’s everything, right? All debt is distressed!

Sure, the world is in a pretty shocking state. Equity markets are falling by ever larger amounts even as bail-out packages spiral seemingly out of control. Credit markets are shut. Currency markets are wilder than an Amish girl stranded in Soho. Debt is, indeed, distressed.

But some debt is more distressed than others.

Collateralised debt obligations (CDOS), mortgage-backed securities (MBS), auto receivable ABS deals and the myriad of acronyms formed in a fridge-magnet bubble of alphabetic exuberance – these are the true distressed debt classes. These are where the new masters of the universe will feed their bloodlust.

Who can analyse these things? Well, start with the people who created them.

The rocket scientists who got us into the mess are going to, if not get us out of it, then … at least make a bucket load of cash for the grubby banks we just bailed out. While that may not sound particularly appealing to the general populace, it is one area that offers real opportunity to the banking community.

The geeks have returned, ladies and gentleman. They’re coming back to analyse their mistakes.

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About the author

Lunch is for Wimps Lunch is for Wimps used to trade currencies and equity indices – and even occasionally traded German government bonds when he was trying to cure insomnia. Watching Wall Street one night, he heard Gordon Gekko deliver the classic line: “if you want a friend, get a dog”. Unfortunately, a large build-up of ear wax led to him mishearing this piece of wisdom, and he ended up starting this damn blog when he should have been at the pet shop instead.

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