In the Tranches
Rio Tinto (NYSE:RTP) was up 23% today, which was a nice surprise because that happened to be one of three items I bought during the August/September correction. The stock had been on my watch list for a while because it had been lagging due to the Alcan acquisition. I also thought that at some point, CVRD (NYSE:RIO) would make a bid for it. I was wrong on that because BHP ended up being the one making the first offer. It appears that Rio Tinto will reject the offer after all, but even so, it is now clearly in play.
I've been railing about the subprime mortgage crisis in recent times, but the irony is I may have actually played a minor part in creating this monster. It was something that I had almost completely forgotten about until a few days ago when I ego-surfed Google Scholar. There, I found this paper, which carries my name in the acknowledgements section at the end.
The story behind that is in my senior year at college, I helped with the coding on a PhD student's thesis project. It was a piece of software that computed multi-dimensional integrals in order to value complex financial derivatives. Goldman Sachs, one of the key players in today's mortgage mess, was the one who provided sample data for the project. Back then, I was a naive youth and I didn't know half of what they were talking about when they bandied around terms like mortgage tranches and CMOs. I do now. That project was a possible precursor to what they now use to slice up a bundle of mortgages into tranches by (supposed) risk level to be repackaged into securities that can be marketed to pension funds, hedge funds, and that wayward bond fund I just rid myself of today. So I guess I could've been a little responsible for that, but hey, at least I didn't continue down that path after graduation. (On the other hand, if I had, I might have gotten stock options. Darn. :) )