Long have I bitched that fundamentals are out of vogue. "Fundamentals" says "Ford makes a lot of cars and pays dividends to its shareholders while doing it, Ford is probably worth more money than Rivian." The problem is, since you can't make any money through fundamentals, nobody even remembers what they are anymore. Except Warren Buffet. That asshole made money on Amtrak.

So let's talk CDOs

The shorthand on 2008 was "(waves hands) mortgages." But this ignores a few steps.

- the perception: Countrywide loaned money to people who couldn't afford it, backed by houses that weren't worth it. These loans were underwritten by Wall Street and they all lost money because as we all know, the blacks and the poors can't be trusted with money.

- the reality: Countrywide loaned money to people who couldn't afford it BECAUSE investment brokers wanted loans made to people who couldn't afford them so they could wager on their failure.

They took these loans, you see, and threw them into a blender. Then they ran that soup through a fractionating column in order to rank their riskiness into "danger" "don't" "kiss your money goodbye" "you already owe money on this" and "this is criminal and you are likely complicit". They then blended those toxic brews into cups full of swill and waved them under the noses of ratings agencies. The agencies said "smells great!" so that university pension funds and municipal bond managers could legally buy these biohazard beverages and tell their coworkers what they did with a straight face.

Now - how deep is the evil? The "2008 take", which David Gerard is all about, is "people shouldn't buy mortgages they can't afford." Of course in 2008 that was "20% of your income" and if you look now, Chase will tell you 28% so... prolly deeper than that on the face of it. The "Pre-Big Short" take was "all the way down to the ratings agencies who should never have called a toxic blend of bad mortgages an AAA bond." But holy shit if we can't trust Morningstar the whole edifice crumbles. My take? banks are not thrifts, thrifts are not banks but I'm one of those assholes who owns cryptocurrency and didn't get wiped out so clearly, I'm a drug dealing pederast.

Options are bets. Futures are bets. Swaps are bets. Most "financial instruments" are bets. 2008 was caused by bets. Terra was caused by the equivalent of an ETF breaking.