Hello, this is Fisher in Best Fisher You will remember the 2008 financial crisis. Of subprime mortgage crisis Aftermath spreads to Korea The stock market and real estate market started to crash Many companies went bankrupt. As well as the self-employed In the wake of honorary retirement The main culprit behind the financial crisis It’s a derivative called CDO. And as of 2019 CDO of the past financial crisis Once again a derivative called CLO Issuance is skyrocketing due to the financial crisis. History repeats We forget it And without letting me know a little deeper It’s gonna be alright In a part of the economy that we don’t know A bubble is created and it bursts After the whole economy collapsed We risk that Only then did you know what it was Today, deep inside the US economy Many people are not aware Learn about the risks How to contrast it Let’s think about what to do CDO stands for Collateralized Debt Obligation Held by financial institutions such as banks Tie a mortgage and a bond It refers to a liquidated derivative As the main culprit of the 2008 financial crisis It is pointed out Knowing the CDO is a problem Because it’s easy to understand the CLO with similar structure, The CDO that caused the financial crisis I’ll explain it easily first In 2003, due to the US economic slowdown The Fed cuts interest rates by 1% It’s no different than it is in 2019. At that time, liquidity funds Overflowing, US real estate speculation overheats When buying a home in the US Through mortgage loans I’m buying a house. What is different from Korea Low interest rates for longer than 10 years I can get a loan In the worst case, banks Foreclosure of real estate All debt relationships end Korea is mortgaged After getting a loan I have a problem with my repayment If a bank seizes a secured home The bank disposes of the house I have to pay off the remaining debt The US mortgage system seizes homes only Is your debt ending? Quite different from our country It is an enviable system Lending money to the bank Because you have to get low interest in the long run Profitability is too low. As a result, banks Have a mortgage Merchandising and selling to financial companies This is called MBS Banks use MBS You can recover the loan back quickly. I’ll give you a mortgage again Make it MBS again By repeating this process Significantly increase profitability Of course only in this way A loan was made It wouldn’t have been a problem if you had a bad loan. Bought MBS from the bank American financial firms Depending on the lender’s credit MBS with high possibility of payback And a low-credit MBS that is likely to save money Tie several things together Reinforce credit And put corporate bonds In a complicated way, To resell to investors This is called CDO And invested CDO or Financial firms By tying again Again issuing a CDO As a basic asset called mortgage A lot of derivatives More leverage. But in 2007, there was a problem Even before the financial crisis The structure of CDO’s complex investment products Investors have a risk rating analysis Because it doesn’t work at all I trust only financial institution reports and credit ratings Invested However, this product is the first underlying asset That is, the principle of mortgage loan If you cannot repay properly Chain default from MBS to CDO It’s a structure that can only fly. Finally, in 2007, the US housing market Starting to fall Failing to repay a mortgage People started to increase Many mortgages go bankrupt. And based on that MBS and CDO investments also There is a chain of bankruptcy. Thus aggressively Invested in real estate-related financial products Large investment bank Lehman Brothers went bankrupt. The rest of the big US investment banks Because we have invested in the same way Received bailout from the government And equally invested in a US CDO Banks in Western Europe were hit in a chain You will receive bailouts from your government. So emerging countries that don’t invest in CDOs Was there a problem? no US and European funds invested in emerging countries Recovered quickly and returned home Emerging Country Stocks and Real Estate Asset prices plummeted As the exchange rate soared, emerging countries also Faced with a chain of economic crises. As of 2019, the CLO in question Much like the CDO I described The underlying assets of the CLO are not mortgages. It is senior Seniors are called leveraged Low credit rating companies below BB- When you get a loan from a bank Receiving property such as real estate and machinery as collateral A mortgage loan Seniorron has collateral If market interest rates rise above a certain amount The interest rate can be applied at variable rates Because there is an advantage Where to invest in a long-term low interest rate environment To meet the needs of unwarranted investors Hard to be funded Loan demand from low credit rating firms Issuance has soared at a tremendous rate. Problem is CLO Mortgage loans from low credit companies Tied together and sold Is similar to the CDO of the past. The CLO is from low credit companies A mortgage loan According to the evaluation, such as repayment Classify from AAA to BB Using methods such as decentralization and credit Raise the investment grade to AA This made it impossible to invest in a low credit company. Insurers and Pension Funds It’s a structure and a product that can be invested. Because of this, your credit rating Interest rate is higher than that of AAA-rated corporate bonds Because you have A lot of money on the market $ 128.1 billion in new issues in 2018 The balance will be the largest ever Of course, now the CLO The structure is not complicated compared to CDO Because it is not a self-replicating situation Because the risk is low and the firm’s senior collateral loan There are also claims that the risk is not high. But there are many opinions that the risk is high. First, the basic asset of the CLO Insolvency problem about leverage Historically, the underlying assets of the CDO are the underlying assets of the current CLO. Look at real estate, machinery and bonds of low credit companies It was a stronger home. Moreover, the current issue of leverage loan For low credit companies The ratio of borrowings to profit is five times. This is higher than the 2007 financial crisis. The problem is that bond yields will rise or When profits of low credit companies decrease On the repayment of interest and leverage Is that there is a high probability Besides this, there are various problems. First of all, American credit companies The amount borrowed from the mortgage Dividends and Treasury Stocks Is that they tend to use The company makes a loan and this money is invested in equipment investment You have to make a profit using this It pays dividend income for major shareholders Is a tendency to use And recently with the US tax reform Mergers and acquisitions are on the rise. Leveraged by out LBO has been successful in borrowing. When LBO mergers and acquisitions Not cash As collateral for the assets of the company How to take over a loan company The problem is that the borrowing Because it is determined in conjunction with the size of the company’s profits Reduce the cost of sales Postpone loss handling Because profit inflate is possible Excessive loans that exceed Is that you can get it. Apart from this, recent leverage theory Lack of investor protection Short loans exceed 80% And according to Moody’s Only as a senior collateral among leveraged issuers Companies that make up debt are increasing If there is a bankruptcy, the recovery rate actually The 61% forecast is also It is quite a concern Because the content is difficult It may be difficult to understand The conclusion is clear CDO, the culprit of the financial crisis, The current CLO is based on That it was a mortgage On assets, such as real estate, It is very similar in that it is a mortgage loan. Banks also liquidate loans This is what financial companies structured Derivatives are similar. Interest rates rise, Interest payment becomes difficult and becomes basic asset When mortgages go bankrupt The CLO is likely to go bankrupt Is also the same The biggest problem is the past financial crisis Up until the very end, many experts and rating agencies Provides a lot of evidence about the stability of the CDO Report or guarantee stability Is that you have a credit rating. Internally stuck parts No matter how external the expert There is a limit to external evaluation. In the end, general investors like us Of American companies Some say that the internal matter is rotting It’s hard to know The US leveraged loan environment It doesn’t get much better Without loan repayment ability Lending to companies, Banks Moral Hazards for Profitability If bond yields rise in the future When profits of low credit companies begin to decline There is also a possibility of a rapid increase in defaults. And now the CLO is the bank of Japan 30% of the total quantity If problems arise in emerging countries Japanese funds can also be removed This means the financial crisis in 2008 Like then No matter how healthy our economy is If there’s a problem with the CLO If the economic crisis occurs in the United States American, European, and Japanese funds As we move away from emerging countries Korea’s economy, like the financial crisis, Is to collapse. So is there no alternative? But what we can confirm High yield spread High yield spread Corporate bond rates of low-credit companies below BB- and The difference between the bond yields This is an indicator If that indicator surges, Of American credit companies Procurement rates are rising It means that the possibility of bankruptcy increases. So if high yield spreads soar Economic indicators are observed and US credit firms If you hear news of an increase in default, We are like the CDO during the financial crisis The problem is likely to occur in the current CLO. Know that To increase the share of government bonds Whether to secure cash or to prepare for risk If you liked today’s video Subscribe and like by all means !! Press Please watch continuously Thank you