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Non-Tech : Income Investing

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brehm233

To: brehm233 who wrote (52120)	12/30/2025 12:47:31 PM
From: Privately	1 Recommendation Read Replies (1) of 52143

Re: CLO owner Eagle Point Credit Company (ECC) has announced they will be redeeming Personally, I have been working my way out of CLOs. I think they may be the next CDOs. I understand the idea of slicing and dicing tranches of debt to (theoretically) reduce risk, but (1) the arguments sound a lot like the arguments that were used for CDOs - e.g. "you can't lose because we sliced up a lot of risky junk and only sold you the best parts", but I am afraid that the best slice of garbage is still garbage.... (2) the CLO market is exploding. Even if the earlier CLOs made sense at one time, so much "other stuff" is being jammed into products in the CLO market that it doesn't look the same as it did a few years ago. Once wall st. sees something taking off, the bankers will bundle anything together to get it under the label of the products that are doing well in the market (they have to sell it somewhere). said another way - If you think about it, the original idea of CLOs was to take "better" mid market debt and package it up. I don't think there is enough good quality mid-market debt to support the avalanche of CLO products that have been pouring into the market. There has to be a lot of "chum" thrown in. (3) I worry that when some of this new garbage fails, it will drag down the whole CLO market. Remember when CDOs failed, it was triggered by a fairly small failure that snowballed into a huge mess. I could be completely wrong on this, it is just a feeling I get from reading all the "rah rah" from the CLO marketers, so I am "voting with my feet". Anyone have a thought about why I am wrong? I would love to hear...

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