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800 billion of subprime mortgages about to reset

The American dream is overbought and overbuilt. Foreclosure rates are climbing fast everywhere, with Florida being ground zero for the disaster.

Image from the Monte Carlo Simulation of CDOs (Part 2), this being the probably faulty way that ratings companies value bonds comprised of bundles of mortgages. Not to mention that they make fat fees doing the ratings.

“The danger with Monte Carlo is that it gives you a false sense of security,” he says. “If the input data that you use is a little bit uncertain, your numbers are going to be trash, but they will look convincing.”