CDO: A Story About Selling Collateralized Debt Obligations

By Ed SJC Park

CDO is the sequel to eGo: A Dot-Com Bubble Story. After surviving the adventures of the Dot-com Bubble and Crash in Reno, Nevada, Bill becomes a Collateralized Debt Obligations salesperson in New York City. He enters the bafflingly complex and shadowy world of financial engineering selling what appear to be safely hedged bond investments with huge returns. When he’s not partying out of his mind in Manhattan, he trolls pension fund conventions for investors and helps open up new CDO markets across the world from London to Tokyo. Bill then meets a billionaire banker who introduces him to the extravagant billionaire lifestyle, psychedelics, mind-bending quantum derivatives using imaginary numbers, a secret society, and a life altering investment opportunity that sounds too good to be true.

• Language: English
• Publisher: Lulu.com
• Release date: Jul 3, 2012
• ISBN: 9781105922497

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CDO: A Story About Selling Collateralized Debt Obligations

CDO

A Story About Selling Collateralized Debt Obligations

by Ed SJC Park

Copyright © 2012 by Ed Park

All rights reserved.

No part of this eBook may be reproduced in any form or by any electronic or mechanical means including information storage and retrieval systems, without permission in writing from the author. The only exception is by a reviewer, who may quote short excerpts in a review.

First Edition: 2012

ISBN 978-1-105-92249-7

Cover image: Copyright ©2012 Jeremy Edwards, iStockphoto LP

The chart on the cover shows dollar value of global issuance of CDOs

Dedicated to Julio O, Sebastian M, Curtis S, Eric L, Brad D, Ian, and Erin F

Chapter 1: Acceleration

There are many things to do in Reno, among the favorites are going to Lake Tahoe to ski or snowboard.  Reno has a great outdoors.  You can hike, bike trails, fish, hunt, swim, jet ski, sail, kayak, skydive, fly small planes, go to Burning Man.  But what if you just don’t give a fuck about the outdoors?  Well then, in Reno, you’re kind of fucked.  It’s not that Reno doesn’t have anything to do indoors; it’s just that as far as indoor activities, Reno has a smorgasbord of shit that may get you fucked.  I mean, if you do too much hiking or sailing, you might get sunburned, but you’re going to be in great shape and get a lot of fresh air.  Here’s the shit you can do indoors in Reno: You can gamble, fuck a prostitute at a brothel (well a few miles outside of Reno city limits), do meth, do coke, drink booze, get a tattoo, get in fights, smoke (at bars), eat all-you-can-eat sushi, masturbate, watch TV, Facebook, go to church, or go bowling.  Doing any of those things to excess can get you really fucked up. 

Sometimes, you just sit at home dying.  We live in a society with a lot of leisure time, and most work these days is not exhausting.  Working on a farm or factory for ten or even eight hours a day and I’d be so tired, all I could do is eat and watch TV before passing out.  Now, what do you do after work?  TV has become so unbelievably horrible.  On Facebook I can only stand so much crap from my friends.  I could spend hours on the Internet, but afterwards, I feel more bored with life than when I began.  I could join some political group or cause, volunteer, but whatever.  Play videogames or World of Warcraft?  I’d rather masturbate.  I could hang out with friends, but then I’d just drink too much and wind up hungover or just sleepy at work the next morning.  I could get a girlfriend.  Maybe that’s what some people do.  What if you don’t have a girlfriend?  There’s just nothing to fucking do. 

I work at an easy 40 hour a week job.  I used to be unemployed.  I blew through my savings being unemployed and snorting coke.  I never used to be such a loser, honestly.  I graduated from Stanford.  I’m not a dumb shit.  I lived in San Francisco, and times were hard.  It was the mid-90’s.  My friend moved to Reno, so I went over looking for work.  Reno’s economy was doing pretty well.  (Of course, now, Reno has one of the highest unemployment rates in the country.)  I got a job at some battery supply company that wound up going public and changed its name to eGo.  I made a lot of money, but I kept it all in eGo, and when the market crashed, I was wiped out except just about as much as I put in.  I could have made a quarter of a million dollars had I sold it at the right time, but hindsight is 20/20. 

My experience at eGo was pretty crazy.  First of all, we had a crazy boss who would fire you for farting outside his office.  Then I fell for some married woman and then a meth addict.  Then Sean Claude Lefort came along when the company went public.  He was some financial hotshot from Chicago who actually beat the shit out of the warehouse foreman to show how much of an alpha he was.  He stole my girlfriend, and I considered confronting him, but honestly, he would have just beat the shit out of me too.  I confronted him on an intellectual level, but he schooled me too.  Then surprisingly, he took me under his wing and gave me promotions and a company car.  He gave me tips on hitting on women, my wardrobe, grooming, just acting more smooth, sophisticated, and confident.  He became like a mentor or older brother.  He even shared coke with me, and that was how I got hooked. 

The best part was being sent to New York City for these fake training seminars where all I had to do was check in and then show up to pick up my certificate.  New York City was my playground.  I made enough by then and used my travel allowance to hire escorts and snort blow off their tits.  I was living a pretty crazy life for someone in his early twenties.  I felt like I was on top of the world, in heaven.  The only thing missing was love, a girlfriend, something meaningful, but besides that, life was fucking pretty awesome.  And then the market crashed, and the party was over.  I sometimes wonder.  Is it better to never have it, or to have something amazing and have it taken away?  I spiraled headfirst into the deepest depression of my life.  Only coke could take me out of this nihilistic nightmare full of haunting dreams of happiness, souvenirs floating around my weekly motel room from my New York City glory days, nostalgia, aching pain, unbearable sadness, loss, grief, hopelessness, despair, melancholy, detachment, anger, rage, resentment, self-pity, self-hatred, the seventeen stages of grief. 

I could not reconcile the present with the past.  I had time to read The Brothers Karamazov and surprisingly, it didn’t cheer me up.  I took long walks in the middle of the night.  I didn’t care if someone tried to mug me.  I had no money.  In fact, I relished the idea of turning a knife or gun on some fuck and killing them.  Sean had taught me this ninja skill.  I slept in late, way late.  I wanted to sleep forever.  At least, in my dreams, I was somewhere else.  It was an escape.  I went to matinee movies when I could afford them.  I took the bus, oh God, I took the fucking bus everywhere.  I respected all the hardworking immigrants.  There were hardworking natives, but a lot of loafers waiting for their monthly government checks to go splurge and then retreat back into their sad, zombie lives.  I got a bicycle.  It got stolen.  I had temp jobs, but there’d be times I would just stare into the computer screen, dumbfounded.  How could I be doing fucking data entry at $8/hour?  I used to be in New York fucking City at a 4-star hotel, paying escorts $500, snorting coke, drinking Dom, eating $35 steaks, wearing suits.  I used to be a somebody.  I didn’t even have to work.  Back in Reno, all I had to do was show up from time to time to talk with Sean, help him out with some spreadsheet, order around junior analysts who were goofing off just as much as me, and taking four hour lunches.  Those were the fucking days.  How could I be sitting here doing data entry for $8/hour living in a weekly motel taking the bus?  I wasn’t religious, but I prayed to God for an angel to rescue me.

It took a few years, but I finally got a fulltime job and out of the weekly motel and into an old car.  My life was gradually turning around, but after the depression somewhat subsided, I had a new problem.  I was bored out of my mind-fucking mind.  I had kicked my coke addiction.  Well, running out of money helped kick that addiction.  My new addiction was eating.  I had packed on about twenty pounds.  That’s all I had in life now, eating.  There was nothing else to do.  Sometimes I’d get panic attacks wondering what the fuck I was doing with my life.  I suppose if I had never worked for eGo and had all that crazy experience in New York, maybe I’d be satisfied with this boring life.  Maybe I’d be stuck here for decades, retire, wind up overweight or obese, spend the rest of my life sitting on my couch watching TV and waiting to die. 

Then in 2004, Sean called. 

Bill?

Yeah.

This is Sean Lefort.

Sean!  Oh, wow.  Hey.

What you been up to?

Oh, uh, still living in Reno.  Um, got a job, you know.  Just hanging out.

How much they pay you? 

I thought that was a bit personal.

Um, $50K a year.  It’s an okay job.  It’s easy, boring.  Work with a bunch of old people.

Bill, you sound bored out of your fucking mind.

Well, I am.  Wasn’t like the good old days at eGo.  But the economy’s turning around.  Reno actually is turning out to be a pretty cool city.  Nightlife is picking up.  Remember when I told you, there’s no chicks here between 21 and 30 unless they live in Sun Valley and have three kids by four different fathers?

Yeah.

Well, things have changed.  There’s a bunch of new bars, new clubs.  I see a lot more 20-something chicks out.  Lot better.

So you got a girlfriend?

No.

Well, hate to pull you away from your much improved Reno, but I have a proposition for you.

Oh, okay.

You free this weekend?

Um, yeah, sure.

I’m flying you out to New York.  I need help.  I need smart people I can trust, you know, trust.  I need people I can count on.  There’s a new market out here.  It’s fucking crazy.  No, it’s not dot com fucking companies.  We’re not selling fucking dog food and pizza over the Internet anymore.  This is bigger, much fucking bigger.  Bill, the dot com created millionaires; this shit is creating billionaires, fucking billionaires.  I can’t do it by myself.  I got a staff full of fuckups.  The best and brightest are being taken by the big names: Bear Stearns, JP Morgan, Lehman, Goldman.  All I get are third-tier fuckups.  I’m trying to sell complicated securities, and they keep fucking me over.  They couldn’t sell crack to a crackhead.  I need you to do a lot of research, follow up on leads, travel a lot, reel in customers, get them to New York, and I’ll take care of the rest.

Do I need any special certification, training?

I’ll give you a little training, but you’re a bright kid.  For you, this will be easy.  It’s just a lot of traveling and a lot of selling.

I, I, I haven’t done any sales -

Ah fuck Bill, selling’s easy.  It’s just perseverance, and you’re smart, you can explain complicated things in simple terms.  You’re going to be selling to a bunch of idiots anyway.  Look, I’m flying you out Friday evening; just get on that plane okay, First Class.  You can make up your mind when you get here.

I, I just got to ask, why did you think of me, now?

Bill, you never let me down at eGo.  I trusted you.  I’m sorry I couldn’t help you out after eGo, but we were all fucking reeling from the market crash.  I had to leave immediately and tie some things up in New York.  I would have called on you earlier, but I lost your number and I got busy.  But as I told you, I’m at my wits end working with these idiots here.  You’re fucking ten times smarter than these guys, and I trust them as far as I can throw them and their fucking whole public university graduating business class across the Hudson.  Look.  You can go back to your $50K a year Reno job, live in Reno, hook up with some homely, full figured Reno rodeo chick.  Or how about a $500K sales commission?  Live in fucking Manhattan.  Date models and the hottest women from all over America and the world who come here to hook up with a rich man.  You can always go back to Reno, but this is a once in a lifetime opportunity man.

There was silence.  I thought about it.  I expected Sean to try to sell me more, but there was just awkward silence.  I wonder if Sean had hung up or something.

Okay, Sean, you still there?

See you Friday.  I’ll have a limo pick you up.

I sat there dumbfounded.  Lots of traveling, $500K commission, New York City all over again.  Could I be dreaming?  Could this really be happening to me, again?  I was in such a low place, then just bored out of my fucking mind, and then out of nowhere, Sean calls with an offer too good to be true.  Maybe it was, maybe it wasn’t.  What if it wasn’t that great?  What if I couldn’t sell anything?  I’d have to beg for my job back.  I could count on $50K a year for maybe ten years at my job.  That’s half a million dollars of guaranteed income.  Would Sean guarantee me a half a million commission?  Maybe I was becoming lame and complacent and dull and boring.  How could I say no?  I figured that once I was in New York, I wouldn’t be going back to Reno.  I had to make up my mind now.  I felt that Sean dumped me after the market crashed.  I understood why he had to downsize immediately and let me go, but I felt betrayed.  I thought he’d take me to his next venture, keep mentoring me, groom me for something bigger and better.  Maybe he was making up for it now?  How could I say no though?  Seriously?  How could I go back to being bored?  My credit card debt was mounting, and I still had old student loans that had defaulted.  $50K a year wasn’t so comfortable.  Sure I had health insurance, but what was the future in this?  A middle-aged, middle manager in Reno?  If Sean became a billionaire, and I read about it in some newspaper years from now, I’d just kill myself.  How many people get an opportunity like this?  And finally, it could be closure.  I could return to New York City, with a full-time job, relive a little of my glory days, put a closing chapter to my loss.  Nothing in life had ever hurt me as bad as losing everything after the dot-com crash.  I had never been so low in my life, so close to utter despair and giving up.  I needed to return.  I needed some closure.

I actually took next Monday off just in case.  I packed heavy, prepared to stay actually a week, maybe forever.  I’d still pay my rent in Reno.  If things worked out I could always fly back out to Reno and put my stuff in storage or just ship everything to New York.  I couldn’t believe I was going to New York.  I only confided in one coworker that I was going to a job interview in New York.  I hadn’t been to New York since the Millennium.  I was actually at Times Square when 2000 arrived.  It was crazy.  The police kept you there all day, and if you left, they wouldn’t let you back.  We were all penned into these sectors like cattle.  People were passing out, but they all wanted to be there for that conceptual millennial leap.  After it was over, I thought it wasn’t worth the hassle.  Other people were having so much more fun at indoor parties all over the city.  Back then, I thought it was going to usher in a whole new era, a great new dawning of humanity, of great wealth and technological advancement, no more business cycles, no more recessions, no more unemployment.  It would be super happy fun time forever ever after.  How fucking stupid was I?  I should have sold all my shares right after January 1, 2000.  Who could imagine the market crash, 9/11, the Iraq War, the world was coming to an end not a new happy fun beginning.  We were all cattle waiting for the slaughter of the 21st century (technically not to start until 2001, but who the fuck cared right).

I still had my nice suits and Samsonite luggage.  I could still pull off New York City and not look like some dumb fuck tourist yokel from Reno.  I couldn’t believe I’d be flying First Class.  I had never flown First Class.  I flew Business Class when I worked for eGo but never First Class.  Sean put me on a flight from Reno to Dallas, DFW, and then to LaGuardia, LGA.  I had always flown into JFK, but I guess LaGuardia was closer to Manhattan.  When I worked for eGo, the first time in New York, I took the subway to Manhattan.  You’d have to take a bus first to get to the subway station.  It wasn’t as nice as I had imagined.  Queens looked like a ghetto.  The next time I took a shuttle van.  Then I just said fuck it and took a taxi every time after that.  Now, Sean was picking me up in a fucking limo!  Weirdly enough, the only time I had ever been in a limo was in San Francisco, and it was an old taxi limo. 

First Class was awesome.  The seats were so much wider, and the leg room was incredible.  The flight attendant was also more attractive than the ones in Economy.  She kept asking if I wanted stuff like a pillow, beverage, cookie.  I was smiling the whole way.  Who was this guy, they must have been thinking?  Rich business guy?  Owner of his own company?  Privileged asshole?  Trustafarian?  But it wasn’t like 1999.  I was smarter and wiser.  I had been through hell.  I had it all taken away from me.  I had been in a very ugly place.  I wasn’t the same old, innocent kid I was back then.  I had some weight, some baggage now.  If I made any kind of money, I knew better now.  I’d diversify.  I’d buy precious metals, a house, mutual funds.  I wouldn’t stick it all in one stupid, fucking stock.  I’d buy some blue chip stock too, fuck NASDAQ.  The blue chips didn’t do as bad as NASDAQ, in fact, I noticed that IGT in Reno did pretty well through the dot com bust.  Maybe I’d invest in IGT this time around. 

I wouldn’t blow all my money on coke and hookers, well okay, maybe not as much.  I had skill.  I could get myself a girlfriend, dates.  I wasn’t that stupid, young kid anymore.  I’d do things differently.  I was getting a second chance, and I wasn’t going to blow it.  Who can say they got a second chance?  I was lucky, really lucky.  In fact, if things turned out well, I’d be happy that I lost it all the first time around.  It matured me.  It made me wiser.  What doesn’t kill you makes you stronger right?  Of course, it also chips away at your self-confidence and innocence and the stress ages you and weakens your immune system, but so what.  You can’t be all stupid, innocent forever.  You’ll never go back to that very first time, the first hit of drugs, losing your virginity, but you know what, the first time isn’t always the best.  I’ve had much better drugs and sex down the road. 

There was an old fat dude sitting next to me.  For whatever reason, I imagined there’d be some hot actress or hot, young chick, but when you think about it, who can afford First Class but fat, old dudes and an increasing number of old ladies?  The hot flight attendant was all the hotness and youth you would get from First Class.  Maybe it’s better to fly Business Class and