Cattle Dunk Cottage vs. Mezzanine CDO
My recent trip to India provided a few insights, which I would like to share. On the one hand, I was reading ‘The Big Short’ from Michael Lewis, offering an excellent overview of the developments leading to the financial crisis (as well as an entertaining read). I was just reading about Mezzanine CDOs as a key trigger for the crash in 2008/09 on a car trip from Delhi to Jaypur. Then, I suddenly looked out of the window and observed a little brown cottage (see pic below). I asked our extremely well informed driver what this was. He answered this would be a way to store cattle dunk pellets and then made it very specific: ‘This is bullshit’. The little brown cottage briefly reminded me of what I was just reading about RMBS/Mezzanine CDOs and their role in the financial crisis.
However, I had to reverse my initial thinking later on:
The bullshit/cattle dunk cottage serves important needs. The pellets are used as fertilizer and for combustion purposes. A lot of the characteristic Indian red bricks are made using cattle dunk pellets for brick-ovens, I was told. I guess, in real estate terms this ticks the alternative usage box.
And the cattle dunk cottage is environmentally friendly as it is fully recycled. Also I cannot see any immediate danger of causing a global financial crisis. I have to admit, that I am still uncertain about their carbon footprint, when used to make fire.
In essence, the bullshit cottage is important, useful, green and pretty safe. It can also be used for different purposes.
I guess, that makes 5:0 when compared to Mezz CDOs.
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