From a reader’s email on Bill Fleckenstein’s site: “A friend of mine works as a Portfolio Manager for a $2.2b CDO pool of subprime loans. I spoke to him today for an hour. Asked how he is doing, he says “nothing”. I ask what do u mean nothing, i hear all these stories about CDO’s and losses (Bear Stearns for example), he shrugs and says nothing will happen until the Rating agencies do something. Asked about losses, he says they are there but he doesn’t have to mark to market his portfolio until someone discovers it or the Rating agencies force his hand. So his plan is to lie low and collect the management fees and pretend as if there are no losses. Asked about management fees, he laughs and says it’s a low 50 bps. On $2.2b, that’s a cool $10m yearly which he and his four colleagues have to split up at the end of the yr. He says he has the best job in the world and says there is really no work to every day. Just wait and hope that the rating agencies don’t downgrade his CDO pool and voila, at the end of the yr, he and his partners can split the $10m spoils (minus the expenses for one Park Avenue office, and a secretary). I am amazed that no body (regulators, investors, the public) hasn’t beseeched the Rating agencies to review all the Subprime CDO’s by now given the headlines and the incredible losses hidden there. This is a SCAM and somebody needs to stop it.”