What's wrong with CDO?
I was reading sixth edition of Security Analysis by Ben Graham and David L Dodd and in 1934 they provided the answer to this question. Here is what they said about investing in Fixed Income Securities: I. Safety is measured not by specific lien or other contractual rights, but by the ability of the issuer to meet all of its obligations. II. This ability should be measured under conditions of depression rather than prosperity. III. Deficient Safety cannot be compensated for by an abnormally high coupon rate. IV. The selection of all bonds for investment should be subject to rules of exclusion and to specific quantitative tests corresponding to those prescribed by statue to govern investments of savings banks. In first point above Safety not measured by lien but by abilty to pay they further explain: The basic difference confronts us at the very beginning. In the past the primary emphasis was laid upon the specific security, i.e., the character and supposed value of the property on whic...