Trading Desk,

Thanks for your thoughtful insights.

 There are some (such as Morningstar) who are attempting to minimize / trivialize the causes of the current market conditions.  For example, the currect article by Rachel Barnard called "Demystifying a Credit Crisis Bogeyman".

Aside from the title suggesting that the current crisis is simply a "bogeyman", she explicitly states things such as:

"the structured investment vehicle, or SIV, now has an evil ring to it because of its association with the credit crisis"   and she further suggests that their bad reputation si simply the result of "media hype". 
Well, Duh.....  There is a good reason for that -- there is a direct link between SIVs (and CDOs) and the current dredit drisis.

She then casually explains that SIVs are a normal part of the investment world and that they simply: "The SIV borrows money for a short time and ... then invests that money in securities that pay higher interest rates."  She unfotunately fails to mention that they receive higher interest rates because they are loaning it out long term -- such as for shaky adjustable rate mortgages that have little chance of ever being repaid.  Although she is Ph.D, she apparently never heard the first rule of investing:  'Never borrow short and lend long' --  it has long been considered a formula for disaster.

Then she has the audacity to tell us:  "SIVs have been around since the late 1980s and have historically been considered safe investments".  Yes, they have been around since the late 80's -- they were created by Citi -- one of the biggest offenders.  And, they were only considered safe by those who were skimming the profits -- otherwise, nobody else understood the shell gave they were playing -- not even those who ran them.  In fact, because of their opacity, they have spent most of 2007 trying to figure out what their exposure was...

Then she tries to make us believe:  "Some SIVs hold subprime securities in their investment portfolios. Although the percentages are not large and there have not been any losses yet".  I think that she owes us facts rather than opinions -- especially when close to a dozen banks have already taken losses in the billions and threaten to take more.  And, if it were so innocuous, then why is Charles Prince, the CEO of Citi, in the unemploment line?

Then she distorts the facts by telling us:  "There are two categories of companies that are exposed to SIV problems: the banks that back the SIVs and any companies that lend to them."  -- Which is implying that individual investors have no risk here.  And, she even tells us that the likes of FIdelity and other managers of money market funds that financed the bad mortgages held by SIVs would absorb the loss rather than pass it on to their investors.  If that is so, why does Fidelity deny it?

So, I think that we all need to be beware of the current market conditions.  SIVs and CDOs got their start and matured into the monsters that they are in anonymity coovered up by the offshore, zombie corpprtations invented by Citi and the their ilk.  It is time for openess and clarity -- not the obfuscation of  Rachel Barnard and Morningstar.