Ludwig Wittgenstein, Tractatus, 5.4732
You had to know it was coming. With the demise of the sub prime mortgage market in 2008, the corporate whore greed heads had to come up with something new. They had to figure out a way to get all the F9 monkeys back to work and out of retirement from their tax havens. The market for junior oil and gas, and the proverbial gold mine of junior mining stocks has all but dried up, due to consolidation. And even if they did exist, the sheer scale is no match of the size of sheer numbers that the sub prime mortgage market once had.
|Old fashioned corporate bond|
|A very ancient trading company bond...|
The Oracle of Ottawa has added a little video to explain all the advanced concepts of the social impact bond. It was the least complicated one he could find at the time of this writing. The problem is that every pitch for SIB's is different in varying degrees. The main problem that the Oracle of Ottawa see's is that there are going to be several add on layers to every government program that they will finance. First, there is the investment bank that will underwrite the so called bond issue, that really is not a bond. This will no doubt add 20% on to the cost of the said program! Second, while the investors (suckers?) money is at work in the project (train wreck?) there is another mediator, or rather and ideological policeman, after all the project cannot really be allowed to succeed can it? You certainly can't sell social impact bonds, if there are no social problems! Add on another 10%. And Thirdly at the end of the project, you have to audit it of course to insure that it was all after all, a total failure. Again this is legal ground paper for the next batch of bonds, and legal conformation for the valuation of the puts on the bonds that were sold by the investment bank to the hedge fund that bet against the project! The variations are endless! Isn't the future great?