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George D. Friedlander Managing Director, Fixed Income Strategist Private Client Investment Strategy 212-816-8721 george

. Beginning to look at the financial world as two feedback loopsFirst feedback loop Bubbles Hunger for yield Collapse of Risk Premia; illusion that risks had truly changed Hyper-aggressive lending/leverage, dismantling of risk models, explosion in derivatives Fragile hedges Huge overrating of CDOs, a key component of the housing bubble Inadequate transparencyIn munis: Dominance by leveraged/hedged buyers, slope scrapes bottom, credit spreads scrape bottom..

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George D. Friedlander Managing Director, Fixed Income Strategist Private Client Investment Strategy 212-816-8721 george

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    17. Steeper slope and ratio slope Retail order periods Couponing—need for institutions to hold a core amount of retail coupons Saturation issues Wider credit spreads Need for additional credit research Challenges for the muni high yield sector Liquidity concerns Sensitivity to headline risk Munis vs. Treasuries/Corporates, not LIBOR Need for bond insurance

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