And you end up with a mortgage backed security.

So these shares each of these one million shares this is a mortgage backed security.

I think it's a distraction.

I have a whole video on mortgage backed securities.

That's how loans worked before the mortgage backed security industry really got developed.

But we have to start with the basics.

Some of them are going to pay ahead of time.

But anyway, this isn't the crux of it either.

I make are to the bank.

And that's why they are called derivative instruments.

And the cash flow will come back to it.

You group them all together.

Mortgage backed security.

But you should watch the videos on mortgage backed securities and collateralized debt obligations, if you want to get a better understanding of exactly how the money flows go.

You'd have to sell that loan to someone else.

So there's no way for him to invest in this security and to get better returns.

So let's make some very simple assumptions for ourselves.

And this guy's an investment bank instead of a commercial bank.

And the loans are just the right on these 10 payments.

Those are essentially derivative securities that are derived from mortgage backed securities.

Real estate.

Now to finish the job you began! It was a pleasure meeting you, but we don't want you here.

This real estate guy.

But on average this Special Purpose Entity will then be able to pay a dividend.

So this is a form of a collateralized debt obligation.

Do pay?

Hey, it's a pleasure. Good to meet you.

loses its central importance.

I assure you, that is unnecessary.

Coldwell Banker, I'm a real estate agent! Please, don't hurt me.

And so money came from when the owners of each of these mortgage backed securities each, let's say, paid 1,000 for the mortgage backed securities.

Charlie the barber.

Somebody solvent?

I develop real estate.

I only have two minutes left in this presentation, so in the next presentation I'm going to focus on what this guy can now do with the loan to turn it into a mortgage backed security.

Guaranteed to work perfectly for a thousand years.

No. Oil and real estate.

Do Low Interest Rates Ensure High Asset Prices?

And that's why we say that it's a mortgage backed security.

And this is what you probably read some articles about, these hedge funds with these computer models to value their mortgage backed securities.

It's just not feasible.

She is an estate agent.

Mmhm. It's a real estate investment.

They'd start with your bonds preferred stock, and then move on to real estate.

I even thought I saw the deeds to city hall somewhere.