Cheap, Cheap, Cheap

This WSJ article got a lot of things right, and deserves praise given the deluge of poorly written articles this week.

Triple-A commercial mortgage-backed securities are trading at roughly 70 cents on the dollar, meaning they would produce a 20% return if held to term.

That's

Back then the cumulative default rate on loans made in 1986 reached 36%.

This number sounds fishy, but not having the data handy let's concede its true. That would mean the average default on any given year for the 1986 was around 3.6%, some were cured, some were foreclosed on and took losses.