Posted by HankM on March 10, 1999 at 17:30:05:
Phil is right on! For zero coups to work the way they have been “promoted”/“taught” … you have to have a seller that really doesn’t understand what is going on. That is a bad thing for both reasons that Phil gave, plus if you ever end up in front of a judge, number 2 looks even worse to the Judge … you became predatory, not a deal maker.
So I concur that they are a fallacy. A similar concept though would be trading paper at face value when bought at a discount; here it is the seller of the paper that must be convinced and you have to do your due diligence as to the borrower and collateral … but the underlying asset is worth it’s face … go read the cash flow forum and some of the how to articles.
Same basic concept, better execution.