Sub-prime CDOs Dressed Up In Hooker Heels!

Holders of investment-grade portions of collateralized debt obligations may lose all of their money in the securities, which have been dressed up in "six-inch hooker heels," according to Bill Gross, manager of the world's biggest bond fund.

Subprime mortgage bonds made up about $100 billion of the $375 billion of CDOs sold in the U.S. in 2006, Moody's Investors Service and Morgan Stanley data show.

CDOs are created by bankers and money managers who bundle together securities and divide them into slices with credit ratings as high as AAA from Standard & Poor's and Aaa by Moody's.

Gross maintains his prediction the Federal Reserve will cut its target interest rate in the next six months as a slowdown in the housing market causes risk premiums to rise and the U.S. economy to slow. Gross said in October that slowing U.S. growth would prompt the Fed to lower rates in the first half of this year. The Fed has kept the benchmark rate at 5.25 percent for the past year.

-Bloomberg