And then the dominos started to fall, one by one...

PIMCO's Gross: Subprime crisis not 'isolated'

NEW YORK (Reuters) -- Bill Gross, manager of the world's largest bond fund, said Tuesday the subprime mortgage crisis gripping U.S. financial markets was not an isolated event and will eventually take a toll on the economy.

Gross said there are hundreds of billions of dollars of subprime residential mortgage-backed securities (RMBS), derivatives on subprime RMBS and collateralized debt obligations (CDOs) that buy subprime RMBS and/or the derivatives on the RMBS - all of which he considers "toxic waste."

Gross, who manages the $104 billion PIMCO Total Return Fund, said the subprime crisis "may be just what the Fed has been looking for - easy credit becoming less easy; excessive liquidity returning to more rational levels," he added.

According to Gross, the subprime crisis will unfold in these resets. The ultimate impact they will have will be on the impaired prices of homes - "the collateral that's so critical in this asset-backed, and therefore interest-rate-sensitive, finance-based economy of 2007 and beyond."

NEW, FMT and LEND pretty much bit the dust today. This subprime implosion is fascinating isn't it?

NEW stock plummets another 69%

FMT down another 33%

LEND off 26%

CFC off 5%

Does anyone else have some serious dot-com deja-vu today?

This meltdown won't stop with subprime and the lenders. Nope, that's not where it ends. That's where it BEGINS.

NEW YORK, March 5 (Reuters) - Shares of New Century Financial Inc. dropped 69 percent on Monday on fears it could go bankrupt as rising concerns about defaults triggered a broad sell-off in the mortgage-lending sector.

Subprime lenders, which make loans to people with poor credit histories, suffered the biggest declines.

But the meltdown also spread to Countrywide Financial Corp, the largest mortgage lender, whose shares fell on concern that even homeowners with good credit scores will miss more payments.

"We think there is further downside risk, possibly to $0," wrote Merrill Lynch & Co. analyst Kenneth Bruce. "Bankruptcy seems a likely course of action."

Many subprime lenders are being forced to buy back loans at a loss, and several have quit the business or have gone bankrupt in the last three months.