CNBC educational video on subprime loan CDOs and derivatives - a must-watch for HP'ers

So if you're a hedge fund, how can you lose everything investing in subprime mortgages?

Now you know.

International Herald Tribune asks: When does a housing slump become a bust?

Here's my take. It's all based on leverage, and as we know now, with stocks you can get 50% margin or leverage. With homes, it's infinite - $0 can get you $1,000,000 or more. Lose 10% on $1 million of leverage/debt, you're bankrupt. Heck, even little kids can get $2.4 million with nothing to back it up.

5%: Correction / Bust / Adjustment
10%: Housing Panic
15%: Epic Historic Housing Crash
20%: Housing Devastation
25%: The end of all that is sane and holy real estate meltdown
30%: Are those locusts? Grandpa get your gun! Housing Armageddon

Interesting thing is that in some markets, we're already seeing 30% off. This one will be for the history books. Wonder what they'll call it?

NEW YORK: Many Americans fear the consequences of a housing bust, but few know what one would really look like.

Think about it. How far do housing prices have to fall before a slump becomes a bust?

In the stock market, we have a pretty good idea what a crash is. Among stock market experts, there is a consensus that a 10 percent decline in a major index is a correction while a 20 percent decline is more significant: a crash or a bear market, depending on the time involved. For the macro economy, there is also agreed-upon terminology. For example, a recession means two consecutive quarters of declining gross domestic product.

But when it comes to declines in housing prices, there is no such framework. As experts debate whether we are headed for a housing bust, you would think that we should at least be able to define it.

The problem is that economists have not agreed on a definition. In part, that is because severe declines in housing prices tend to be rare events, not a common subject for discussion. The last really big decline in national housing prices occurred more than 70 years ago, during the Great Depression. Another reason is that the data measuring the housing market is far more opaque than that for the stock market.