Just when you thought the subprime CDO mess couldn't get any worse, it's gonna get a LOT worse real quick, thank you Bear Stearns hedge fund blowup

Can you say systemic meltdown? Can you say spreading cancer? Can you say Enron-like unraveling?

Homebuilders are holding inventory on their books that is still wildly inflated - that per Sarbanes Oxley must be marked down to true market value. The financials and hedge funds are holding Subprime and Alt-A liar's loan CDO cancer at wildly inflated values, that also must be marked down to true market value.

That's why Merrill didn't sell their Bear Stearns junk the other day - if they did, then the new market price would have been achieved, and you'd have hedge funds (and Merrill themselves) failing left and right.

Get ready HP'ers. The fuse has been lit.

Peter Schiff, president of Euro Pacific Capital] argued that if the bonds in the Bear Stearns Companies Inc. (BSC) funds were auctioned on the open market, much weaker values would be plainly revealed.

"This would force other hedge funds to similarly mark down the value of their holdings. Is it any wonder that Wall street is pulling out the stops to avoid such a catastrophe?," Schiff said.

"Their true weakness will finally reveal the abyss into which the housing market is about to plummet," he said.

Merrill Lynch supposedly to hold onto $850 million subprime cancer CDOs taken from Bear Stearns' blown up mortgage hedge fund

Man, I love a good hedge fund blow-up. But I especially love one that "experts" didn't see coming, while HP'ers know damn well many more like it are on the way.

Interesting thing about this whole Bear Stearn / Merrill Lynch mess is that Merrill was gonna dump the cancer as fast as they could, but then all of a sudden they put the word out that they weren't gonna do that. Now why do you think that is?

1) No buyers?

2) Unattractive firesale prices?

3) Middle of the night calls from Bernanke and Paulson (and Cheney and Bush)?

4) Would blow up the entire industry, including Merrill, even faster?

Oh, what a tangled web trillions of dollars of mortgages that aren't gonna be paid back weave. Can you say "systemic meltdown"?

Merrill won't flood market with securities

NEW YORK -- Merrill Lynch & Co. has backed away from a threat to dump about $850-million (U.S.) of securities it seized from Bear Stearns Cos. hedge funds, according to people with knowledge of its plans.

Merrill sold a small portion of the collateralized debt obligations through an auction, said the people, who declined to be identified because the details haven't been announced. It plans to hold on to the remaining securities for now, one person said, without being more specific.

The decision, and the scrapping of a sale Wednesday by JPMorgan Chase & Co., diminished the risk that a large amount of securities would be liquidated immediately. Merrill set the sale in motion to reclaim its loans to the two hedge funds, which had posted losses of as much as 20 per cent by betting on CDOs. The plan may have confirmed that other funds were overvaluing their holdings of similar securities, potentially causing a chain reaction of writedowns causing billions in losses.

"It's an industry issue," said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. Mr. Hintz was chief financial officer of Lehman Brothers Holdings Inc., the largest mortgage underwriter, for three years before becoming an analyst in 2001. "How many other hedge funds are holding similar, illiquid, esoteric securities? What are their true prices? What will happen if more blow up?"