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.

With interest rates skyrocketing and the 10-year US bond in meltdown, you know what that means, right?

So many ramifications

1) buyers who got pre-approved a couple of months ago likely might not be approved today, so they won't be able to close

2) potential homedebtors will see their expected monthly payments soar, which may lead them to rethink closing

3) ARM resets will be even more painful

4) Foreigners may sell bonds even faster, making interest rates go up even faster

5) Home prices fall even faster so that the dummies who buy based on monthly payment (vs. asset price) can afford the same monthly payment

6) Renting is even cheaper today vs. buying or owning (with an ARM)

7) "Analysts" were wrong yet again

8) China finally realizes they've been playing a fools game, and sitting on $1 Trillion of worthless paper is not a good idea

What'd I miss?

Treasuries plunged on Thursday as fears of tighter monetary policy globally fueled a break in yields above 5 percent, unleashing another round of heavy selling.

Yields across all maturities rose to or above 5 percent for the first time since July and benchmark rates posted their biggest one-day spike in seven months.

"We are being overwhelmed by mortgage-related selling," said Thomas di Galoma, head of Treasury trading at Jefferies & Co. in New York.