"A time-honored tradition among governments has been to release bad news late on Friday, ensuring it ends up only in the Saturday newspaper, the least-read paper of the week (back when people did such things like read newspapers). But J.P. Morgan, viewed as one of the more prudent when it came to risk management, managed to casually toss off news of its own credit-related issues in regulatory filings, issued two trading hours before the weekend begins, right around the time the market seems to be oversaturated with news about banks with bad positions. Bank of America was not similarly lauded, but it has also snuck its third-quarter 10Q out there late Friday as well.... The truth about this CDO nonsense is that at this moment, the last thing the banks holding the paper want is the sudden appearance of an efficient market. Which is why the announcement from Standard & Poorâs that a CDO managed by State Street Global was being forced to liquidate its holdings should scare the heck out of them. In a sense, whatâs kept the lid on these losses is that nobody knows just what these various pieces of paper are worth, and many of the financial services firms held the paper in part because they felt the market would recover to a point that would satisfy whatever âmark to modelâ or âmark to mythâ they were doing. After all, Merrill Lynchâs once-CEO Stan OâNeal wouldnât comment on the firmâs earnings conference call as to whether their CDO exposure had been marked down to a level that could âclear the market.â Because when no price exists, the price is whatever you want it to be â but if a liquidation has begun, investors can no longer can keep up the charade of paying no attention to the man behind the curtain, hence the desire by these big banks to create a presumably shape-shifting form that would eat up these assets without showing any details, sort of like the Blob. S&P said the trustee of the CDO, called Carina CDO, âhas not informed us when the collateral will be liquidated, we believe the liquidation process has begun.â
http://blogs.wsj.com/marketbeat/2007/11/09/four-at-four-cdo-losses-who-us/?mod=yahoo_hs The JPM and BAC tidbits posted on "The Fly on the Wall" just before the market closed Friday so I sold GS and bought a few puts.
I do not pretend to know how much effect this will be on the balance sheets. All I know is that publicly GS has stated on several occasions that their exposure is minimal.. Wouldn't that be a criminal offense if they are caught lying? PD