http://www.bloomberg.com/apps/news?pid=20601087&sid=aN4sulHN19xc&refer=home Rosner estimates that collateralized debt obligations, which have packaged thousands of bonds and derivatives into new securities, will lose $125 billion. Institutional Risk Analytics, a Hawthorne, California-based company that writes computer programs for the four biggest accounting firms, says 25 percent of the face value of CDOs is in jeopardy, or $250 billion. Oh, oh....big trouble ahead ??
ah the infamous black swan finally appears. this is going to be fantastic. reverse leveraging and forced selling are two of the funniest things to watch in a market at the same time. i would suggest to all you are about to watch history in the making here. this will make the savings/loans crisis and the ltcm debacle look like a walk in the park. if people want to make money out of this trade quite simply buy the credit spreads. that is what i have done.
The Real Money columnist confirms the "80 pt markdown story " today. Also, a contact spoke to an exchange official who confirmed same. There is not enough equity in the CDO's to cover the debits; it rolls to equities, and everything else. What a nice job the regulators and politicians did on this one. Don't say we didn't warn them.