Exploding Equity

Or Negative Equity...The attention being brought to the CDO/ CLO or Collateralized Debt/Loan Obligation market is keeping the executives at Bear Stearns, Goldman and Merrill Lynch up at night for good reason...The words backed by mortgages or collateralized is fine when there is equity but when the (leveraged) "equity" implodes then the market shifts...it happens in a heart beat and is happening now...with the over the counter market that is not marked to market and traded with non regulated and non registered hedge funds you have nothing.....let me repeat you have nothing....the equity at the broker dealers now trying to save face with the investors is extremely fragile and not very abundant. If one private equity deal fails here because of one bank jumping from the syndicate not electing to participate in yet another highly leveraged deal...WATCH OUT!

Words like distressed, creditworthyness, reputations, change in assessment, wind down, remaining assets, structured finance and investment policy committees are front and center. This comes all out from the prospectus we discussed last week highlighting the nonsense in the Blackstone LP.... Congress and Bernanke want this to stop, top out and correct its excesses.....

Most people have no idea how hard it is to raise corporate money....much less debt. When measured in the billions like right now the market expects to raise over $200 billion in the next 30 to 60 days to pay for announced sub prime (non investment grade) lending transactions this is going to get much more difficult.....the cost of money is going much higher!

To make money in this market you have to be away from the crowded trade....

Danny Boy seen here does not own CDO's he likes an easy boat ride watching the A Scows compete in the A Invitational.