Burning Bed

In 1989, First Boston Corp, made a bridge loan for a buy out of Ohio Mattress. The Junk bond market collapsed before First Boston could refinance the loan (i.e. Sell.) The broker dealer ended up owning a big stake in the bedding manufacturer...this deal became known as the "burning Bed."

Wall Street's broker dealers are going to get swamped with broken deals and their equity, which is relatively small, is going to get buried here....

The quality of the companies the private equity boys are buying is marginal at best...that is why their stocks are lower not higher and why would anyone want to buy these companies higher yielding debt? The answer is investors don't want to buy it...this mkt has topped and will have a substantial correction in front if it....history will show Pension funds, Endowments, high net worth individuals and consultants have been taken to the cleaners.

Hedge funds long this debt are going to get killed...Bear Stearns is just the beginning. Current bridge loans to these take overs are the icing on the cake! Bear says sorry ALL YOUR MONEY IS GONE!

The JP Getty famous quote, "If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the banks's problem." What happens when when the collective hedge funds owe the banks several trillions of dollars.

Bernanke is going to be tested here, just like Greenspan was in 1987. Congress has become an embarrassment.

Oil keeps going higher......save some powder for later in the year!

Danny Boy seen here is studying his options.