Quote from flytiger:
Check this out. Is this Armageddon, or what????
Liz Rappaport
CDOs Marked To Market
6/29/2007 3:23 PM EDT
I hear the dropoff this afternoon is partially due to CDOs of all qualities being marked to market, so to speak, a.k.a. repriced, because funds are doing quarter-end reviews and reports. The repricing is ugly and could spell pain for more than the Bear Stearns hedge funds.
According to one reliable source, high-quality AAA CDO paper is marked down by about 6 points, but lower AA and A by 20 to 30 points, and some BB and equity tranches (the lowest-rated and riskiest paper) are being marked down as much as 80 points
With 22:1 leverage, what's a markdown of 6 points worth?? 80 points??? I think the days of Hedge Funds have peeked.
sounds potentially very severe. i hope i eventually get the opportunity to trade under more natural leverage conditions. this phenomenon has gotten a little ridiculous
better not be a bailout by the taxpayers