Economy and General Discussion

I read this on another blog, the implications are like a lightning bolt. "A friend of mine laid out some connections which I find fascinating. First, the Bear Stearns auction of the Merrill CDOs has been continued today. Remember how they initially seized $400 million of CDO obligations, then it went up to $800, then $850m? Well, today Duetsche Bank got into the fray and added another $350m of CDOs it seized and is auctioning, so there’s over $1bn of CDOs up for grabs. Now the auction is continuing. How many reasons are there for that? One. They can’t get the price they want. The rumors in the currency trading circles are that the auction was also continued so the big lenders have time to position themselves with options on the downside of xx vs. yen pairs because (and here’s the great part) the big houses need to unwind the carry trade *right now* to have liquid funds available for margin and leverage calls when it becomes apparent that over $1 trillion of CDOs being held are worth considerably less than face value. Think it through slowly, because it’s huge. I can barely grasp the full extent of this process, so maybe we call in the black-belts to handle this one. Update: Bloomberg reports that Merrill has pulled the plug on the auction after selling only a “small portion” of the CDOs. http://www.bloomberg.com/apps/news?pid=20601103&sid=aKayDn8BDFB8&refer=news Apparently they either could not get the price or the howls of protest have penetrated - or both. Now to see if Deutsche Bank follows suit…" As I posted elsewhere, if a shred of this is true, and I think it is, the fall out = systemic risk.