Bear Takedown

You may not be aware of it, but there's been a quiet meltdown of a hedge fund at Bear Stearns. Mike Shedlock has documented the events which have left a lot of investors with no options to get out of the fund, and with very large bond losses guarateed due to the subprime mortgage meltdown. Here's how it goes:

Since no one wants to comment I will: This is just the start of what's to come. Many hedge funds are going to have assets seized and sold over bad bets on CDOs, the carry trade, and just plain out and out over leverage into everything.

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This saga has two more steps to complete and by the time it concludes here will be more scandals underway all following the same pattern: leverage troubles, redemptions halted, asset seizure, lawsuits, and investigations.

I think these meltdowns were expected. The remaining question is how many and how large will the failures be as the slow-motion meltdown continues (we're in the very earily stages of the subprime problem). Government officials say the problem is not likely to hurt the overall economy much. Shedlock says it will. One thing for sure, we'll know who's right down the road a piece.