Anything but Revalue

Check it out. Read this article.

This is a slow motion train wreck worth keeping an eye on. Financial dark matter, hidden from sight and illiquid, is deteriorating. The players in these complex transactions are levered to the hilt. The Bear Stearns fund mentioned in this article started with $600 million in equity and borrowed up to $6 Billion!

This hidden from view market is a ticking time bomb. The players are not marking to market their exposure so until a trade happens or a rating agency downgrades your exotic security of choice you can pretend everything is OK and continue to value your exposure to this mess at par. Hence the reason Bear would throw another $3 billion of good money after bad. Normally when a fund blows up they admit their suckery and liquidate. In this case liquidation would cause all other players to come to grips. So the market is frozen and waiting for the inevitable downgrades which are very slow in coming since the rating agencies get paid by the players.