Late word this evening from the FT that Bear is canceling an IPO: Bear Stearns to cancel Everquest IPO. Everquest is tied to the two stricken Bear hedge funds. Earlier, Reuters ran a story on how Bear may get through its hedge fund crises without suffering major bottom line losses. But now Bloomberg is reporting that Bear is going to take on a bigger chunk: Bear Stearns May Take on $3.2 Billion of Fund Loans, People Say. The truly scary issue is that CDO pricing via mark-to-model is a complete delusion as Bear is now forced to take on loan obligations because creditors are realizing that the sale of the collateralized debt obligations are exposing how far off the mark mark-to-model pricing is. The last thing creditors want is for the CDO's to be marked-to-market which could cause a chain reaction selloff throughout the entire industry. This is starting to look like the equivalent of Three Mile Island, and the loan offer may yet contain the situation keeping it from becoming a financial Chernobyl.
While I've made negative posts on Bear, Blackstone and housing, this doesn't necessarily mean I think the stock market is going to crumple tomorrow. The bulls are still intent on pushing stocks higher. Just the mere word that Merrill decided to stop liquidating the assets it seized from Bear, was enough to stop the bleeding today and further empower techs. As the old saying goes, "never short a dull market".