by Calculated Risk on 6/21/2007 06:04:00 PM

From Barron's: Bear Stearns Hedge Fund Woes Stir Worry In CDO Market (hat tip Chance)

... the value of CDOs is measured by a "marked to market" technique that pegs them to their value in the market, rather than their book value. ... CDOs containing mortgage-backed securities seldom trade, which can mean that their "marked to market" value does not reflect recent events.
...
[Peter Schiff, president of Euro Pacific Capital] argued that if the bonds in the Bear Stearns Companies Inc. (BSC) funds were auctioned on the open market, much weaker values would be plainly revealed.

"This would force other hedge funds to similarly mark down the value of their holdings. Is it any wonder that Wall street is pulling out the stops to avoid such a catastrophe?," Schiff said.
...
"Their true weakness will finally reveal the abyss into which the housing market is about to plummet," he said.

I'm not sure about housing "plummeting into an abyss", but I do think housing is poised for another downturn with no bottom in sight.