June 28, 2007 (LPAC)--Today's Financial Times reports that in the wake of the failure of two Bear Stearns hedge funds over the past two weeks, a number of bond offerings have had to be cancelled. Among others, Foodservice, the American subsidiary of the Dutch supermarket giant Ahold, had to cancel a $650 million bond offering on behalf of its takeover by KKR. MISC, the world's biggest owner of liquefied natural gas tankers, cancelled a $750 million bond offering yesterday. The failure of the Bear Stearns funds has cast a pall over all collateralized debt obligations (CDOs), not only those based on mortgages, which has now spread over junk bonds and commercial bonds generally.

The plain fear is, the guy who wakes up from a nightmare, and finds himself in the nightmare from which he woke up. They were having a fantasy; the fantasy turned into a nightmare; they woke up and found out that the nightmare was real.

The great fear, as expressed by the Bank of England last week, is that a takeover deal will go sour in the middle, leaving the bankers holding the bag.

Banks are brought in as bettors in schemes. When the schemes go under, you get a collapse of the bank because it was foolish enough to bet. The plain fact is, they're investing in nothing! This is a John Law bubble, and the bubble has reached its end point.

All this is nothing but gambling. What you're talking about is a pyramid club; the end of the pyramid club!