On Merrill selling CDOs for 22 cents on a dollar

The market partied yesterday because, hey, all the bad news must out by now, right? Well, we’ve heard that song and dance for some months now, haven’t we? Then more bad news comes out. (In the meantime, shorts like me lie in the weeds happily waiting for this little rally to start getting tired.)

Back to the party. More like a hangover, says Asymptotic Life, quoting this colorful trader.

“They’ve established a benchmark for everyone else,” said Michael Cohn, of Atlantis Asset Management. “These guys who have cash waiting on the sidelines for the final puke of these securities are now making phone calls trying to find out who else wants to puke, who else wants to sell at 22 cents on a dollar. There, that’s where the bottom hits.”

But Merrill only sold their hangover-producing older vintages (as they are called in CDO-land.)

The Merrill sale involved “U.S. super senior ABS CDO, the majority of which comprises older vintage collateral – 2005 and earlier.”

2 0 0 5 !

How many “Vintages” might we have left? 2 0 0 6, 2 0 0 7?

If the older vintages were like drinking Thunderbird, then the 2006-2007 vintages are akin to drinking Sterno – as they can be even more toxic.

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