Bear Stearns Hedge Fund Meltdown

I wanted to put down a few thoughts so I wouldn't lose them before you all return to World HQ.Here's the 30 second version of my apocalyptic view (WC WAPing this event).The Bear HF had $600mm in capital that was levered 10 to 1, so $6bn invested (I'm now hearing there was some in margin accounts = more leverage, but just rumors). The problem was in the CDO (collateralized debt obligations) with sub prime mortgages as basis. As they tried to price the HF, early estimates were the CDO's had declined 6%, but with the 10 to 1 leverage - 60% of the equity was gone. Then a few weeks later, the CDO's were estimated to have fallen 18% now all the equity is gone & the lenders were underwater by $480mm (or 8.9% of capital lent). Merrill Lynch decided to liquidate.This is where it gets interesting - With a mark to model, prices are estimated until a transaction takes place. Now that Merrill is establishing a market price, how many others are at risk larger than estimated losses? Like Bear, is the equity gone? Are there other lenders underwater? Is there counter party risk?The icing on the cake is that the CDO's where there are currently problems were under-written in late 04 to early 05. Underwriters got more aggressive through the end of 06, so presumably there is more of this to come as the sub prime loans become "seasoned."What do we do? Given the quality of our companies & clean balance sheets, we should have very little direct exposure - only thing I can think of is counterparty risk to some of the forward oil & gas hedges, but that even seems remote. Most likely investors become more risk averse that could lead to multiple contraction in the short term (we may want to review high multiple stocks or those with the longest time horizons). But longer term, I think we are likely to be a net beneficary of the money that was chasing outsized returns without an appreciation for the risk profile as it returns to more traditonal products.