The CDO (collateralized debt obligation) blow-out at Bear Stearns recently continues to simmer on the back burner with the media doing a fine job of trying to keep the heat from being turned up.

But, here is what is interesting or should I say here is what is scary.

Following this blow-out, Merrill Lynch stepped up to the plate to take some of these smelly, putrid CDO’s off Bear Stearns’ plate. Merrill was subsequently stunned when they tried to put some air freshener on these CDO’s and re-peddle them back to the market. The market was only willing to pay Merrill a fraction of what Merrill thought they were worth. And herein lies a problem of tectonic-like magnitude.