It won't exactly be the finish to the financial year that everyone was hoping for a week or so ago when it seemed as though we had shaken off those early June blues about rising interest rates and falling Chinese stockmarkets.
Even if the market finishes with a bang today in a burst of last minute window dressing for the end of the financial year, the easy money party is now over.
Risk is back in fashion and there's now a bit of a hangover to endure. All those glamour gigs of hedge funds, private equity, buyouts, deals, the Macquarie Bank (at its lowest point since April but up 81c yesterday to $85.93) to doing business, are still going to be around.
They won't go away.But some of those leveraged deals and their financing will come home to roost before the shake-out is finished.
It's now the old fashioned ideas of risk and reward that will be to the forefront of consideration, rather than distribution, or buy, sell, flick and take your cut through fees, points and other annuity streams.
What we are seeing isn't the end of the world like 1929; it's more like the end of the tech and net boom in 2000 which was marked by the huge Time Warner takeover of AOL, which was so big and outrageously excessive.
Likewise, the float of the Blackstone private equity group in the US last Friday and the run up from the issue price of $US31 a share, to $US38, and then back down again this week, will be seen to have marked the highpoint and the start of the adjustment from the years of declining risk aversion and easy money.
Easy money allows the incompetent to paper over mistakes and hide the errors: now we are seeing the return to investors pricing in risk. The canny have retreated to the sidelines in US Government bonds until they see what happens.
The unwise are still trying to play, get the last deal up, make the bonus and score a killing.
The widening spread between junk bonds and other forms of speculative finance and US Government bond rates, is telling us the days of easy money are gone.
Deals will still be done but they will have to reflect risk and return, and the possibility that things can go down, and not just up, up and up.
The bull market in bonds, stocks and financial derivatives, anything financial, is fraying at the edges.
Since last Friday, the yen has risen by around one per cent, hurting carry trade investors (it's why the Aussie and Kiwi dollars got a dose of the wobbles midweek).
The Blackstone Group's shares have tanked by 15 per cent; and Wall Street has refused to bail out two Bear Stearns hedge funds hit by the subprime crisis.
(Bear Stearns had to do the bailout on its own after other big banks refused to help. Many remembered the Long Term Capital Management bailout in 1998, how Bear Stearns refused to be a part of the rescuing consortium. Who says money doesn't have memory, or its owners don't enjoy revenge?).
Carlyle Group has postponed a planned $US415 million initial public offering of a fund that invests in bonds backed by mortgages after a slump in the U.S. subprime market.
Carlyle said in a statement overnight to issue was being put off and a revised timetable for the sale is being prepared.
Carlyle planned to use most of the money from the IPO to buy AAA-rated residential mortgage-backed securities. The fund also targeted loans, high-yield bonds, and collateralized debt obligations, all of which are a bit risky to buy in the present market climate.
In London, Caliber Global Investment Ltd., a $US908 ($A1.1 billion) million fund managed by Cambridge Place Investment Management, will close after losses on subprime mortgage debt.
Caliber said in a statement yesterday that it would sell assets and shut the fund within a year. The fund, listed on the London Stock Exchange, reported a second quarter loss of $US8.8 million last month.
The Caliber fund invests in mortgage and asset-backed debt and about 60 per cent of its investments are in the US.
The decision comes after Queen's Walk Investment Ltd., a fund managed by London- based hedge fund manager Cheyne Capital Management Ltd., said last Friday that June loss $US91 million ($A10.6 million) in the year to March 31 in part because of the subprime mortgage slump.
Shanghai's overvalued stock market is losing its zip, as are markets elsewhere.
And the cause of all these woes (besides the easy money), is the US housing sector which resembles a battle ground, with casualties still being found and forecasts of worse to come before it improves.
Now, just as markets overshoot and undershoot, so to the events of the past five trading days could very well be an overreaction.
But if it is, then the pillars supporting the current market confidence are mightily weak. Strong markets are not shaken by hedge funds going bad, or shares dropping.
Just as the Long Term Capital bail out back in 1998 cost billions and rattled markets, shares, bonds and other investments didn't head south for another 18 months.
The amount of money now invested across all classes of assets is many times more than in 1988, the stakes are higher, the time horizons shorter; communications are better: so are the trading parties and mechanisms in place.
But the underlying worry is that no one knows how these new fangled securities called CDOs (and their imitators) are going to behave in a set of circumstances no one has experienced for years.
Bill Gross, chief investment officer at Pimco, the world's largest bond fund, wrote said in an investor letter this week that the subprime mortgage crisis "is not an isolated event and it won't be contained by a few days of headlines".
And Amitabh Arora, the New York-based head of interest rate strategies at Lehman Brothers, said: "The bigger risk now is that it calls into question C
