Bear Stearns finally reported the news on their two hedge funds that bet on subprime mortgages and other similar credit-based securities. The results? Not pretty if you invested in said funds.

Bear Stearns announced today that investors have little chance of getting any money back after the blow up in the two funds. As we have been reporting here at Ponder This… for quite some time, the increased leverage and increased financial complexity of the structured credit markets, along with the extreme optimism in the housing sector and generally loose credit economy-wide, has led to the perfect set up for a substantial readjustment in the broader financial markets, with effects likely to be felt in broad economy.

Simply put, WAY too much risk was taken on with little regard for the potential consequences, and the Bear Stearns hedge fund blow ups are just one other example of the fiasco that is likely to come about due to the historically loose credit of the past 10 years.

Investing with significant leverage, at the current juncture, seems to me a great way to go bust. Due diligence is key.

Click here to read the Bloomberg article on Bear Stearns’ money pit.

Be sure to note the quote: “This is a watershed,” said Sean Egan, managing director of Egan-Jones Ratings Co. in Haverford, Pennsylvania. “A leading player, which has honed a reputation as a sage investor in mortgage securities, has faltered. It begs the question of how other market participants have fared.”

Filed under: Social Mood, Economics