and damage it may have on the overal financial industries. In simple language, CDO is an synthetic instrument that invest banking industry created to be traded as a insurance policy for all the mortgages that home buyers borrow. When times are good, CDO investors will receive quarterly coupon payments as reliably as they hold a US treasury bond. CDO's yield is higher than US treasury bond. High senority CDOs have always been regarded very safe, like a no-loss fixed income investment. Every funds in the world are buying them, treating them like safest bet they can have. Credit rating companies like Moody has indirectly misled the financial world by assigning very high AAA rating to these credit instruments. Misleading all the world's fund to pour into these presumably no-loss investment. Now, the safe floor under them are falling apart. Borrowers are defaulting on their loans, junior CDO tranches are now wiped out, senior tranches are now paying loss premiums to CDS issuers because CDO is an insurance policy for CDS and CMS. In layman's language, this CDO over CDS/CMS over mortgage loan structure is a multi-layer protection structure to spread the risk by one instrument act as insurance policy for another instrument. In the end, the whole world's money is insurancing the mortgage loans we are paying.

So, right now, we are seeing a chain effect unwrapping and spreading. How far will go and how much damage will it do? Even experts don't know, Fed doesn't know because this credit derivative layer is now so widespread and so intertwined that it would boggle everybody's mind.

I hope for the better. Howevwer, don't assume that one company or business can be totally shielded from this credit melt-down. Nobody can escape. GE can't escape. Microsoft can't escape, Coke can't escape, our 401k can't escape...