The next shoe to drop?

CDO's or credit cards? Bloomberg reports that Fitch is downgrading CDO's on credit default swaps. "Sales of CDOs to investors fell about 11 percent last year to $491.6 billion, and probably will slide 65 percent this year." Hmmm... on the CDX index, investment grade is getting about 97.8% and high yield about 90.9%. Seven percent is a pretty big spread. On $491 billion, that's almost $41 billion. The investment banks are still choked up with $200 billion in leveraged buyouts that are stuck on the balance sheet because they don't want to cut their losses at 10 cents on the dollar. Big mistake. They need to get out while they still can. If their losses get any worst, they won't be able to hedge without taking huge losses on the expense of dubious coverage. Oh, and don't forget the monoline insurance companies. That shoe will drop as well.

So the question is, "What has three shoes?" Nothing. There must be a fourth shoe out there that isn't even in the picture yet.