Bear Stearns to investors: Oops! My bad!

That money you invested with us... yeah, there's a problem.

No, we aren't freezing redemptions. Actually, we don't have to impose restrictions on redemptions, because there's no money to be redeemed! Talk to our lawyers.

Investors in two troubled Bear Stearns Cos. hedge funds that made big bets on subprime mortgages have been practically wiped out, the Wall Street firm said yesterday, in more evidence of the turmoil in this corner of the bond market.

Bear said one of its funds was worth nothing and another worth less than a 10th of its value from a few months ago after its subprime trades went bad, according to a letter Bear circulated and to people briefed by the firm. The Wall Street investment bank -- known for its bond-trading savvy -- has had to put up $1.6 billion in rescue financing.

If you think this is limited to a couple of Bear Stearns funds, think again. The Bear funds were in "high-grade" securities. Imagine how CalPERS and Texas Teachers are doing with their bottom-of-the-barrel "toxic waste." Hint: not well.

This news may have come a little too soon for my liking. Countrywide, which makes a living selling this loans that no one wants to buy any more, was down a buck after hours. If it goes down too much by Friday, the profits from the option spread will disappear.