Presumably that's because Merrill couldn't unwind them. The securities are that complex, with some part of the CDOs having nothing to do with mortgages per se, but they are just derivative bets on mortgages, so they don't have a call on anything.

Maybe Lone Star, with its servicing knowledge through Accredited Home, which it bought last year, may have more of an idea how to value the stuff. But if you are cynical, you could say that when you throw in the financing, the stuff is close to worthless.

After this deal, we still have no knowledge of what this stuff is or how it really works, That's unbelievable to me. We have no real knowledge of the vintages, the ratings, nothing, of this paper.

My takeaway: Merrill couldn't figure it out, the auditors couldn't figure it out, it couldn't be hedged or reserved against, so just write it to near zero and start over. That's what really happened here.

We do know that the insurance, which allowed people to claim this unfathomable stuff is investible -- and allowed Merrill to represent higher values than it got yesterday -- is basically worthless and the insurers are paying a fraction of what they are supposed to pay.

That's how they are staying in business. By not paying. It is Russia: the bonds pretend to work and the insurers pretend to pay.

Eric Dinallo, the New York State Insurance Superintendent, said there are 13 more deals like this coming, 13 more deals that unwind the insurance so the stuff can be sold and the insurers stay in business. If you liked the Merrill deal, presumably you will like the next 13.

There may not be as many buyers as we think for this stuff. LS can buy it because it can sit on the stuff for five years and maybe even work out the individual mortgages within the CDO, if it really is worth anything. LS is already in with Accredited Home Lending. Who else is in? Fortress (NYSE: FIG) (Cramer's Take)? Blackstone (NYSE: BX) (Cramer's Take)? Oh please. I am sick of hearing about private equity to the rescue.

Go tell the people at Cerberus. Go tell Bob "going according to plan" Nardelli. I have to believe that more than 10-20% of mortgages are going to pay off. But I also know that some of these contracts simply exist to pay other contracts that are tangentially based on mortgages paying off. Again, who can buy this stuff?

We also know the government -- the SEC? -- simply doesn't exist as a regulator. The fact that bonds worth x could be worth half x a week later is a total violation of Sarbanes Oxley, which says you simply aren't supposed to be able to misstate the worth of your assets without being punished.

But nobody's going to punish Merrill for this "mistake." Sarbanes is proving unenforceable after this transaction. The kitchen sink is back.

We also now know that anyone who has this paper still on its books and carrying it over 22 cents on the dollar is kidding himself, because there is no penalty whatsoever now for getting it wrong or overstating its worth as Merrill repeatedly did. It might not matter.

It is just broken-field running out there now. You can say whatever you want, value it at whatever you want, nobody cares. We can also say safely that many of the mortgages in these CDOs are a product of fraud and organized crime, which is why they are defaulting at rates up to ten times the default rates of real banks and real lenders. But nobody acknowledges that either.

Keep in mind going forward that when you buy a financial with CDO exposure, you are just pretending to value the company. What you are really buying is an overly-shorted instrument that might rally on anything: a short squeeze, talk of another Lone Star deal, whatever.

So why would anyone buy one of these financials? Because of fear that they will miss the bottom. Because of fear of the dramatic gains that were made yesterday and right after July 15th. Because the Merrill deal "worked" and it is obvious that there are other buyers.

In other words, you are buying because you don't want to be left out. Sometimes that all it takes, even if you are buying something that is overstating its worth dramatically.

That's the real takeaway of what happened yesterday,. We didn't really get price discovery, we got a company, Merrill, that is now just a brokerage again, and we like it because now it can be valued and it is solvent. That's quite a move considering that's all that really happened yesterday when you think about it.

And after yesterday's run, we go from thinking who will be killed by CDOs to who will be the next Merrill. Don't worry there will be plenty of Merrills. The question is: are there plenty of Lone Stars?

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Citi Faces $8B More in Writedowns: Analyst
Cramer: Merrill, Sell the Whole Thing
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer held no positions in stocks mentioned.