When Fred Joseph came on board Drexel Burnham Lambert back in the mid 1970s, the firm was fairly small. But he met a young trader at the firm he considered to be brilliant: Mike Milken. Yes, this was the beginning of a major transformation on Wall Street, which would lead to the decade of deals during the 1980s.

Unfortunately, over the weekend, Joseph died. He was 72.

A Harvard MBA, Joseph got his first break on Wall Street when he joined E.F. Hutton in 1963. Seven years later, he moved over to Shearson Hammill and and eventually became the chief operating officer.

It seems strange to invest in a security that is called "junk." But it's a huge business that can be quite lucrative. Hey, it made Mike Milken a billionaire. What's more, junk bonds have become a key financing mechanism for growth companies as well as leveraged buyouts.

The market for junk bonds has been particularly strong over the past few years, with a large spread between junk and high-quality securities was. That is, until the "credit crunch" hit Wall Street in August.

Now, Edward Altman – a professor and a finance guru – is predicting some grim news for junk bonds for this year. Basically, he thinks the default rate will spike to 4.64%, according to a piece in the Wall Street Journal [subscription required]. Keep in mind that the default rate was a paltry 0.51% in 2007.

From Sunday to Tuesday, the private equity firm Apollo Group struck $37 billion in deals, buying Realogy and Harrah's. This is the subject of an excellent piece in today's New York Times.

The master of the universe at Apollo is Leon Black. And he is a veteran. During the 1980s, his mentor was Mike Milken. If you look back into the 1980s, Milken did some big deals in the casino industry (he was the key backer for gaming mogul Steve Wynn). So it makes sense that Apollo is gravitating to the gambling space with its big play for Harrah's.

Black has a knack for finding value. When the junk bond market imploded in the late 1980s, he was there to buy the gems. He is also has lots of experience with distressed companies and understanding the intricacies of bankruptcy.

If the boom in private equity deals falls apart (which seems inevitable), Black will probably know how to capitalize on that situation too.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates DealProfiles.com.