I am so not rooting for Emirates Team New Zealand in the America’s Cup any more. The exhibition that they put on today was not worthy of a top-level professional sailing team. Things go wrong on race boats and the test of skill is dealing with it. They failed the test big-time, embarrassing themselves and their supporters. They don’t deserve the Cup with that kind of teamwork (or lack of it). A torn spinnaker is a frequent problem, the sails are fragile. It happens. You deal with it. There can be no excuses: it wasn’t blowing hard, there were no big seas, it was daytime, they had lots of people and they’ve had ample opportunity to practice. They even had a new chute on deck being hooked up. Come on guys. Someone should be fired.

And a little financial comment for sarcastic relief.

The ABX.HE indices were pasted again today. So were the CMBX (commercial mortgage-backed paper). There’s certainly some fear out there. Of course, the ABX.HE indices are based on second mortgages, typically one imagines from 80/20 structures. Unlike the first mortgages, seconds are often a total loss when a foreclosure occurs, which explains why some of the lower quality indices are trading down in the 50s.

Also, there’s a lot of quiet talk about the rising default rate in the so-called Alt-A mortgage pools. These are loans made to borrowers with prime credit scores, but which do not conform to the Federal agency guidelines. This is where the “investors” are. And they are starting to walk away.

“‘We remain nervous about the end of the week, when many leveraged investors in the CDO markets will have to mark down their positions,’ debt strategists at Barclays Capital in New York said in a June 28 report. ‘The worry is that this will be large enough to trigger margin calls which, in turn, will cause other liquidations and so on.’”

“A senior portfolio manager of a U.S.-based mortgage arbitrage hedge fund told The Post that the fund woes in London were `totally secondary to the mortgage market’s real concern: the end-of-June valuation process.’

The hedge fund partner referred to the close of business this week, when hedge fund portfolios are valued, largely from the trading data provided by Wall Street brokers.

The bond value declines across the subprime-mortgage spectrum are likely to lead to performance losses for many hedge funds, although exactly which ones facing pain is the subject of much trading-room gossip.

Also at month’s end, hedge funds that have, or are perceived to have, subprime-mortgage bond exposure are going to have to begin to return the capital of investors who have requested it back.”

The bond rating agencies - S&P, Moody’s, Fitch - have a reputation for closing stable doors only after the horses are long gone. Bloomberg says they are doing it again with mortgage debt.

“Almost 65 percent of the bonds in indexes that track subprime mortgage debt don’t meet the ratings criteria in place when they were sold, according to data compiled by Bloomberg.

That may just be the beginning. Downgrades by S&P, Moody’s and Fitch would force hundreds of investors to sell holdings, roiling the $800 billion market for securities backed by subprime mortgages and $1 trillion of collateralized debt obligations, the fastest growing part of the financial markets.

`You’ll see massive losses from banks, insurance companies and pension managers,’ said Joshua Rosner, a managing director at investment research firm Graham Fisher & Co. in New York and co-author of a study last month that said S&P, Moody’s and Fitch understate the risks of subprime mortgage bonds. `The longer they wait, the worse it’s going to be.’ “

The stock market had a strong rally yesterday, but the credit markets weren’t so ebullient. Many of the ABX indices pushed to new lows, interesting that even (especially) the A tranches are now being taken out and shot. Only the AA and AAA are still holding their ground. Numerous LBO credits are being postponed, revised or withdrawn, and another, smaller, hedge fund invested in subprime mortgages bit the dust. Carlyle Group, the buyout firm run by David Rubenstein, postponed a planned $415 million initial public offering of a fund that invests in bonds backed by mortgages. Sounds like Everquest. The Mortgage Lender Implode-O-Meter is now reading 91. Yet I still read people calling the bottom in residential real estate.

Fed day today. Boring markets expected until the announcement, then wild swings.