Worse, worst and worser.

New data on pending home sales - 85.5, lowest on record. Down 6.5%. 21.5% down y/o/y.

Worst numbers since the series was created.

Did the market respond? Well yeah. A bit. But the bottom line is that the market just "sighed and moved on."

But it also did some whistling past the graveyard. But here's the reality on all of this - can you sustain a market rally - and a strong consumer - without a housing market?

Oh hell no. There are so many who say this "won't happen", but folks - that's just plain stupid, and the cheerleaders continue to spin everything towards "well this means more rate cuts even though the economy sucks."

But wait a second..... if the economy sucks why is the market rallying? Why are we at 14,000 on the Dow? If the economy doesn't suck then why do we need rate cuts?

This is the "short bus" sort of mentality that traders in the equity markets are known for, and its exactly the same sort of bull**** that was being run in 1999 and indeed all the way up to March of 2000! Of course we know how that turned out.

ICSC Same Store Sales came in unchanged after down 0.1% last month. No growth in consumer spending on that report eh? Two in a row.... hmmmm.....

In the "you can't make this **** up" department we have this:

"As far as the world's biggest bond investors are concerned, the Federal Reserve is failing to restore confidence in the U.S. credit markets.

Pacific Investment Management Co., TIAA-CREF and Insight Investment Management say the central bank's decision to lower the overnight lending rate between banks by half a percentage point last month won't prevent the economy from slowing or corporate defaults from increasing. Lehman Brothers Holdings Inc. strategists say last month's rally in high-yield corporate bonds, the biggest since 2003, may fizzle by year-end."

Someone needs to appoint a special prosecutor and indict some of these *******s.

The "push for yield" is why we are in this mess! They pushed for the higher yields and "more exotic" instruments, and now that the music has stopped and the pain started, they want someone - anyone - to come bail them out!

The particularly GALLING part of this is that it was about 20 years ago that this exact same **** was run by Millken and his merry band with the S&Ls. It did the same thing - it imploded the S&L industry - and ultimately the taxpayer was the one who got the check to the tune of $150 BILLION - that's with a capital "B".

This one will be far worse.

Well what the ****? We have people from PIMCO showing up on CNBC saying that "please Uncle Benny, try to save us" even though they say it won't work? Why? So they can exit their trades and dump it on someone else - ultimately, the US Taxpayer?

Think it won't wind up there? Think again. TIAA-CREF, for example, has a lot of 401k and 403b money, no? So do most of these other guys. Guess what - its all polluted with this ****!

You want to know how bad this has gotten? If you have a 401k, look at the prospectus for your "government" or "conservative" bond funds. Do not believe the title of the fund, look at the prospectus! Look at what's in there. I bet you can't find one that doesn't hold CDOs, CLOs and/or mortgage-backed paper. Betcha. Even better, you'll find this **** in money market funds! Yet of all of it, only "Ginnie Mae" (GNMA) bonds are truly "as safe as government paper"; all the rest has at best an implicit guarantee, no explicit one, and anything that's a derivative carries no guarantee or reasonable degree of safety at all!

Why do we tolerate this? I've been talking to friends of mine who have 401k money and are freaking out - equities are at all-time highs, they see the consumer slowdown - its evident to them - and then when they move their allocation to "conservative bonds" they find a ****load of junk in there along with all this derivative crap! There is nowhere safe for them to hide with their retirement money!

What's even worse is that 90% of them have absolutely no idea what a CDO is nor a MBS, and when they read "conservative" and "government bonds" in the title that's what they think is in there - but its not!

This is out-and-out FRAUD and it makes me ill. In my view every corporation that has a 401k that claims to have a "conservative" investment that is polluted by this **** needs to be sued off the face of the planet by their employees. ALL OF THEM. If you work for someone with a 401k or have a 403b through a quasi-government institution (e.g. you're a teacher) you ******n well better start investigating this **** NOW and banding together with your fellow employees to get it stopped and/or bring legal process, because I guarantee you this - your employer does not have the ability to cover the losses if you wait to sue them until after your 401k implodes!

Sure, in a bull market nobody cares, because everyone makes money and defaults are sparse if not non-existant. But what happens when the economy turns? When suddenly performance isn't so good? When CDOs, CLOs and RMBSs DO default? When real capital losses are taken in these so-called "safe" investments?

Act now folks while things are somewhat calm or you will get an ugly surprise that you may not be able to recover from!

Of course we have the cheerleaders out again - this time from Goldman, talking about the bank situation and corporate credit:

"This transfer of liabilities from the capital market to the bank system will be temporary if credit conditions continue to improve in the wake of the Federal Reserve's massive liquidity infusion, including a half-percentage-point interest rate cut on September 18, according to Hatzius."

Yeah ok. How about you tell the truth? The truth is that these banks intentionally structured these "credit" deals so as to keep the liabilities off the balance sheet. This, of course, was predicated on people being willing to EAT this commercial paper when it wasn't really asset-backed at all, but rather was stuffed with fancy debt instruments like CDOs, CLOs and mortgages!

Well, suddenly people aren't willing to do that any more!

Why not?

Because they have figured out that they were defrauded - in short, they were lied to and are not going to take on that risk without a significant increase in the price!

So NOW we have Goldman (who incidentally is one of the "bad actors" in this whole mess) out trying to soothe the capital markets, telling them that "it will all be ok."

Uh huh. Ok. Tell 'ya what Goldman - how about this? How about you, and the rest of your cronies, document all of your conduits and SIVs, and lay bare for everyone exactly what exposure is in there and under what terms?

Oh, you don't like that deal do you? No indeed you don't!

Why not?

Because if these banks did this they would likely violate their regulatory capital requirements and be seized by the government! In short, in order to be able to lend more and more money (and thus make more and more money) the banks have figured out how to game the regulatory system and evade the very safety systems that were put in place after the Depression to keep banks from imploding and screwing their customers!

This **** needs to stop. OCC, OTS and The Fed need to step in and put an absolute halt to it and the Reg 23A letters need to be rescinded. If they won't then Congress needs to, and it needs to happen NOW.

I know, I know, I'm a broken record on this. But reality is what it is and what we've got now is a system in a high state of stress which got there not due to "market forces" but rather due to cheating, and until this is unwound we have an unsafe and unstable set of circumstances.

The best part of this is that Wall Street is trying to avoid unwinding all this, because that will mean their EARNINGS have to return to something sustainable against their actual regulatory capital!

Well as they say - DUH!

Here's your technical!