This afternoon after the market closed we were treated to two announcements on the newswire - both Accredited (LEND) and Fremont (FMT) had their auditor (Grant Thornton) quit over alleged irregularities in the firm's routine financial statement audits.

For what its worth, this sort of announcement is never good. It usually means that the auditor found something they didn't like and when they either requested cooperation from the company to figure it out, or were preparing whatever sort of statements they needed to prepare related to that, they were told to effectively pizz off by the company in terms of cooperation.

In addition, New Century Financial filed bankruptcy, and named their creditors. Lo and behold, some interesting names showed up there! Among them:

• Countrywide (CFC)
• IndyMac Bank (NDE)
• Washington Mutual (WM)

Oh hoh! The rest of the list was a "who's who" of large money-center banks (Lehman, Morgan Stanley, etc) - but these three names stand out.

While the amounts of these claims is not currently known, what stands out in this filing is the fact that all of these companies have steadfastly told investors that they are not materially exposed to subprime. Now we find out that the materiality of their involvement may in fact be in question, but what has just been revealed is that we were not told that they had interlocking business relationships with New Century!

So, Countrywide, IndyMac Bank and Washington Mutual - what else haven't you told us about your intertwined business relationships? Exactly what level of exposure do you have to these companies that are certainly in trouble, including but not limited to New Century, Fremont and Accredited!

Now add to this that IndyMac had their General Counsel resign Friday. They alleged in their press release, of course, that this was "prearranged". I might believe that, and I might also believe that there is a Santa Claus.

This entire sector of the stock market is imploding right in front of our eyes. This is like a long tunnel with a truck full of propane parked over the tracks. You can see the faint glow of a light down the tunnel..... and feel the rails start to sing. You know what is coming. You know how ugly it is going to be.

But despite all that, you just can't take your eyes off it....... because its gonna be that good.

Disclosure: I'm short or have PUTs on a whole bunch of these companies, and am loving every minute of this.