Neither goods or currencies, it seems.

Durable goods orders decreased 5.3% on the month. Oops. Ex-transport, it was still down 1.6% (transportation orders, such as aircraft, are frequently very volatile), which is not a good sign at all.

But the truly bad news is that all of shipped, unshipped, and more importantly inventories all increased, with the latter at all-time highs. Ramping inventories are often the sign of a recession in process, as manufacturers are frequently dumb enough to build right into slowing demand, just like homebuilders are.

The Dollar. Ouch. We broke out of what should have been a reversal pattern to the bottom on the DX, now trading below 74.5. Currency speculators have been piling into the "short dollar" trade; it remains my view that this is an extremely crowded trade and the ship is listing, but so long as the consensus view remains that "we're screwed and everyone else will be fine" this is likely to continue - for a while.

Unfortunately for those speculators that "consensus view" is almost certainly wrong. But the "hate America" crowd is a large group, and they'll run straight off the cliff to their own destruction. 'Tis fine with me; the thesis that says "oh America is screwed but we'll decouple" is the nuttiest thing I've ever heard; come talk to me about that when America isn't well beyond the majority of global GDP.

Fannie reported a crushing loss of $3.80/share; a number which simply stuns. Housing has (or will) bottom this year? Ha. The impact of subprime foreclosures hasn't even really begun to be felt yet; what's being foreclosed on now defaulted in August! To believe that we're near the bottom is to deny both history and common sense. Come talk to me six months after the peak of subprime and ALT-A resets have both passed. That will be in a couple of years!

The Dow has put together a several-hundred-point rally over the last few days based on..... what? Hope. The old 'slope of hope' claim. Yeah, right - pull the other one.

In other "bearish prognostications" I have to add Kunstler. He's even more bearish than I am on America, but his angst derives from the same place mine does - our politicians' insatiable desire to buy votes via the K-Street lobby instead of the public's weal. The former insists that the banking system not be forced to take its marks and call a zero a zero (if you can't sell it, its worth zero - ask anyone at a garage sale who winds up still having a garage full of crap!) while the latter would benefit tremendously from those-who-are-zeros being forced into the light where they wither and die from exposure (by literally being embarrassed - then shorted - to death.)

OFHEO was apparently strong-armed into removing part of the Fannie and Freddie caps which spiked the markets by a good 70 points immediately. Any rational analysis says that this doesn't mitigate risk, it adds it - and given that there is no real guarantee on these institutions by the government and Fannie just posted a huge loss, do you "double down" into a declining market?

Speak of "doubling down" here's a hattip to CubGuy99 on the Forum, where this little gem was dug out of the Fannie 10Q (I hadn't gotten to reading it yet)

"The total number of loans we purchase from MBS trusts is dependent on a number of factors, including management decisions about appropriate loss mitigation efforts, the expected increase in loan delinquencies within our MBS trusts resulting from the current adverse conditions in the housing market and our need to preserve capital to meet our regulatory capital requirements. For example, we recently introduced a new HomeSaver Advancetm initiative, which is a loss mitigation tool that we began implementing in the first quarter of 2008. HomeSaver Advance provides qualified borrowers with an unsecured personal loan in an amount equal to all past due payments relating to their mortgage loan, allowing borrowers to cure their payment defaults under mortgage loans without requiring modification of their mortgage loans. By permitting qualified borrowers to cure their payment defaults without requiring that we purchase the loans from the MBS trusts in order to modify the loans, this loss mitigation tool may reduce the number of delinquent mortgage loans that we purchase from MBS trusts in the future and the fair value losses we record in connection with those purchases."

You gotta be kidding me.

This **** is legal?

We take a delinquent SECURED loan and replace the delinquent part with an UNSECURED LOAN WHICH IS INHERENTLY OF LOWER QUALITY FOR THE EXPLICIT PURPOSE OF NOT REPURCHASING THE BAD PAPER AND THUS TAKING THE MARK TO MARKET LOSS THAT WOULD BE REQUIRED.

Heh GSE "Agency Paper" buyers!

WAKE THE HELL UP - IT LOOKS LIKE YOU ARE BEING SYSTEMATICALLY SCREWED ON PURPOSE AS THIS SURE AS HELL APPEARS TO THIS WIZENED PAIR OF EYES TO INCREASE, NOT DECREASE, THE RISK YOU ARE TAKING IN HOLDING THIS PAPER!

If there is any rationality in the pricing of risk this SHOULD result in a decidedly-nasty impact on the price of that agency paper.

Note to those same agency paper investors: THERE IS NO GOVERNMENT GUARANTEE ON FANNIE AND FREDDIE PAPER.

To the Pedestrian Investor: If you own a bond fund, including a money market fund that holds "agency" paper, you damn well better wake up and pay attention to this lest you get a very ugly surprise at some point in the not-so-distant future!

AS FAR AS I AM CONCERNED THIS DISCLOSURE MAKES FANNIE A POTENTIAL SHORT TO ZERO CANDIDATE.

Late in the day Charlie Gasparino said that Dinallo is considering getting legislation passed that would outlaw the writing of swap insurance on CDOs.

The market did not react much to this, unlike the pump it got from the "bailout" chatter - but it damn well should have, because if this comes to pass it will destroy the issuance of these securities under the claim that they are "AAA" paper. Securitized paper will be forced to trade at its underlying credit quality and the games will STOP!

The impact of this cannot be overstated.

THIS NEEDS TO HAPPEN but this is NOT priced into the market. NOT EVEN CLOSE. It will essentially "fork" a huge part of the securitization revenue stream permanently, which destroys one of the Bull's pillars - that "the market for these loans will come back."

Uh uh!

Bernanke talks and gets pounded repeatedly about mortgage rates being market set instead of Fed set. Gee, you think some of these fine Congresscritters have read the Petitions? Oh, but you say, Congress never listens. They never care what we think, and its all a waste of time.

Yeah, ok. That's why I have heard multiple references to specific points that have been raised, right? Your voice is never heard or paid attention to, which is why Bernanke has been repeatedly roasted over these very issues?

Now consider this - how hard would he have been pounded if there had been 100,000 signatures on those same Congressfolk's desks instead of 1,000?

I'll answer it for you - he'd have the Chrysler Building up his butt right about now.

WHEN, not if, you lose your job, gasoline is $5/gallon and your food bill has doubled as we see continued stupidity I do not want to hear you WHINE about the outcome, when you had the opportunity to do something about it and REFUSED.

Again, a plane ticket to DC is about $500, round-trip. Your time? I don't know what that's worth. Nor do I know how you assign value to the future your children and grandchildren will have.

But I do know the possible range of outcomes, with a reply of the 1970s being about the most benign. The "middle", or most likely case, is something like Japan - a 20-year+ moribund economy with ramping unemployment, but no possibility of the "stick save" they got from personal savings (because we don't have any.)

The worst case is a 1930s rerun - or beyond.

Think Ben doesn't know this? WRONG. He admitted it in his testimony, if you listened carefully. In fact, he said way too much but the fact that the market didn't immediately sell off 500 points means that essentially nobody paid attention to him - or traders have the cognitive capability of a flea. I heard it, and stuffed a bunch of TWM in my IRA. Any questions?

So what's left?

Well, Sir Bucky will eventually turn, but only when our mess is recognized as "less bad" than everyone else's. That day is coming, by the way, and sooner than you think.

This doesn't mean it won't be bad for us. It will be. Very bad. Maybe ruinously so.

We have refused to develop our own energy resources out of a misguided sense of "green", which has extended to prohibiting any new nuclear energy development for 30 years. The bad news is that it takes 10 to get a new plant online, 5 or more on a crash program, so we're now 5 years away from deploying any new nuclear electrical generating capacity - right when we need to get as much energy production into non-foreign-sensitive areas as possible.

We've foolishly decided to burn our food, which has contributed mightily to the ramp in commodity prices, never mind the above with energy development. Burn up natural gas to make electricity, and guess what - that's the "raw material" for ammonia, which is the primary input to fertilizer.

As for oil itself, we have lots of it off the Gulf Coast. We've refused to drill for 90% of what we know is there and has been found over the last 20 years. Fat Cats don't want to see the lights of a drill rig at night from their 30th floor condo window, ergo, we can't go get it. Can we refuse to fill their Gulfstream sitting at the Destin Airport since they're largely why we have gas headed to $4 and beyond? Oh, by the way, diesel fuel is used in tractors too, which means even more energy price inputs to agricultural prices.

Make sure when you go to the grocery store you thank the liberals. They're the reason that Milk is now north of $4/gallon - a 30% increase in less than a year. They're the reason that hamburger has nearly doubled in price, as has pork, and chicken is headed there too. They're the reason that wheat has gone lock-limit-up multiple days in a row on the commodity exchanges.

In short, your liberal buddies (and perhaps even you) are the reason we have huge price ramps in commodities at the same time that our artificially-postponed price increases in everything else that we shoved off into the rest of the world while we were allowing the mad creation of shadow credit (which should have immediately rebounded into price increases here and this signalled the monetary disaster that shadow credit can cause) have started to boomerang.

For those who say "but we need to save the planet!" or trot out some euphemism about "Global Warming" you had better not be the ones complaining when you lose your job and then are forced to stop consuming energy as your house and car are next to disappear! Such is the price of your folly; forced conservation is such fun when it is served up on you eh?

Let's talk geopolitical risk - what's really driving metals prices. Its not talked about, but it should be. China has north of 1.2 billion people. Russia, which shares a border with China, has 140 million, or about 1/10th of China.

Russia has a net surplus of both oil and natural gas, and in addition has a surplus of land per-capita. China has a dearth of all three. So long as China can pay for what they need, this is not a serious problem.

But as we flush, to believe that China can turn to internal consumption and pick up the slack, with a per-capita income of under $2,000, where ours is more than 10 times as high, is pure fantasy.

I wouldn't take that bet at any odds.

What I expect to happen is that China will eventually run out of ability to subsidize, and will turn to what nations have always historically turned to when faced with severe internal pressures and a resource-rich nation sharing a border with them.

Now consider Russia's dilemma in this situation. They have 1/10th of the population and a conventional military that is tiny by comparison to China. What option do they have should a serious threat to take resources by force appear on their border?

And should they take that option, how does China respond?

This isn't a situation you want to see, no matter how bearish you might be on the economy.

For those who think that metals are responding to "inflation", think again. Between this, the risk of a wider Middle East conflict, and the newest activity in the Balkans, you need not look very far to find good reasons for people to be concerned about geopolitical stability.

Or, if you prefer, history. Gold's spike in 1980 wasn't "inflation". Have we really gotten to the point where we don't teach history any more in our schools and a simple search of historical precedent is too much to ask? Iranian Hostage Crisis anyone? And gee, wasn't the collapse in gold's price closely tied to the outcome of a certain Presidential Election and the certainty that said President-elect would, if the hostages were still being held on his inauguration day, "settle that instability" in a decisive way?

How soon we allow people to forget that which is inconvenient to those who have something to sell.

Don't be a sucker.