Well November dawned yesterday to a sea of blood.

Jobs jobs and more......

Up 166,000 according to the "official statements". More than double the consensus.

The problem is that 103,000 of those "jobs" are a Chimera. A ghost in a machine. They were "created" by a computer model, not by a payroll count, tax receipts or a census. What's worse, their model "created" nearly 40,000 jobs between construction and finance. Do you believe that those numbers could possibly be correct given the mess in mortgages and homebuilding?

One little additional fly in the ointment is found here:

"But a separate survey of households showed that fewer Americans were employed last month over all. The labor force shrank by 211,000 jobs, and 465,000 Americans said they were no longer working."

So let me see if I understand this correctly - the economy added 160,000 jobs, but 211,000 fewer people are in the labor force than were working last month.

Is this new math or something?

No, its our wonderful government.

Should we believe their numbers, or should we pay attention to ICSC and Redbook retail sales numbers, the former of which was +0.1% and the latter -0.3%, with both on a two-week rolling basis solidly negative. Oh, and consumer confidence is falling, the Chicago PMI is negative (under 50 at 49.7) and the manufacturing index significantly weaker over last month.

All of those numbers aren't collected by The Government.

I wonder who's lying?

The futures went insane positive on the announcement. The 10 Yield bounced higher immediately as well.

Unemployment was flat at 4.7%.

Factory orders up 0.2% in September. Not exactly roaring, but better than the negative print for August, I guess.

"The market is sound" so says CNBC.

Yeah, right. Ok.

How about Merrill Lynch?

"The transactions are among the issues likely to be examined by the Securities and Exchange Commission. The SEC is looking into how the Wall Street firm has been valuing, or "marking," its mortgage securities and how it has disclosed its positions to investors, a person familiar with the probe said. Regulators are scrutinizing whether Merrill knew its mortgage-related problem was bigger than what it indicated to investors throughout the summer."

SssshhhhENRONshhhhhhh.

Specifically....

"But the company's fortunes unraveled after revelations the company had used off-the-books deals to hide billions of dollars in debts."

The problem in the allegations is that they claim that Merrill had set forward a "floor buyback" price; in other words, they were exposed to a risk of loss if the market wasn't good enough. This, if true, makes the transaction potentially unlawful because it shoves off the risk of a market decline to someone else on paper, but not in reality. That sort of "book cooking" is not allowed - if you sell something and thus remove the risk from your balance sheet, it actually has to be gone, with the entirety of the risk going with the sale.

ENRON pulled this with their infamous "Barge" transactions (which, not-so-amusingly, had Merrill involved!) which came back and blew up in their face. Now we've got allegations that the same games are being played throughout ALL of the major Wall Street investment banks!

Why don't we just send in the auditors and government investigators, identify all of this nonsense, call them all out, put it all out on the balance sheets, and let the chips fall where they may?

And the real fun comes with all these "Level 3" assets - in other words, "marked to whatever I want to say it is" that all of the big "investment banks" have enough of that crap on their balance sheets to literally make them insolvent if they were to all go bad.

Now of course nobody expects them all to be worth zero.

But - are they worth even a small fraction of what is being claimed? It simply is impossible to know. and there's the problem, because we need to know as investors, as bank regulators, and as the public.

Everyone wants to talk about "liquidity" being the driver in prices. The truth is that what's really going on here - and has been - is outright fraud and deception.

Indeed, my best estimate is that a full thirty percent of the market's current "value" is based upon fraud and deception, and not on actual value.

Its wrong and it needs to stop. Yet so far we've had the typical anemic response from the regulators - instead of the aggressive, Doberman-style response that this market needs.

You don't think that the big Investment Banks making huge campaign contributions to everyone on The Hill has anything to do with this, do you?

Make no mistake about it - the fraud in the system is systemic.

Lawsuits are just getting started in the real estate and lending space. We've got suits over organized appraisal fraud out there now too, with the latest filed just yesterday.

My outrage over the appraisal lawsuit is that there are thousands of signatures on a petition sent to Washington DC more than five years ago complaining about illegal arm-twisting in the property appraisal business, and absolutely NOTHING was done.

This lawsuit is symptomatic of the underlying problem on "The Street" - marking "assets" to whatever you want to claim they're worth, just like houses.

Same game.

Same lie.

I'm tired of it, you should be tired of it, its long past time when we should simply refuse to accept it. This sort of nonsense and game has permeated the entirety of the world of finance over the last ten years, going back to the boom times of the Internet bubble.

Back then we had companies that were "valued" as worth $1 billion when they had a business model that could best be described as "I'm on the Internet, therefore I'm worth $1 billion." Mark-to-I-made-up-a-good-number.

Today we have investment banks that have market caps of $40 billion that have the basis of their value resting in a portfolio of securities that they claim are worth $80 billion because, well, that's what they say they're worth!

Now perhaps you and I are from different planets, but on the planet I'm from when you claim that you've got a value of $80 billion in some portfolio you have to be able to sell it to someone for that amount of money!

See, this is the world that I live in every single day as a trader.

My portfolio is "marked to market" every night and if some option or stock position that I have open has nobody willing to give me a bid for it, it is marked on my balance sheet as worth ZERO!

And more importantly, my cash position is either debited or credited to cover my margin requirement on those positions!

It doesn't matter whether I think those "assets" are worth a billion dollars or not - the price is marked at zero because nobody will give me anything for it.

That's the beginning and end of the discussion, and that's as it should be.

But in the world of Investment Banks, that's not how it is. All of these guys not only mark their portfolios to whatever they want to, they then pay themselves bonuses on that inflated number!

Now I am normally no fan of "landsharks" and the "sue everyone" mentality, but this time I'll make an exception.

What we need - desperately - is the mother and father of all class-action lawsuits by property owners. ALL who bought during the "mother and father of all bubbles" need to sue the banks, appraisers and money center institutions involved in this.

Yes, I'm advocating a multi-trillion dollar class-action lawsuit. Every buyer of property from 2003 until the turn in early '07 needs to get involved in this.

There is the mother and father of all class actions here from my point of view, and it has the smell of Racketeering and thus treble damages as well.

All you need for a RICO suit (and thus treble damages) is a predicate felony and a conspiracy by two or more people to commit it. Appraisal fraud gets there quite handily and the amount of money involved in any single transaction is in the tens if not hundreds of thousands of dollars. This is a multi-trillion dollar class action lawsuit that needs to be put together and filed - RIGHT NOW.

If we can't get The Government to do its job then perhaps we can get The Landsharks to go for the jugular on banks like Goldman, Merrill, WaMu, Countrywide, Morgan, Lehman, Bear, et.al.

After all, they have plenty of money, and that's what the landsharks run on right?

Why include the big money-center banks? Because they put together the "myth-based securitization" that made this all possible. They were therefore part of the conspiracy, and if you can prove a predicate felony (appraisal fraud) then everyone who touched it or participated in it is potentially on the hook!

This is the same way that, if you drive someone to the local convenience store knowing they have a gun in their jacket and they then rob the store, you go to jail - even though you didn't get out of the car! You were proximately connected to the crime and enabled its commission - bang, you're tagged.

One way or another the balance sheet games must stop. The fraud must stop.

Now let me note that I ain't a lawyer and don't play one on the Net. But it sure seems to me that if someone defrauds you then you have good cause to sue their pants off.

So - where are the lawyers? Some of you guys who are attorneys need to smell the blood in the water here. There's a lot of it, and there's also more than enough meat to go around to fill the bellies of a whole cadre of sharks!

The Petition is also a good way to try to get it to stop. But if you bought a house in the last four years, even if you were a speculator, you need to start talking to lawyers and see if you can get someone interested in the systemic fraud in the financial system.

The law firm that goes after this successfully (and I believe they'd be more than successful) would make a name for themselves 100 times bigger (and better) than the folks who went after the Tobacco companies. What's better, they'll get a lot richer.

This is a landmark issue and a landmark case. It has the potential to force all of the fraud out in the open where we can see it and clean it all up.

It may also be the only way to make it happen since our government sure doesn't want to touch it, even though it is the regulator's job to take care of this nonsense!

Oh, and today, here come the pundits (late of course) calling for the Recession that I've been predicting since, oh, APRIL:

"The U.S. will likely slip into a recession in 2008 and such a development may affect Asian economies, Morgan Stanley Asia Chairman Stephen Roach said Friday."

You think?

But wait.... where was all the blood today? It wasn't that bad, was it?

Oh yes it was. We got another Hindy today and all sorts of nasty internal divergences.

You'll see in the technical...... there's nothing to like here.

I believe this market is headed lower.