Into The Grey Zone The future is always a grey zone, never black and white.

Taylor, Bean & Whitaker Shuts Down Lending Operations. One of the last large independent sources of mortgage funds is being shut down. Loans that were in the pipeline are dead and will not close. TBW laid off 5000 people yesterday as well. Additionally, TBW is tied tightly to Colonial Bank who has already reported negative core capital ratios (which are grounds for shutdown and seizure by the FDIC). If you read the article, Colonial's rescuers was... TBW! And now TBW has been shut down. Colonial is a dead bank walking. The only question is why hasn't the FDIC shut them down? Karl Denninger (amongst others) asks Is The FDIC Broke And Covering It Up? It sure is starting to look that way.

Now in an additional act of utter stupidity, the Obama administration is considering overhauling Fannie Mae and Freddie Mac by taking trillions of dollars in bad loans onto the backs of taxpayers. Such a solution will hurt the credit rating of the United States even further, driving up borrowing costs right as deficits are going sky high.

Another Orwellian stat was the claim that initial unemployment claims "fell" by 35,000 yet continuing claims rose by 69,000 while 139,000 people fell off the back end, having exhausted their benefits. The traders in the pits are starting to smell something, like maybe Obama's "green shoots" are more like green manure. Additionally, retailers are reporting same store sales fell for July even amongst discount stores. That's bad bad news and easily falsifies any "green shoots" lies that the media is spinning right now.

In Indiana, we get this tale of woe about a family but I see that and ask myself a whole lot of questions about why they are continuing to do stupid stuff with their remaining money. These are the sorts of people who will crawl on their bellies to the very kleptocrats who robbed the country blind to begin with and then beg to be saved from their own mistakes. It's hard for me to find pity for these people.

So except for "Cash for Clunkers" pulling forward already weak auto sales demand by a few months, most economic data looks really bad. Yet the market has made its best climb since 1938. It doesn't add up.

The pressure is building against this rally, folks, and it will explode at some point, in a downward direction.