Remember what I said about the art department? I guess that’s not needed anymore. Unbelievable. Hat tip to Market Ticker.

Some of the saddest anecdotes that I have read relate elderly people being evicted as a result of foreclosure, even though they have lived in the house for many, many years. Of course, the problem is refinancing. Elderly parents seem to have often allowed their children to borrow money, using the parents’ house as collateral. And then the child defaults, for one reason or another, and the elders cannot afford the payments.

There are strong deflationary pressures out there:

• Rising unemployment
• Slowing consumer spending
• A credit crunch and associated deleveraging
• Falling real estate prices

It seems these are now being joined by falling commodity prices. This most recent bubble seems to have kept things going despite the other pressures. Is there another waiting in the wings, or do we finally get to the big D for deflation? Or are we going to see the last bubble in stocks, as in 1929?

It is a myth that the high foreclosure rate is the result of interest rate resets. True, there is a coming tsunami of Options ARMS that will reach their maximum negative amortization, but it is not here yet. Early evidence suggests that somewhere between 40% and 50% will default immediately. But the real problem remains fraud, fraud and more fraud. First in subprime, now in Alt-A.

Buyers — many with Latino surnames — bought homes in new subdivisions in Watsonville for $600,000 to $700,000 with loans that didn’t require proof of income. In the industry, they were known as “no documentation loans.” Biancalana called them “don’t ask-don’t tell loans.”

Emilio Martinez, a private investigator running for City Council in Watsonville, said many Latino borrowers came to him claiming they had been cheated by their mortgage brokers.

But in reviewing the documents, he found that in a majority of cases, the incomes of the borrowers had been inflated to qualify for the loan. One example: a couple employed at a sandwich shop earning $35,360 bought a $628,000 home with 100 percent financing and no down payment.

It is interesting to me that the US, with its extreme religiosity, shows dishonesty on such a massive scale. Lenders are doing everything in their power to avoid recognizing this problem because it is a political and public relations disaster. Also, in many cases, the lenders were guilty of at least turning a blind eye. Although some went even further. Remember the art department? It should be no surprise that extending even more credit to allow borrowers to bring their payments current just puts off the problem.

Don Coxe has always said that the news that is worth trading is on page 16, not the front page. Today’s page 16 news that could have serious consequences is the outbreak of fighting between Russia and Georgia. The Belfast Telegraph:

A convoy of Russian tanks and troops is reportedly moving toward South Ossetia’s capital as Russian Prime Minister Vladimir Putin declares ‘the war has started’.

Tech stocks are being jammed today, well, because they can be. Ostensibly, because the price of oil is falling. I suppose it is dumb to point out that tech stocks have rallied anyway since oil broke out above 100 in March. However, this kind of violent action has a tendency to feed on itself, as over-leveraged players blow up or are forced to liquidate positions by margin calls. Watch out, as usual.

My suspicion is that the collapse of commodities is the beginning of the end. It shows that the liquidity crunch and economic slowdown have gone global.