Kass: It's a Sad State of Affairs

This blog post originally appeared on RealMoney Silver on Jan. 15 at 8:31 a.m. EST.

Interest rates and commodities are again turning lower, the world's economy is deteriorating, and we appear to be in a synchronized global recession.

Investor fear is rising, as measured by the VIX, which is trading above the 50 level for the first time in a month.

The availability of credit is extremely limited on all levels. As an acquaintance of mine reminded me last night, the irony is that excessive leverage in the banking industry got us into the current mess, now the deleveraging of the system is prolonging the mess!

Many, including myself at times, have suggested that the equity market has begun to discount lower corporate profit expectations, but frankly, there is zero visibility to anyone's 2009-2010 forecasts or of the period's likely trajectory. These S&P 500 profit forecasts amount to a moving target, which for now is a target moving ever lower.

Despite improvement in certain credit measurements (Libor, swaps, etc.), credit remains dear as the transmission of credit is still clogged. For example, jumbo mortgages are unattainable to almost anyone, and even conforming mortgages are very difficult to get despite lower mortgage rates.

Despite targeted policy aimed at stabilizing the residential real estate market, the decline in home prices continues (though it appears the rate of decline is moderating). On Tuesday, Beazer Homes (BZH Quote) reported a 45.6% cancelation rate in its latest quarter; its orders were down by 56% year over year.

The banking industry remains unstable, with a never-ending need for new capital and continuing write-offs, which are translating into the aforementioned tighter lending standards and the renewed notion that the Fed and the Treasury are "pushing on a string." More specifically, Citigroup (C Quote) is on the ropes (and is technically insolvent), and Bank of America (BAC Quote) now needs additional government assistance for its merger with Merrill Lynch.