This could get uglier...

Although many on Wall Street are downplaying the sub-prime mortgage swoon, it seems to be growing nonetheless. The trouble is the slide can generate its own momentum. As foreclosures rise, more houses come on the already crowded market, and new groups of possible buyers dwindle.

Meanwhile, all those who took it as a solid assumption home prices would appreciate a tidy 4-7% annually are faced with a different business plan. Flipping properties, especially for highly leveraged speculators, could be along time regaining profitability.

Could this touch our wonderful little commodity party? I think so, because we have so much "outside" money in commodities tight now.

But as to which way - I have no idea. One thought is commodities will look more attractive by comparison, hence funds will keep buying.

A second choice is as the Dow declines in response the lost equity will suck up money available for commodity speculation. This seems like a reach given the numbers involved, but the slow-motion meltdown in mortgages is not shrinking.

One thing that could be helpful is more pressure on the Fed to lower interest rates to help keep some mortgages going through another wave of refi's similar to a few years ago.

We seem to have a pattern in the US now of slow-motion disasters: Iraq, Libby, Britney, the Chief, and now this.

I guess we love pulling the bandaids off really slow.