Yesterday saw a significant sell off in equities, and while most people under the age of 25 started calling their brokers demanding to know how stocks can go down, money started flowing into the treasury markets later in the day. Disappointing earnings and worries about the prolonged housing slump was the catalyst for the selling in stock-land, which created the proverbial flight-to-quality bid when money seeks the shelter of high credit fixed income. At the end of the day the Dow Jones composite index was down 226 pts, the 10 yr saw 4.9% before settling at 4.92%, and mortgages were slightly better at the end of the trading day. Countrywide’s CEO Angelo Mozilo yesterday, while reporting weak earnings and the lowering of their profit targets, reiterated popular sentiment with anyone affiliated with mortgage originations when he commented that supply needs to be worked through, and prices need to stabilize, before any real rebound in the mortgage market can happen. Amen, Angie.

This morning we saw the release of the monthly MBA data: applications down 3.6%, purchases down 5.0%, and refinances down 1.4% The rest of today’s worries revolve around the release of June’s existing home sales report which is expected to be down 1.5%, and an $18B 2yr note auction. Currently the 10yr is at 4.92%, and mortgages are holding tough, only down a few bps across the coupon stack.

A tiny but dignified old lady was among a group looking at an art exhibition in a newly opened gallery. Suddenly one contemporary painting caught her eye. ''What on earth,'' she inquired of the artist standing nearby, ''is that?''

He smiled condescendingly. ''That, my dear lady, is supposed to be a mother and her child.''

''Well, then,'' snapped the little old lady, ''Why isn't it?''