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It really feels like watching a slow-motion collapse.
One:

Merrill Lynch & Co Inc (MER.N) reported about $16 billion in mortgage-related writedowns and adjustments on Thursday in the worst quarter of the company's history.

Merrill shares fell 8.3 percent to $50.51 as investors worried about more write-downs and the company's exposure to capital-strapped bond insurers.

The start of a booming year for investment banking fees and big bets on subprime mortgages ended in dismal fashion. Merrill's fourth-quarter net loss was $9.8 billion, or $12.01 a share, compared to year-ago profit of $2.3 billion, or $2.41 a share.

For 2007, Merrill lost about $8 billion on second-half write-downs and adjustments of about $24 billion. Lax risk management led to the ouster of Stan O'Neal as chief executive while nearly halving the company's market capitalization.

Two:

The steep slump in housing intensified at the end of last year, pushing home construction down by the biggest amount in nearly three decades. Analysts forecast more bad news in the months ahead with the big question remaining whether the housing slump will be severe enough to push the country into a recession.

The Commerce Department reported Thursday that construction was started on 1.353 million new homes and apartments last year, down 24.8 percent from 2006. It was the second biggest annual decline on record, exceeded only by a 26 percent plunge in 1980.

The year ended on a weak note with construction dropping by 14.2 percent in December and applications for new building permits, a good indicator of future activity, falling for a seventh consecutive month, indicating that activity will be weak at least through the spring of this year.

Economists said the current housing slump has already surpassed the 1990 downturn and will likely rival, if not surpass, the prolonged housing downturn in the late 1970s and early 1980s, a period when the Federal Reserve was pushing interest rates to the highest levels since the Civil War in a successful effort to halt a decade-long bout of high inflation.

Three:

Small U.S. companies dropped, sending the Russell 2000 Index to its first bear market decline of 20 percent since 2002, after falling home construction and manufacturing reinforced expectations the economy will contract.

Raw-material producers and energy companies led the retreat after Federal Reserve Chairman Ben S. Bernanke's acknowledgment that output is weakening added to concern that earnings growth will slow. CF Industries Holdings Inc., which makes fertilizer, plunged the most since November. Petrohawk Energy Corp., an oil and gas producer, retreated for a third straight day.

``Anything that's leveraged to the economy is bad right now,'' said Dan Veru, who helps manage $3 billion as co-chief investment officer at Palisade Capital Management in Fort Lee, New Jersey. ``It's fear that's driving it, that these companies are going to miss their numbers and give terrible guidance.''

The Russell 2000, whose members have a median market value of $510 million, declined 2.8 percent to 680.57, more than 20 percent below its July 13 record. That meet's the common definition of a bear market, the first for the benchmark since October 2002. The Standard & Poor's SmallCap 600 lost 2.6 percent to 353.37. The S&P 500 declined 2.9 percent to 1,333.25.

Four:

Growing conviction that the U.S. is in a recession sent stocks plunging in their worst three-day decline since 2002.

Exxon Mobil Corp., General Electric Co. and Bank of America Corp. led the drop after the Federal Reserve said manufacturing in the Philadelphia region slid to a six-year low and Merrill Lynch & Co. posted a loss double analysts' estimates. Ambac Financial Group Inc. and MBIA Inc., the two biggest U.S. bond insurers, retreated on concern their AAA credit ratings will be revoked. All 10 industry groups in the Standard & Poor's 500 Index, and 452 of its members, decreased.

The S&P 500 lost 39.95, or 2.9 percent, to 1,333.25 and is down 9.2 percent this year after tumbling 5.9 percent the past three days. The Dow Jones Industrial Average decreased 306.95, or 2.5 percent, to 12,159.21. The Nasdaq Composite Index slid 47.69, or 2 percent, to 2,346.9. More than seven stocks fell for every one that rose on the NYSE.

``The problems seem to be intensifying,'' said John Carey, who helps oversee about $13 billion at Pioneer Investment Management in Boston. ``I can't remember a worse start to a year. We're in for some rough months.''

And for five, the worst of the worst, go read Atrios.

His Jenga analogy really is just about perfect. It isn't so much that we're watching a slow-motion collapse as it is that the Jenga game isn't yet over. One by one the pieces are being pulled out, and eventually the entire thing will just topple over. And lord help us all when it does.