TheStreet.com's Jim Cramer says most people -- including the Fed governors -- haven't spotted this market Achilles heel.

Round up the usual suspects: Radian (NYSE: RDN) (Cramer's Take) - MBIA (NYSE: MBI) (Cramer's Take) - MGIC (NYSE: MTG) (Cramer's Take) - Ambac (NYSE: ABK) (Cramer's Take) - PMI (NYSE: PMI) (Cramer's Take).

Throw in walking dead ACA Capital (NYSE: ACA) (Cramer's Take) and Security Capital (NYSE: SCA) (Cramer's Take), and I think you produce what is really wrong with this market.

Anybody who takes even a casual look at the October delinquencies knows that these companies are going to be severely capital-challenged. Meanwhile, value guys like Third Avenue Management (Radian) and fellow travelers (Old Republic and PMI) make Pyrrhic stands and engender short squeezes that are mistakenly not used to recapitalize. And outfits from E*Trade (NASDAQ: ETFC) (Cramer's Take) to Fannie Mae (NYSE: FNM) (Cramer's Take) are left holding the bag on this stuff.

MOST NOTEWORTHY: The software sector, Ericsson, Paccar, Eni SpA and Valueclick were today's noteworthy downgrades:

• Bear Stearns downgraded the software sector to Underweight from Market Weight, citing valuations and increased risk to 2008 IT budgets.
  
• Ericsson (NASDAQ: ERIC) was downgraded to Equal Weight from Overweight at Lehman and to Neutral from Overweight at JP Morgan following the company's Q3 profit warning.
  
• Paccar (NASDAQ: PCAR) was downgraded to Underperform from Market Perform at Wachovia. The firm believes Street estimates are too high due to weaker-than-expected North American unit production.
  
• ABN Amro downgraded shares of Eni SpA (NYSE: E) to Sell from Hold as they expect the company to invest significantly more in its upstream activities than guidance suggests due to cost pressures.
  
• Oppenheimer downgraded ValueClick (NASDAQ: VCLK) to Neutral from Buy following the Q3 pre-announcement and guidance.

OTHER DOWNGRADES:

• Merrill downgraded Equity Lifestyle Properties (NYSE: ELS) to Neutral from Buy.
  
• Autodesk (NASDAQ: ADSK) was downgraded to Neutral from Buy at UBS.
  
• JP Morgan downgraded ACA Capital Holdings (NYSE: ACA) To Neutral from Overweight.
  
• Citigroup downgraded Vimpel Communications (NYSE: VIP) to Sell from Hold.
  
• Yahoo! (NASDAQ: YHOO) was downgraded to Hold from Buy at Gabelli.

Battered financier and derivatives firm ACA Capital Holdings (NYSE: ACA) took a sharp turn for the better Wednesday, climbing 21.4% to $7.10 from its opening $5.85 as it reported a second-quarter loss of $2.55 per diluted share. The gain of $1.25 boosted ACA shares back over halfway under $13, the price of its initial public offering last November 9.

Trading volume was more than double its average, with 1,806,300 shares swapping hands.

As elsewhere in the lending industry, ACA Capital shares have been sacked by the deteriorating subprime mortgage market, dropping from a high of $16.55, posted on February 22.

ACA Capital manages assets for participants in the global credit derivatives markets, structured finance capital markets and public finance capital markets. Learn more at www.aca.com.

MOST NOTEWORTHY: Novartis AG (NVS), Intel (INTC), Total S.A. (TOT), Syniverse Holdings, Inc (SVR) and Kindred Healthcare (KND) were today's noteworthy downgrades:

• Merrill cut Novartis (NYSE: NVS) to Neutral from Buy based on a lack of near-term catalysts. Credit Suisse downgraded shares of the company to Underperform from Neutral on expectations of slowing sales growth in 2H07.

• JMP Securities downgraded Intel (NASDAQ: INTC) to Market Perform from Outperform based on valuation and lower estimates.

• JP Morgan cut Total S.A. (NYSE: TOT) to Neutral from Overweight on valuation.

• Syniverse (NYSE: SVR) was cut to Strong Sell from Sell at Matrix USA as competition in North America is creating a cut in Network Services and Number Portability Services revenue.

• Kindred Healthcare (NYSE: KND) was cut to Underperform from Market Perform at Wachovia based on valuation...

OTHER DOWNGRADES:

• DaVita (NYSE: DVA) was downgraded to Hold from Buy at Deutsche Bank.

• Citigroup downgraded the coal sector, including Arch Coal (NYSE: ACI), Peabody Energy (NYSE: BTU) and Foundation Coal (NYSE: FCL) to Hold from Buy.

• Credit Suisse downgraded ACA Capital Holdings (NYSE: ACA) to Neutral from Outperform.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Shares of ACA Capital Holdings (NYSE: ACA), which have tanked nearly 50 percent since June 20 amid concerns about the company's exposure to the subprime mortgage market roared back today, gaining almost 16 percent.

Perhaps this was short covering. Perhaps some positive comments from the company's largest shareholder Bear Stearns (NYSE: BSC) Merchant Banking, helped as well. Regardless, there is no way to know for sure if this rally is sustainable though Keefe Bruyette & Woods defends the stock saying "in our worst-case scenario, we think the stock has a double-digit valuation," according to the Times.

ACA has written off billions of dollars worth of insurance on financial assets and manages collaterized debt obligations on billions more. The New York Times noted that some of the collaterized debt obligations or CDOs. ACA manages for others were mentioned by bond rating agencies as potential candidates for a downgrade though the exact impact this action will have on ACA isn't clear.

Yesterday's 22% decline in the stock was triggered after S&P said it was considering downgrading various securities issued by four CDO's that were managed, but not owned, by ACA, citing "the increased probability of default" for the underlying mortgages. The company also said it could lose money on 2006 and 2007 contracts tied to $4.5 billion of subprime securities.

Nonetheless, The CEO of Bear Stearns Merchant Banking, John D. Howard said in a statement, "We have great confidence in ACA's management team."

Remember there's plenty at stake for the Wall Street firm. As Bloomberg News notes, Bear Sterns last month agreed to extend a $1.6 billon loan to one of its two hedge funds that "almost collapsed because of CDO bets."

They must have some confidence. The fund owns a 27.6% stake in ACA Capital Holdings and in the past month has lost almost $90 million in market value.

The front center article in today's Wall Street Journal (Dow Jones & Co., NYSE:DJ) reminded me of a time, not too long ago, when I was driving down a remote country road near Frankfort, Ohio and came upon a hand-lettered sign that said "Cornhole games for sale."

Now, when I was a youth, the word cornhole was a vulgar slang term for -- how shall I say this delicately? -- a sexual practice that will not lead to procreation. A popular prison recreation. Perhaps I should just let Wiktionary explain it.

Therefore, I was taken aback to see such a term used so openly, and couched as a game, no less. Further research put my mind at ease, however. I find that cornhole is, in fact, very similar to the game we knew as bean-bag toss. The goal is to toss a bag filled with corn through a hole cut in a piece of plywood. The game is played very much like horseshoes, with innings, specific distances, a scoring system in which close counts, and teams.

Ohio is the home to the American Cornhole Association, apparently the ruling body for this "sport." It claims over 8,000 members, and growing. The sport especially seems to be catching on at NASCAR events.

Ohio is also the home of The Ohio Cornhole Company, official supplier of products for the ACA. Each of its items carries the American Cornhole Association seal of approval. Here you can buy your "Play Cornhole" t-shirts and hats, your cornhole bottle koolies and combination scoreboard and bottle holder. Maybe I'll buy one of their shirts as a change of pace from the "Butthole Surfers" t-shirt I save for family reunions.

Toss on!

MOST NOTEWORTHY: aQuantive Inc(AQNT) and Vanda Pharmaceuticals Inc (VNDA) were today's most notable initiations:

• CIBC initiated aQuantive Inc (NASDAQ: AQNT) with a Sector Performer rating and $30 target. The firm believes aQuantive's key challenge is margin pressure from the rising cost of talent, but they expect strong fourth-quarter results.

• Friedman Billings is positive on Vanda Pharmaceuticals Inc's (NASDAQ: VNDA) lead drug candidate, atypical antipsychotic iloperidone, which showed positive data in Ph III studies for schizophrenia; Friedman started the company with an Outperform rating and $40 target.

OTHER INITIATIONS:

• Canaccord started Unica Corp (NASDAQ: UNCA) with a Buy rating and $15 target.

• Oppenheimer initiated Community Bancorp NV (NASDAQ: CBON) with a Buy rating and $38 target.

• Bank of America initiated ConAgra Foods Inc (NYSE: CAG) with a Neutral rating and $27 target based on valuation.

• Stephens put a $20 target on ACA Capital Holdings Inc (NYSE: ACA) and started the company with an Overweight rating.

• Friedman Billings says Sepracor Inc's (NASDAQ: SEPR) Lunesta faces generic challenges and that 2007 guidance may be hard to achieve; the firm started Sepracor with a Market Perform rating and $58 target.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).