Ray Davies and Lou Reed are two of rock 'n' roll's greatest misfits. Ever since the '60s--when Davies founded the Kinks and Reed, the Velvet Underground--these singer-songwriters have revealed a fundamental uneasiness with the world around them, even with the worlds of rock 'n' roll and bohemia.

Rather than lapse into cool, cynical detachment, though, they have always struggled to come to terms with the world. With their incisive lyrics and muscular music, they have managed to appeal to both the highbrows and the lowbrows of rock; they speak for anyone who tries to find a place in an inhospitable world.

Davies leads the Kinks (who come to the Capital Centre next Wednesday) into their 20th year with "State of Confusion" (Arista AL 8-8018). In a particularly playful mood, Davies uses his outsider perspective to poke fun at the pop world and the real world. He amuses himself with different styles; on Side 1 he goes from the pop harmonies of "Definite Maybe" to the heavy metal guitar of "Labour of Love" to the calypso steel drums of "Come Dancing" to the art-rock synthesizers of "Property." He amuses himself with the world's ironies: How marriages begin with romantic idealism and end with property settlements; how the young are often the most conformist; how the most sincere emotions often produce the tritest cliche's.

Typical of Davies' contradictions is the title cut and album opener. The verses describe the world around him falling apart, but Davies internalizes it on the choruses as his own "state of confusion." Nonetheless, he confesses these self-doubts in a confident, bellowing voice over his brother Dave's ringing guitar hook. In a richer irony, Davies tweaks the younger generation on "Young Conservatives" in exactly the same manner he mocked the older generation 18 years ago on "Well-Respected Man." On "Labour of Love," Davies describes marriage as a sci-fi movie about a two-headed transplant. Yet even within this comic setting, Davies insists that each head needs the other. Thus his seemingly blithe satire avoids the easy out of cynicism and asserts its own definite values. This is most obvious on "Don't Forget to Dance," a classic Kinks ballad with Davies' words of encouragement to an aging woman backed by romantic Beach Boys harmonies.

Dave Davies--the original heavy- metal guitarist and in many ways still the best--delivers a Jimi Hendrix parody in "Labour of Love" and chord-crunching momentum in "Bernadette." Keyboardist Ian Gibbons is given new prominence in this computer age; he supplies the synthesized steel drums for "Come Dancing" and the melancholy synthesizer wash of "Property." What really sustains this album, though, are Ray Davies' catchy melodies, the strongest he's written in years. On the new single, "Come Dancing," the music captures the seductive elegance that neighborhood dances hold for unsophisticated teen-agers. "Heart of Gold" and "Definite Maybe" have a music hall sing-along quality; even the flat-out rockers like "Young Conservatives" and "State of Confusion" have hummable tunes. Perhaps this is Davies' ultimate paradox: that he makes the misfits' role seem so appealing.

Lou Reed's "Legendary Hearts" (RCA AFL1-4568) is initially forbidding with its slow tempos, prickly textures and low-key dynamics. The persistent listener, though, will be rewarded by some of the best songs Reed has ever written. On the title cut, Reed contrasts the "legendary love" of romantic myth with real life Romeos "in a car or at a bar." He begins this song embarrassed by the shabbiness of real love compared with the ideal, but he ends by suggesting that the real heroes are those who can hold a marriage together in a tenement. Similarly, Reed's meandering sense of pitch and rhythm might initially seem shabby compared to glossy radio pop. In the end, though, Reed is the real musical hero for making his everyday dramas so thoroughly gripping.

Reed develops this theme of ordinary heroism into his own national anthem, "Home of the Brave." For nearly seven minutes, the song solemnly celebrates those brave enough to carry on amid street violence, domestic violence and suicidal violence. On "Martial Law," the strongest song musically, he describes two cops breaking up a husband-wife fight at three in the morning with some tough talk. On "Bottoming Out," the strongest song lyrically, Reed tells the story of his own fight with his wife and the wild motorcycle ride that followed.

Reed leads a superbly balanced quartet. Jazz bassist Fernando Saunders is often dominant in the mix, and his pithy, rolling lines give the songs their optimistic warmth. Lead guitarist Robert Quine and drummer Fred Maher--both from the punk band, the Voidoids--supply the threat of violence that could intrude at any time. The much underrated Quine doesn't play violently but ominously, with his barbed notes scratching the foreground but only rarely entering it. Reed balances the optimism and violence in his guitar work and vocals. As he does on "The Last Shot," when he insists each drink is his last one, Lou Reed always hopes for courage but often falls prey to weakness.