Epain Homes

The following charts provide a simple comparison between the big stock bounce that occurred in the wake of the DOW crash of 1929 and the bounce we are seeing today in the S&P 500 index.

The method of alignment was simple… take the first definitive up trading day off the bottom of the preceding bear market low and set that as the start of the series… then simply re-base both series to a value of 100 so that they can be compared side-by-side.

The lower bar chart plots the cumulative percentage change since the start of each bounce.

The S&P 500 is up over 45% in a little over 160 trading days… an historically aggressive run with an obvious note of mania to it… and wholly comparable to… even far stronger than… the price movement seen in the 1930s-era DOW rally.

At this point for the 30s-era DOW, the bull-run was over as the bear trend resumed in earnest… today though the Bull is seriously on the move… how long will this boom last?

Only time will tell… But for now, let’s continue to keep a watchful eye…

As a logical consequence of the prolonged economic downturn it appears that participation in the federal food stamp program is on the rise.

In fact, household participation has been climbing so steadily that it has far surpassed the last peak set as a result of the immediate fallout following hurricane Katrina.

The latest data released by the Department of Agriculture shows that, on a year-over-year basis, household participation has increased a whopping 25.25% while individual participation, as a ratio of the overall population, has increased 22.83%.

The August results confirm that participation is continuing to climb dramatically, likely as a result of the recent jump in total unemployment, driving the nominal benefit costs up an astounding 62.61% on a year-over-year basis to $4,853,114,719 for the month.

Looking at the last chart that plots the total unemployment rate (unemployment rate of all traditionally unemployed workers plus all marginally attached and part time workers) and the population adjusted individual program participation rate normalized since 2005, one can plainly see that program participation would be expected to continue its surge.

Today, CNBC’s Steve Liesman nearly had a coronary while announcing the latest ISM manufacturing data, suggesting that the employment index breaching 50 could “change the calculus” for Friday’s employment situation report… the markets reacted with a customary frenzy ebullient bullish buying.

But… the employment index appears more than likely to be simply “juiced” by the government’s historic stimulus efforts.

Looking at the following Blytic chart (click for fullscreen player) you can see that in the past several recessions, the manufacturing employment index did not signal expansion until well into the post-recession period with a minimum of 5 months of down trending unemployment.

Given the circumstances, it is more likely that manufacturing swung into expansion as a result of the cash for clunker “autos and homes” programs and resultant dynamics and not organic economic expansion.

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for September showing a whopping 21.2% year-over-year increase in pending home sales nationally coming largely as a result of the governments historic housing tax gimmick.

Meanwhile, the NARs chief economist Lawrence Yun reports that there has been a “rush” of first-time “buyers” racing for a chance to jump at the governments housing tax carrot… the result… wealth stabilization for middle class families?

“What we’re witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month, … Home values will stabilize sooner rather than over-correcting. That, in turn, will mean wealth stabilization for the vast number of middle-class families and lay the foundation for a durable economic recovery.”

The following chart shows the national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).

Look at the seasonally adjusted pending home sales results:

• Nationally the index increased 21.2% as compared to September 2008.
• The Northeast region increased 16.9% as compared to September 2008.
• The Midwest region increased 17.8% as compared to September 2008.
• The South region increased 22.8% as compared to September 2008.
• The West region increased 23.7% as compared to September 2008.

Decades from now the summer of 2008 will likely be remembered to mark the turning point where legislative blundering took an otherwise serious financial crisis and molested it into an epic financial collapse.

By fully assuming the liabilities of Fannie Mae and Freddie Mac, the two colossal and corrupt (and conduit of corruptness funneling junk Countrywide Financial loans onto the implied balance sheet of the federal government) government sponsored enterprises, the federal government, led by Treasury Secretary Paulson and Federal Reserve Chairman Ben Bernanke, has thrust taxpayers into an abyss of insolvency with one mighty shove.

Given the sheer size of these government sponsored companies, with loan guarantee obligations recently estimated by Federal Reserve Bank of St. Louis President William Poole of totaling $4.47 Trillion (That’s TRILLION with a capital T… for perspective ALL U.S. government debt held by the public totals roughly $4.87 Trillion) this legislative reversal making certain the “implied” government guarantee is reckless to say the least.

The following chart (click for larger ultra-dynamic and surf-able chart) shows what Fannie Mae terms the count of “Seriously Delinquent” loans as a percentage of all loans on their books.

It’s important to understand that Fannie Mae does NOT segregate foreclosures from delinquent loans when reporting these numbers.

Finally, the following chart (click for larger ultra-dynamic and surf-able chart) shows the relative movements of Fannie Mae’s credit and non-credit enhanced (insured and non-insured) “Seriously Delinquent” loans.