Paper Economy - A US Real Estate Bubble Blog

Two Great Bounces! - November 09 2009

2009-11-09T23:07:00.001-05:00

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 51% 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…

Bubble’s Bounce Then Bust Again!

2009-11-09T12:48:00.007-05:00

Against the backdrop of historically low interest rates and government stimulation, participants in property markets in both the United States and the United Kingdom responded with nothing short of jubilance.

Whereas pessimism was the leading dynamic for the majority of 2008, it seems that the Spring of 2009 brought a renewal of housing euphoria, though in a more limited and fragile sense.

In the U.S., the first time “homebuyer” tax credit, the “cash for clunkers” of housing, provided significant stimulation on the lower end, driving sales and a noteworthy bounce in prices.

In the U.K., the lowest interest rates in most peoples' lifetimes taken together with significantly corrected prices provided the impetus for a notable price bounce as well.

But how long can this stimulation last and what will happen if it doesn’t?

Now is where the rubber meets the road.

The most recent data is showing signs that the euphoric bounce is drawing to a close.

The Radar Logic home price indices clearly show that the U.S. home price bounce has topped out and is now fully in decline even in some of the worst hit markets where prices have already dropped back to levels not seen in at least a decade.

While the “Nationwide” series, one of the leading U.K. housing market indices, showed the first year-over-year increase in 18 months, on a month-to-month basis prices hardly moved from September while the “Halifax” series followed suit.

The S&P/Case-Shiller Composite 10 series, a comparable series to both of the U.K. series, is also showing that the rate of house price inflation is slowing on a month-to-month basis while remaining strongly negative on a year-over-year basis.

What does it mean for all of these series to be moving together and leaning toward a posture of deflation?

It means the bounce is likely drawing to a close leaving intervening governments with a serious dilemma.

Two Great Bounces! - November 06 2009

2009-11-07T09:43:00.003-05:00

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 48% 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…

Full Time Workers Fully Under Pressure

2009-11-06T12:41:00.004-05:00

Today’s employment situation report showed that things have taken a turn for the worse for full-time workers with the full-time unemployment level jumping to 13,901,000 workers or 11.1% of the civilian workforce, very near the highest rate seen in 41 years.

The Bureau of Labor Statistics considers full time workers to be those “who have expressed a desire to work full time (35 hours or more per week) or are on layoff from full-time jobs”.

Full time jobless workers currently account for 88.5% of all unemployed workers.

On The Margin: Total Unemployment October 2009

2009-11-06T11:10:00.003-05:00

Today’s Employment Situation report showed that in September “total unemployment” jumped to 17.5% of the civilian population or 41.4 million people.

The traditional unemployment rate is calculated from the monthly household survey results using a fairly explicit qualification of “unemployed” (essentially unemployed and currently looking for full time employment) leaving many workers to be considered effectively “on the margin” either employed in part time work when full time is preferred or simply unemployed and no longer looking for work.

The Bureau of Labor Statistics considers “marginally attached” workers (including discouraged workers) and persons who have settled for part time employment to be “underutilized” labor.

The broadest view of unemployment would include both traditionally unemployed workers and all other underutilized workers.

To calculate the “total” rate of unemployment we would simply use this larger group rather than the smaller and more restrictive “unemployed” group used in the traditional unemployment rate calculation.

Below is a chart (click for larger version) showing the “total” unemployment rate versus the “traditional” unemployment rate along with the year-over-year percent change to the “total” unemployment rate.

Notice that the “total” unemployment rate jumped 45.83% on a year-over-year basis while the spread between the “traditional” and “total” unemployment rates now stands at 7.3%.

The chart below (click for larger) calculates the spread between the “total” unemployment rate and the “traditional” unemployment rate.

Envisioning Employment: Employment Situation October 2009

2009-11-06T10:55:00.005-05:00

Today’s Employment Situation Report continued to reflect weakness in the job market with the unemployment rate jumping to 10.2% while the Establishment survey showed a decline of 190,000 non-farm jobs since August.

It’s important to note that today’s report brings the total private job losses to 7.382 million jobs or a 6.38% decline since the contraction began in December 2007.

The following chart combines both the “residential building” and “residential specialty trade contractors” into one payroll series and then plotting the data since 2002.

Notice that, in aggregate, these payrolls, having peaked in February 2006 and declined 32.02% or 1,106,500 jobs since then, appear to be headed lower.

Also note that independently, “residential building” has lost 34.25% of its payrolls or 350,200 jobs since it peaked during September 2006 and that “residential specialty trade contractors” have lost 31.28% of its payrolls or 763,100 jobs since it peaked during February 2006.

Next, let’s take a look a slightly broader set of industry sectors that have been directly impacted both by the housing boom and now the bust (click for larger chart).

Note that I carefully selected sectors that showed either an obvious expansion-to-contraction trend OR a flattening-to-contraction trend and that ALL sectors have both a historical and logical relationship to residential housing as well as recent industry press releases disclosing declining profits as a result of the housing bust.

As you can see, sectors that are now being directly impacted by the current housing decline are numerous and cut across many levels of the job market from construction and materials to manufacturing and finally to retail.

Combining these series into an aggregate of payrolls “directly impacted” by the housing boom and bust cycle and plotting it, along with the S&P/Case-Shiller Composite Home Price Index (click on chart below for larger version) since 1997 provides some pretty solid evidence that a relationship exists.

To expand the analysis a bit look at the following chart that shows percent change on year-over-year basis to BOTH the “directly impacted” payrolls sectors and ALL private non-farm payroll overlaid with the S&P/Case-Shiller Composite Home Price Index.

To get a sense of the relative intensity of the pullback to the “directly impacted” payrolls by plotting both the percentage of overall private non-farm payrolls that the “directly impacted” aggregate represents as well as the contributions it is making to the rate of change of the underlying total private non-farm payrolls.

Notice that at its peak the “directly impacted” payrolls represented over 6.7% (now 6.04%) of Total Private Non-Farm Payrolls and now contracted to a far more significant degree than that seen during the entire course of the 2001-2003 contraction.

Plotting the ratio of overall and private non-farm payroll as well as the payroll of various business sectors to overall non-institutional population (above 16 years old and not in jail or “juvee”), the last eight years seem to pose more questions than answers.

The payroll-population ratio concept simply provides a mechanism for better isolating the changes to payroll rosters by calculating the percentage of population that is employed in a given sector at any given time.

In the following chart (click for larger version) you can see the ratio of overall non-farm payroll and private non-farm payroll to non-institutional population from 1948 overlaid with all U.S. recessions in that period.

As you can see, there is a fairly strong correlation to declining percent of population employed in non-farm and private non-farm endeavors and recession with particularly good peak-trough alignment for all recessions prior to 1990.

During the 2001 recession (and to a far lesser extent in 1990), although there where large declines to the ratio during the official recession period, the economy seemed to be able resume growth while the ratio continued to slide or stayed well below the peak of the prior expansion.

This is an interesting situation in that, although increases in population have been steady and could have replenished the literal number of jobs lost during the downdraft of 2000-2003, the 2000s expansion of payrolls was not strong (jobless recovery).

The following chart (click for larger version), on the other hand, the payroll ratio related to construction has remained above even the peak set in the 90s expansion but has dropped significantly below trend.

Two Great Bounces!

2009-11-06T06:00:00.000-05:00

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 47% 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…

Outstanding Contraction!: Commercial Paper Outstanding November 5 2009

2009-11-05T14:53:00.001-05:00

The Commercial Paper (CP) market is essentially a private debt market used by corporations as a cheaper means of funding typical recurring operations than drawing on a line of bank credit.

Commercial paper, as financial instrument, is by no means a recent innovation and, in fact, you can read about how the CP market was affected by the many historic financial shocks experienced by the U.S. (read Panic on Wall Street: A History of America’s Financial Disasters)

Although the Federal Reserve was able to artificially bring CP rates down significantly since the shocking 615 basis point spread blowout (A2/P2 spread) of late 2008, they have apparently not been successful in preventing an overall contraction in the CP market.

The Federal Reserve calculates and published the total amount of CP outstanding every week and as of the latest published period, commercial paper outstanding is contracting at nearly the fastest rate on record, registering a whopping 17.81% decline year-over-year.

Mid-Cycle Meltdown!: Jobless Claims November 05 2009

2009-11-05T11:12:00.004-05:00

Today, the Department of Labor released their latest read of Joblessness showing seasonally adjusted “initial” unemployment claims decreased 20,000 to 512,000 claims from last week’s upwardly revised 532,000 claims while “continued” claims decreased 68,000 resulting in an “insured” unemployment rate of 4.4%.

As with the last few weeks, today’s results indicate that initial claims are continuing to stay elevated while the continued claims series is presenting a slow descent.

It's important to consider that with net non-farm payrolls (as well as likely job hires and job openings) are still firmly in decline, declines to the continued claims series could be due, in part, to the fact that many recipients have simply reached the end of their benefit period.

With the busiest seasonal job cutting period of the years fast approaching, are we on the verge of a new upturn in joblessness or just in a slow trend down from last year’s epic shakeout?

If firms go for another substantial round of layoffs and job cuts during the fall to early winter we could see an unemployment super-spike form whereby two years of significant job cutting activity merge into one large spike of unemployment.

Of course there are many ways that the job picture could trend but if firms underestimated their cutting last year and need to cut even deeper this year, it would clearly differentiate this period from most of the past post-WWII recessionary periods.

Clearly, careful attention needs to be paid to these indices to see how they reflect the state of the job market as we move further into the second half of the year.

***

The following chart shows the recent trend in initial non-seasonally adjusted initial jobless claims with the year-over-year percent change acting as a rough equivalent of a seasonally adjustment.

Historically, unemployment claims both “initial” and “continued” (ongoing claims) are a good leading indicator of the unemployment rate and inevitably the overall state of the economy.

I have added a chart to the lineup which shows “population adjusted” continued claims (ratio of unemployment claims to the non-institutional population) and the unemployment rate since 1967.

Adjusting for the general increase in population tames the continued claims spike down a bit.

The following chart (click for larger version) shows “initial” and “continued” claims, averaged monthly, overlaid with U.S. recessions since 1967 and from 2000.

As you can see, acceleration to claims generally precedes recessions and vice versa.

Also, acceleration and deceleration of unemployment claims has generally preceded comparable movements to the unemployment rate by 3 – 8 months (click for larger version).

In the above charts you can see, especially for the last three post-recession periods, that there has generally been a steep decline in unemployment claims and the unemployment rate followed by a “flattening” period of employment and subsequently followed by even further declines to unemployment as growth accelerated.

This flattening period demarks the “mid-cycle slowdown” where for various reasons growth has generally slowed but then resumed with even stronger growth.

Until late 2007, one could make the case (as Fed chief Ben Bernanke did on several occasions) that we were again experiencing simply a mid-cycle slowdown but now those hopes are long gone.

Adding a little more data shows that in the early 2000s we experienced a period of economic growth unlike the past several post-recession periods.

Look at the following chart (click for larger version) showing “initial” and “continued” unemployment claims, the ratio of non-farm payrolls to non-institutional population and single family building permits since 1967.

The most notable feature of the post-“dot com” recession era that is, unlike other recent post-recession eras, job growth had been very weak, not succeeding to reach trend growth as had been minimally accomplished in the past.

Another feature is that housing was apparently buffeted by the response to the last recession, preventing it from fully correcting thus postponing the full and far more severe downturn to today.

It is now completely clear that the potential “mid-cycle” slowdown that appeared to be shaping up in late 2007, had been traded for a less severe downturn in the aftermath of the “dot-com” recession, and resulted, instead, in a mid-cycle meltdown.

On The Stamp: Food Stamp Participation August 2009

2009-11-04T15:41:00.002-05:00

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.

Two Great Bounces! - November 04 2009

2009-11-04T15:22:00.002-05:00

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…

Pick-A-Writedown, Teleporation, Liabilities Inflate Then Get Burnt To The Ground and Bears Bickering over Bubbles to Become Battle?!

2009-11-04T12:48:00.010-05:00

Wells Fargo has decided that they are going to implement a new “Pick-A-Writedown” program whereby they shoehorn their massively underwater “Pick-A-Pay” borrowers into interest only loans rather than face the writedown reality… this is a desperate attempt by the bank and shows how bad their position really is … the best thing these borrowers could do, financially, is to simply walk away from these junk loans.

Buffett’s “all-in” train play has some wondering if there will be a “Rail Renaissance” and appears to be a long term wager against teleportation… So, should “investors” now turn to “green energy” or resurrect “standard oil”?

Wouldn’t the term “liability price deflation” be a more appropriate description of what’s happening to housing rather than “asset price deflation”? An underwater mortgaged house is a liability not an asset… maybe it should be “liability value deflation”… or possibly “liability inflation”.

Someone is burning down vacant homes in Rochester NY and Houston TX… guess they don’t consider homes to be assets either.

A cantankerous Jim Rogers takes a whack at Professor Roubini over bubbles while Roubini says Rogers $2000 an ounce gold call is “utter nonsense”… Is this the start of a a good ole fashioned bear-on-bear smack down!? ... Which Bears Bubble is Better?

... They are ALL bubbles to me!

Reading Rates: MBA Application Survey – November 04 2009

2009-11-04T09:35:00.004-05:00

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages, 1 year ARMs as well as application volume for both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage decreased 7 basis points since last week to 4.97% while the purchase application volume decreased 1.8% and the refinance application volume increased 14.5% compared to last week’s results.

It’s important to recognize that while the Federal Reserve’s “quantitative easing” measures have worked to push down fixed rates and resulting in two separate booms of refinance activity earlier in the year and what appears to be a third one shaping up now, purchase activity still appears to have been only lightly effected.

Even with historically low lending rates both refinance and purchase application volume appears lackluster and possibly even still in an overall declining trend.

The following chart shows how the principle and interest cost and estimated annual income required to cover the PITI (using the 29% “rule of thumb”) on a $400,000 loan has changed since November 2006.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages over the last number of weeks (click for larger version).

The following charts show the Purchase Index, Refinance Index and Market Composite Index since November 2006 (click for larger versions).

Two Great Bounces!

2009-11-03T22:12:00.001-05:00

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 44% 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…

Liesman’s Calculus

2009-11-03T11:33:00.005-05:00

Yesterday, CNBC’s Steve Liesman reported what he termed a potentially “calculus changing” event for the Friday’s employment situation report.

The latest ISM manufacturing employment index breached 50 indicating expansion in manufacturing employment and, as Steve noted, there have been very few instances where total nonfarm payrolls have declined (on either a month-to-moth or year-over-year comparison basis) during periods where the ISM manufacturing employment index is at or over 50.

This would appear to imply that Friday’s number could come in much stronger than anticipated.

Looking at the following chart, you can see quite clearly that Steve is right in his assertion.

The green vertical bars show instances where the ISM index is over 50 but the nonfarm payroll number declined on a year-over-year basis while the purple vertical bars highlight month-to-month instances.

One thing to note from the chart above though is that since 1985 the ISM’s manufacturing employment index has rarely been above 50 so the overall significance of an “ISM vs Employment Situation” mashup may be minimal… but still… the employment index appears to be indicating pretty strongly that manufacturing employment is expanding.

Again though, 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.

Two Great Bounces!

2009-11-02T17:28:00.002-05:00

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 44% 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…

Employment Bounce?

2009-11-02T12:15:00.004-05:00

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.

Rough Sledding Ahead for Housing

2009-11-02T09:48:00.005-05:00

The “extra-seasonal” housing price rally brought on by the governments tremendously expensive and poorly targeted housing tax credit gimmick is now thoroughly and completely over.

How many “homebuyers” have jumped at that $8000 carrot only to now find that Uncle Sam was dangling it over an abyss of deflation?

I suppose someone had to buy all those homes but to use a “credit” as the bait… too cruel! … You actually got credit (a nice government-issued pat on the wallet) for making a poor financial decision.

Only in America!

I can’t stress enough the importance of following the housing price data published by Radar Logic.

Not only did the RPX series very clearly capture this season’s exceptional bounce across the majority of metro markets, it captured the top and now, the turn-down.

Better yet, the data is published daily for all of you (and me!) housing junkies that need that continuous flow of new information.

So, looking at the 25-MSA composite’s 28 day aggregate series (click on the Blytic chart below) it’s clear that prices “bottomed-out” between March and April and then climbed about 6.5% to top in mid August.

No small feat…

But since then prices have come down by 1%... ever so slight… but as you can see from a selection of other regional price charts below, they ain’t a comin’ back this season!

Las Vegas, Phoenix and Miami are obviously trending down.

Boston and Cleveland too…

Detroit is setting new series lows backing home prices down to likely somewhere not seen since the early 1990s.

Even Washington DC is turning lower while the New York area appears likely topped out from its snappy late season bounce.

San Francisco, Seattle, Denver, Chicago, Sacramento… everywhere you look, residential real estate is under serious pricing pressure.

Construction Spending: September 2009

2009-11-02T09:30:00.000-05:00

Today, the U.S. Census Bureau released their September read of construction spending showing a continuation of the government’s tax-carrot fueled bounce in residential construction spending while indicating an acceleration in weakness to non-residential construction spending.

Even with the governments tax-credit gimmick residential construction spending is still 26.96% below the level seen last year and a whopping 62.16% below the peak set in March 2006.

Worse off though was private single family residential construction spending which declined 34.99% as compared to September 2008 and a truly grotesque 76.39% from the peak set in February 2006.

Non-residential construction spending, currently accounting for just under half of all private construction spending, posted another significant year-over-year decline of 15.42%.

The following charts (click for larger versions) show private residential construction spending, private residential single family construction spending and private non-residential construction spending broken out and plotted since 1993 along with the year-over-year and peak percent change to each since 1994 and 2000 – 2005.

Pending Home Sales: September 2009

2009-11-02T09:00:00.000-05:00

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.

"Recovery" Jobs Cost Taxpayers Over $80,000 Each!

2009-10-31T23:44:00.004-05:00

The math is trivial... Recovery.gov states that the American Recovery and Reinvestment Act has already "created or saved" 640,329 jobs as a direct result of $52.1 billion of funds (a.k.a. your tax dollars) payed out in "contracts, grants and loans".

So... $52.1 billion divided by 640,329 = $81,364 per each job "saved or created".

Here is a nice image widget that you can embed in your favorite web page in order to keep track of the governments costly shenanigans ... Ill updated it as the stats at recovery.gov are updated.

Ticking Prime Bomb!: Fannie Mae Monthly Summary September 2009

2009-10-30T16:06:00.001-05:00

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.

Two Great Bounces!

2009-10-30T15:27:00.003-05:00

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 43% 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…

The Rundown - “Plan B, Propaganda, Congressional Lowlifes, Another Glassman Prediction, Shrinking Road Crews and Arson In Nevada”

2009-10-30T10:43:00.007-05:00

Do you have a plan B? A MUST WATCH… last night’s Frontline. Aw Shucks… poor bastards on the upper-east side.

The White House says it has already “saved or created” 650K jobs... only problem… since just this January, 3.386 million jobs have actually been lost and the losses are continuing… Jared Bernstein says the figure is closer to a million jobs “saved or created” and adds “It's a great example of the unprecedented transparency, where the American taxpayer can point and click and see their taxes creating jobs … you have to understand the nature of Keynesian stimulus”… I say it’s a new low for government falsehoods and propaganda and so does the AP.

If they can’t manage their own finances why should they be influencing yours?

J.P Morgan Analyst James Glassman thinks unemployment could trend down this winter… He also predicted back in 2000 that the DOW would reach 36,000 and wanted to help you profit from it.

It seems to me that the size of crews repairing roadways is getting substantially smaller … just a few guys and some serious machinery… definitely not long lines of guys with shovels as in the 1930s depression era… When we think about infrastructure stimulus it’s easy to imagine lots of potential employment... Is this misguided?

Is it any surprise that a people in Nevada are encouraging children to play with matches?

Two Great Bounces!

2009-10-29T18:11:00.002-05:00

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 47% in a little over 150 trading days… an historically aggressive run with an obvious note of mania to it… and wholly comparable to… yet notably 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…