Despite all the doom and gloom seen over the last year, the S&P 500 index is still looking expensive. At Friday's close the benchmark index traded at a Price to Earnings (P/E) ratio of 24.30, much higher than the 17.17 ratio seen a year ago when the downturn started. FYI - the long term average P/E ratio for the S&P 500 is around 15. With some commentators proclaiming that we are facing the greatest crisis since the Great Depression, why do stocks remain expensive?

"Housing finance in the U.S. has long depended on the GSEs Fannie Mae and Freddie Mac," writes Stephanie H. Giroux, TD Ameritrade's Chief Investment Strategist. "These mortgage lending giants were created by Congress in 1938 and 1970 to support the housing market, and currently hold $5.4 trillion of the roughly $12 trillion U.S. mortgage market. Over the past four quarters, Fannie and Freddie have posted losses totaling roughly $14 billion, as mortgage foreclosure rates continue to climb in the U.S.

The government’s intervention will result in the largest federal bailout in U.S. history, which is intended “to meet the objectives of market stability, mortgage availability and taxpayer protection," said Treasury Secretary Henry Paulson."

Even though he is a right wing cheerleader who is always eager to politicize every stock market jitter, while wearing his pinstripe suit and pinkie ring, I have to take my hat off to CNBC's Larry Kudlow. He has always had the guts to take a contrarian stance. Lately though, he seems to have lost his marbles. "I don't want to do a Lehman analysis on this program," said Larry, eager to skip the bad news and move on to the miracle of Sarah Palin. "It's too darn boring!" With all due respect to Larry, Lehman's demise might be the biggest story yet.