Stocks enter the final hour about even following yesterdays brutal sell off on little significant news. The latest MBA activity index jumped 54.7 points to 675.9 last week as mortgage rates fell to a record low, the 30-year contract rate came in at just 4.7%. That said purchase apps slipped 5.8 points to 172.1 while the refi index surged just over 400 points to 3,613.1. Given recent housing data and that mortgage purchase activity continues to decline despite falling mortgage interest rates and the outlook for real estate is growing ever more challenging by the day.
While frequently at odds with the official employment report due Friday ADP’s nonfarm private employment survey increased an anemic 13,000 in June less than 25% of the expected gain of 60,000. Expectations for Friday’s official release are –155,000 as the effects of temporary Census hiring wanes.
A recent interview with the usually sage Bill Fleckenstein on Bloomberg regarding market behavior and valuations found Mr. Fleckenstein voicing the opinion that S&P earnings and therefore valuations couldn’t be trusted because the financial sector is essentially making up the numbers as they go along. Most of this is compliments of the relaxed accounting standards and rules granted the sector following its pursuit of reckless lending in the name of fees and record profits, aka the originate to syndicate business model. The more egregious parts of said relaxed standards include mark to model asset pricing essentially fantasy and the booking of a fully amortized income stream from option ARM loans 85+% of which used the negatively amortizing minimum payment. He went on to state that based on historical valuations that the S&P 500 wasn’t necessarily cheap at 13x earnings.
Hi and welcome to The Profit Motive, I’m your host Caleb Lawrence. Once upon a time in America the media acted as the watchdog of the corporations and the state. In the modern era it’s all about ratings and profits, opinion has been substituted for news and frequently is presented as fact. 
