Stocks enter the final hour with small losses on mixed news. The FDIC 2nd Quarter Banking Profile is out. Problem banks increased by 54 to 829 involving 403 billion in assets, a decrease of 28 billion from the first quarter. This puts the FDIC on pace for 1,000 problem banks by the end of the year. Through the 2nd quarter the FDIC Deposit Insurance Fund or DIF is overdrawn some 15.2 billion which is an improvement on the –20.7 billion seen at the end of the 1st quarter. That said the fund is actually ok due to last years pre-paid assessments.
The Case/Schiller Home Price Index for June shows a nice gain of 4.2% from a year ago. Some notable standouts include San Francisco +14.3%, San Diego +11.2%, Los Angeles +9.2%, Washington +7.3% and Boston + 3.2%. This report marked the 5th consecutive increase in prices from a year ago. I could stop here and just provide the positive spin ala the mainstream media. But I’m rather fond of the truth and you seem to be as well based on your kind words, comments and feed back over the years that I really appreciate, thank you very much. First up is the usual warning about undue seasonal factors skewing prices that Case/Schiller have warned about for the last few months. Of much greater significance is how the price index itself is calculated. Which is a 3-month moving average, so June’s figure is actually an average of the data for April, May and June. Now this helps smooth the data and provides a more accurate picture, the downside is that it introduces a significant lag in reporting of true price action. This is why some of the other price indexes are already showing negative numbers. Home sales were strong through June due to the tax credit and the roughly 60-day closing period for existing home sales that make up about 85% of the market. As is well documented, sales collapsed in July and remain under pressure, but this won’t be reflected in the Case/Schiller Index until the end of October when we get an average price based on the months of June, July and August.
The minutes of the previous FOMC are out, expectations of economic growth have been lowered but the Fed governors and chairman still think 2nd half GDP growth will be positive and that the recovery will improve in 2011. Inflation was noted as being very low. Well I certainly hope they are correct, that said their track record of seeing this train wreck coming, and predicting what would happen next doesn’t inspire confidence in their forecasting ability.
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. 
