Stocks opened strong and faded late on little real news. The July Trade Deficit fell to 42.8 billion, exports gained while imports slipped. Energy made up just about half of the total at 20.9 billion.
Yesterday’s report on Consumer Credit showed more of the same in July with a decline of 3.6 billion as consumers continue to follow the expected credit bust script reducing both their use of and total credit outstanding.
The Fed’s Beige Book Report on regional economic conditions covering the period from mid July through August showed a marked slowing of economic activity particularly in the southern and eastern districts. Consumers continue to bargain hunt and limit their spending to necessities for the most part. Tourism showed some improvement but that probably has more to do with seasonal factors than anything. Manufacturing slowed, as did residential real estate and construction. Commercial real estate remains on life support while lending weakened further despite some interest in re-financing. Wage and price pressures remain non-existent or nearly so. Mild increases in some commodity and agricultural prices being the only exceptions.
Yet another example of not only the absence of inflationary pressures but that of what inflation is present it is diminishing. Classic deflationary credit bust as one would expect, why the hyperinflationary gold bug crowd doesn’t see this and fails to include the credit creation part of the money printing equation into their forecasts is beyond me. What I do know however is that if the fundamentals don’t support your investment thesis your asking for trouble because the trend is your friend, until it isn’t.
Over the last year or so the Case/Schiller Home Price Indexes have shown nice gains for the metro areas of San Francisco, San Diego and Los Angeles. I had always figured these numbers to be suspect as the inventory, distressed sales ratios and employment figures were not indicative of the gains being recorded.
The San Diego Reader is out with a piece detailing the San Diego market and looking at exactly this phenomenon. What they found was that much if not all of the gains reported were a statistical mirage. Because the sales mix had skewed the numbers due to more high priced properties being sold following the reduction in inventory at the low end brought on by the first housing tax credits. This resulted in distressed sales making up a smaller share of the total. The article went on to state that the Case/Schiller data was overly optimistic and detailed how sales had plunged over the summer and prices were starting to fall again as more local participants expected a real estate double-dip citing the “artificial” nature of the recovery.
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. 
