Registered Investment Adviser Caleb Lawrence
Disappointing data and another unconstructive firebrand speech from President Trump spooked the markets in early trade sending the major averages into the final hour with modest losses. Mortgage activity slipped .5% last week as per the Mortgage Bankers Association, purchase apps fell again down 1.5% while refi’s gained .3%. The 30-year jumbo loan rate declined fractionally to 3.99%.
New home sales fell hard for a second month in the last four dropping 9.4% in July to 571,000 units annualized. Month’s supply increased to 5.8 while the median price advanced 2.7% to $320,100. Large declines were seen in the Northeastern -23.8% and Western regions -21.3%, marking a second large sales decline for the western region in the last 4-months. There is some anecdotal evidence that the flood of hot seemingly price insensitive Chinese money is drying up due to capital controls. While this is definitely a trend worth watching it is too early to tell for sure.
The Fed’s zero and near zero interest rate policies continue to benefit the banks at the expense of savers whilst encouraging reckless speculation. The FDIC or Federal Deposit Insurance program reports that the banks earned net income in the 2nd quarter of 48.3 billion, 10.7% higher than a year ago. The too big to jail or fail crowd has also gotten bigger after 265 institutions were merged in the quarter, failures are down to a handful. Bank assets increased 9.8% to 16.5 trillion. Return on assets also hit a 10-year high in the 2nd quarter reaching 1.14%. There is considerably more in the report but it is by and large very solid from top to bottom. That said of the 29.6 trillion used to bail out the banksters and others following the 2007-2009 financial crisis some 600 billion is still outstanding or has been written off. At least that is the best guess as we won’t have the complete picture for a number of years yet.