Bank Earnings Up, Mortgage Rates Up, Starbucks Down

Usually I stop at Starbucks every morning, on the way from my bedroom to my bathroom. I was a little surprised that they put one of their outlets in my house last year, kicking my daughter out of her room, but I guess they figured that it made sense financially. As it turns out, California, Florida and Texas have the most Starbucks. They are closing 88 locations in California, 5% of the almost 1,800 in this state. Florida will lose 59 stores, and Texas 57. Unemployed mortgage folks will have to drive a little farther to find a place to meet…

BANK EARNINGS BETTER THAN EXPECTED
Speaking of her, if I thought that my daughter was going to receive a “D” in Science, and she ended up with a “C-“ on the report card, is that cause for celebration? I guess so. Bank of America, now the biggest U.S. consumer bank and home lender, said second-quarter profit fell less than analysts estimated. BofA said net income declined 41% to $3.41 billion from $5.76 billion a year earlier. That beat estimates. We still have Wachovia and WaMu earnings ahead of us this week, but four of the nation’s five biggest banks have now reported better-than-estimated results, sparking a rally in financial shares. (She actually does very well in science, no thanks to me.)

One analyst in Florida tracks the 107 US banks and thrifts that hold at least $5 billion in assets, and came up with 12 “at risk” banks based on the amount of non-performing assets they hold as either a ratio of outstanding loans or as a ratio of reserves and equity. They are Downey Financial, Corus Bankshares, Doral Financial, FirstFed of Santa Monica, Oriental Financial, BankUnited Financial, BFC Financial, First BanCorp, Flagstar Bancorp of Troy, Mich., Santander BanCorp of Puerto Rico, and Washington Mutual Inc. (WM) of Seattle.

RATES WORSE ON LEADING INDICATORS
In other news, rates continue to get worse. Friday afternoons are notoriously bad for markets, as many in NYC head out after battening down their positions and leaving skeleton crews. But between Wednesday, Thursday, and Friday mortgage prices worsened by .375% on a “vanilla” 30-yr conforming loan. We’re off again by another .125 in price versus Friday afternoon, and the 10-yr is up to 4.09%. We have $56 billion in Treasury supply this week (2-yr, 5-yr, and 20-yr Treasury Inflation Protected Securities), but the only data today is Leading Economic Indicators at 7AM PST, expected to show a decrease of 0.1%. Tomorrow brings the July Richmond manufacturing index, the May house price index, and on Wednesday we’ll see the Fed’s beige book follow on Wednesday. Thursday brings both weekly initial unemployment claims and June existing home sales. Lastly, Friday brings June durable goods orders, the final-July US consumer confidence report, and June new home sales.

Mortgage Insurer MGIC is going to a maximum 90% LTV in California as of August 4 (down from 95%). They will still allow conforming jumbos up to $729,750 (90% LTV, 45 DTI, 700 FICO).

JOKE OF THE DAY
Jesus and Satan were having an on-going argument about who was better on the computer. They had been going at it for days, and frankly God was tired of hearing all the bickering. Finally fed up, God said, “THAT’S IT! I have had enough. I am going to set up a test that will run for two hours, and from those results, I will judge who does the better job.”

So Satan and Jesus sat down at the keyboards and typed away. They moused, faxed, e-mailed, e-mailed with attachments, downloaded, did spreadsheets, wrote reports, created labels and cards, charts and graphs, genealogy reports They did every job known to man.

Jesus worked with heavenly efficiency and Satan was faster than ever. Then, ten minutes before their time was up, lightning suddenly flashed across the sky, thunder rolled, rain poured, and, of course, the power went off. Satan stared at his blank screen and screamed every curse word known in the underworld. Jesus just sighed.

Finally the electricity came back on, and each of them restarted their computers. Satan started searching frantically, screaming: “It’s gone! It’s all GONE! “I lost everything when the power went out!” Meanwhile, Jesus quietly started printing out all of his files from the past two hours of work. Satan observed this and became irate.

“Wait!” he screamed. “That’s not fair! He cheated! How come he has all his work and I don’t have any?”

God just shrugged and said, “Jesus Saves!”