Here we go again....

After the release of the minutes of the Fed's August meeting on Tuesday, stories about a possible Fed rate hike started circulating.

Such reports hinged on the following declaration: Fed "members generally anticipated that the next policy move would likely be a tightening."

That's probably true, but the eagerness of some news organizations to distill the minutes into a simple conclusion (i.e., "rate hike coming") omitted several key points which add up to a "no rate hike anytime soon" conclusion, including:

• The line following the one about a tightening, which reads: "The timing and extent of any change in policy stance would depend on evolving economic and financial developments."
• The Fed's downgrading of its GDP forecast for the second half of 2008 and 2009.
• The Fed's comment about how "the financial system remained fragile" and a separate report Tuesday from the FDIC showing a sharp rise in the number of "problem banks."
• In addition, "most members did not see the current stance of policy as particularly accommodative," the minutes read. Translation: Most Fed members don't think policy is too loose, meaning there's less need to tighten -- more especially now that commodity prices (especially oil) have come down from their mid-summer peaks.

Finally, while Ben Bernanke must talk tough about inflation, his actions suggest otherwise and the Fed would actually prefer a little inflation to a deflationary spiral -- especially given the nation's debt overhang -- as Henry and I discuss in the accompanying video.

In sum, take any reports about future Fed rate hikes with a very large grain of salt, and don't forget, many reporters fell into this same "rate hike coming" trap in the spring.

Some hopeful housing numbers surfaced yesterday, among them the Case-Shiller Index showing that the rate of home-price declines slowed from May to June and that 9 of the 20 cities tracked by the index posted minor month-to-month gains.

That's no reason to start calling a bottom in the housing crisis, though, as Henry and I discuss in the accompanying video. The Case-Shiller Index also revealed that national home prices fell by a record 15.4% in Q2 compared to a year ago, and a recent Zillow.com survey indicates that a whopping 29.1% of homeowners owe more on their mortgages than their houses are worth. Factor in rising unemployment, tighter credit for borrowers, and a record unsold-home inventory, and the bottom still looks a long way off.

Whether Hillary Clinton's speech accomplished party unity grabbed the headlines from day two of the Democratic convention in Denver.

But economic issues were also a major theme among the speakers, including Sen. Clinton, who talked about creating "a clean energy economy that will create millions of green-collar jobs."

Energy independence and alternative energy initiatives were also the key theme of a speech by Montana Gov. Brian Schweitzer, who declared: "The petro-dictators will never own American wind and sunshine." (Schweitzer did not, however, give as much attention to "clean coal" technologies, of which he is a big champion.)

Former Virginia governor Mark Warner also talked about alternative energy and generated a flurry in the Twitter community by declaring, "Just think about this: in just four months we will have an administration that actually believes in science."

Henry Blodget says the alternative energy talk was nice, but wonders "where's the beef?" -- i.e., specific policy recommendations, which were lacking amid the rhetoric. Henry also thinks the GOP convention (which, yes, we'll be covering with equal verve) will likely tackle similar themes of energy independence. Still, I wonder if John McCain will focus more on drilling for U.S. oil vs. alternative energy policies, even though he supports such "green" measures.

At this point, there's only one "candidate" who is talking about doing both offshore drilling and pursuing alternative energy policies: Paris Hilton.

John McCain touched off a furor last week when he couldn't remember how many houses he owns.

The answer is seven.

His wealth, of course, is largely tied to that of his wife Cindy, whose father founded a lucrative Budweiser distributorship.

Together, the net worth of the McCain couple is some $140 million. Obama's is just over $1 million. But the guy who wins the poor guy sweepstakes is Joe Biden, worth a paltry $150 THOUSAND. And by many accounts, Biden's everyman lifestyle was a key factor in why 0bama chose him to be his running mate.

After all, the McCain camp has had some success branding Obama as both an elitist and celebrity, suggesting he's not just like the rest of us.

And recent political history has shown that the elitist tag can hurt. Remember George H.W. Bush, who didn't have a clue about price scanners, much less the price of milk?

And John Kerry, the WINDSURFER? His culinary gaffes were many -- he went to a Midwest diner and ordered green tea. And even worse, he ordered a Philly cheese steak with Swiss cheese, instead of Cheez Whiz.

They both lost.

So how important is a candidate's wealth? Tell us what you think.

Lacking direct figures for the Kindle from Amazon.com, a running debate has emerged among analysts over sales of the e-book reader.

After TechCrunch reported 240,000 Kindles have been sold to date, Citigroup's Mark Mahaney recently gushed the Kindle is shaping up to be the "iPod of the book world" and forecast 380,000 sales in 2008.

But McAdams Wright Ragen analyst Tim Beuneman downplayed Mahaney's enthusiasm by taking the novel approach of actually talking to the company, as AllThingsD reports.

Amazon managers "told us that the Kindle is definitely selling very well, but they also said the analysts and reporters giving out these extremely high estimates 'did not run them by company,'" Bueneman wrote.

Lost in the analyst vs. analyst debate is the fact the Kindle is outperforming most expectations and Amazon needs to be successful in the digitization of media as more than 50% of its sales still come from old-fashioned paper books and CDs.

The hammering of financial stocks was taking a reprieve early Tuesday, helped -- in part -- by the slowing pace of decline in the S&P Case-Shiller Home Price Index.

The index fell a record 15.4% in the second quarter vs. the prior year but the month-over-month decline of "just" 0.5% is providing a glimmer of hope.

"While there is no national turnaround in residential real estate prices, it is possible that we are a seeing some regions struggling to come back, which has resulted in some moderation of price declines at the national level,'' said David Blitzer, chairman of S&P's index committee.

In addition, new home sales data showed a 5.2% decline in the inventory of unsold homes, but June's sales figures were revised down to a 17-year low. Those groping for a bottom in housing can't ignore yesterday's existing home sales data, where more than 30% of sales were of "distressed homes" while inventories of unsold homes rose to 11.2 months supply, or about double normal levels.

Meanwhile, even in the unlikely event the housing market hits bottom today, optimists like Tom Brown are overlooking a series of challenges the financial sector still faces, including:

• The cost of a presumptive bailout of Fannie Mae and Freddie Mac, for which estimates range from $25 billion to as much as $500 billion. However much the government spends is money that will not be available to bailout the struggling banks and brokers, including Lehman Brothers.
• Fannie and Freddie need to refinance a combined $233 billion of short-term debt between now and Sept. 30.
• Banks, securities firms and lenders have $260 billion of short-term notes coming due by year end and a record $871 billion of bonds maturing through 2009, according to JPMorgan.

Banks are likely to struggle to get financing for those debt deals at attractive terms (assuming they can find it all). That, in turn, will make them less inclined to lend to consumers and businesses, which will crimp economic growth and keep pressure on the financial sector's profitability for some time to come.

And so the vicious unwinding of the credit bubble goes...

Recent rumors that Apple is considering a music subscription service may not be credible, but they do underscore the pressure on the music industry and brick-and-mortar retailers to successfully compete with the iPod/iTunes juggernaut.

My colleague Peter Kafka, managing editor of Silicon Alley Insider, says that record labels need to scale back in order to survive, preferably by getting out of the new-music business and focusing on their back catalogs. As for other online music stores, only Amazon shows signs of giving iTunes a run for its money, and Kafka says alternative models like Radiohead's "pay what you want" only work for bands that have already been developed (and made rich) by labels.

See Also:
Music Subscriptions Coming To iTunes (AAPL) Next Month? Nope
Wal-Mart Phasing Out Music Sales...And That Revenue Isn't Coming Back

Hedge funds used to be seen as a license to print money, but 2008 is shaping up to be the year the bubble burst. Earlier this month, former CNBC anchor Ron Insana folded Insana Capital Partners, the hedge fund he launched in 2006, while superstar investor Dan Benton announced that he's shuttering his $2 billion hedge fund Andor Capital Management in October.

Our guest, New York Times M&A reporter Andrew Ross Sorkin, detailed Insana's travails on his DealBook blog, and goes into the finer points of the rash of hedge fund failures in the accompanying video.

When are rumors more than just idle gossip? When they cause the collapse of one of the world's oldest and largest investment banks, of course.

In the accompanying video, our guest Andrew Ross Sorkin, New York Times M&A reporter and DealBook editor, weighs in on the SEC's ongoing probe into whether hedge funds spread false rumors about Bear Stearns and Lehman Brothers in order to cash in. Sorkin acknowledges that such rumor-mongering on the part of short-sellers occurs, but is skeptical as to whether it's what brought about Bear's demise.

He emphasizes that chatter is inevitable on Wall Street, and that nefarious intent is what matters in these cases. Third Point LLC founder Dan Loeb made the same point in his second-quarter letter to investors, albeit with more at stake: His firm is among the hedge funds under investigation.

New York AG Andrew Cuomo is, in my opinion, striking a good balance between hard-ass prosecutor and free-market realist. Unlike some regulators, Cuomo is quick to say that if people speculate and get burned then that's their own fault. As our guest, New York Times reporter and DealBook editor Andrew Ross Sorkin, and I discuss in the accompanying video, Cuomo is right to draw a distinction between speculation and auction-rate securities, which were often bought and sold as an equivalent of cash.

If banks understood and made clients aware of the risks of ARS and the clients bought them anyway, then there's no foul: When you roll the dice and lose you have no one to blame but yourself. In this case, however, I suspect some banks either underestimated or ignored the risks of ARS (negligence) -- or, in some cases, misrepresented them (fraud). In the latter cases, Cuomo's solution is fair: Ask the banks to make clients whole by buying the ARS back at par. Citi and UBS have agreed to do this. Other banks, such as Merrill Lynch, haven't.

Cuomo's ARS investigation is yet another blow to already-battered financial stocks, along with the continuing saga of Fannie Mae and Freddie Mac (and the spector of a Bear Stearns-style bailout for them). Does it finally signal a bottom in financials? Doubtful, says Sorkin -- and don't expect a V-shaped recovery when the stocks do finally do hit bottom.

As for the Merrill case, I have no idea what the facts are (nor, I suspect, does anyone else opining about the the firm's guilt). If Merrill thinks it adequately represented the risks of ARS and clients bought them anyway, it shouldn't rush to settle. Judging from Cuomo's appearance on CNBC this morning, however, his patience has run out (transcript after the jump).