Earnings Announcements: Novellus (NVLS)

Good day… And a Marvelous Monday to you! A Home Run Derby Monday to boot! I have no Idea what’s going on this morning, as I just woke up, and it’s very late in the morning! I was very careful to set my alarm last night, and I’ve never been one of those people that hit the snooze button when it goes off, but here I am, waking up late… UGH!

So… I’m writing from home, and then I’ll shoot in to work… We’re short handed this week, so, I’m sure everyone will be arriving to the office, not see my car, and be a little ticked… So, I’ve got a surprise for them, something they’ve never seen… Me come in late!

Well… It looks like Risk is under pressure once again… And the only thing I can see that’s causing this Risk Aversion, is the Corporate Earnings Season… For instance we get 4 banks reporting this week, Goldman (yes, remember they’re a bank holding company now… They ex-chief, and ex-Treasury Sec. Paulson, made sure that the change was made so that Goldman would qualify for TARP last year!) We also have JP Morgan, Bank of America, and Citi…

Data wise, there are a few top shelf reports out this week, and the thought of them showing more dandelions instead of green shoots, is probably wearing heavily on the risk assets this morning too.

So… The euro is sitting just below 1.40 this morning at 1.3985, so no real harm being done at this time, but still the bias is to sell the risk assets like currencies and commodities as we start the week.

You know, I’ve harped about this for so long now, that I sound like a broken record, OOOPS! For the younger crowd that would be a scratched CD! What I’m talking about is the fact that the risk assets like currencies and commodities being thrown into the same barrel has stocks… And how I was just wishin’ and hopin’ and thinkin’ and prayin’ that we would return to the fundamentals of these asset classes not having anything in common with the stocks! I just knew… No wait, I can’t say that… I just knew, not that I know anything on the inside, that is… That stocks were going to be under pressure from the Corporate earnings season, and with the “link” still in place… That wouldn’t be good for currencies and commodities… Let’s hope I’m wrong!

The one piece of data we get today is the Budget Statement… Last month, the Budget Statement printed an awful deficit of -$189.7 Billion (May)… Historically, June prints at a surplus… But Historically, so did April, and April was no where near a surplus this year! Year-to-date receipts for the Gov’t are down 18%, and Year-to-date outlays are up 19%… That doesn’t bode well for “history to come into play here”…

Last week, on Thursday, reported Friday in the Pfennig (thanks Chris!) was the Weekly Initial Jobless Claims, which printed the lowest level for this data series in more than 6 months, at less than 600K! But still, the number is still staggering, and one of the reasons that Commercial construction in the U.S. is set to decline 16% this year, followed by a 12% fall in 2010. No jobs… no need to build offices for the “ghost jobs’ that the BLS adds each month, because… THEY DON’T EXIST!

No need to get me started on the BLS (Bureau of Labor Statistics) this morning… I have to be clear and concise to get this out the door and me off to work!

Well… With the risk aversion back on the table… The two main beneficiaries remain to be Japanese yen and the U.S. dollar… Swiss francs are on the “kids table” but still a part of the beneficiary crowd…

The High Yielders like Aussie, kiwi, and South Africa get taken to the woodshed, when Risk Aversion comes to town… The Brazilian real is seeing a bias to sell, but for the most part has hung in there… Of course I remember saying that exact line early last fall, only to watch the real play catch up, until the turn-around in March of this year. So… I guess, what I’m saying is be careful!

So! Did you hear that Russian President Medvedev, showed off the “new world currency coin” at the G-8 meeting last week? He said.. “We are discussing both the use of other national currencies, including the ruble, as a reserve currency, as well as supranational currencies. So… Here it is! This is a symbol of our unity and our desire to settle such issues jointly.”

He then pulled a new coin out of his pocket and displayed to the attendees… Now… Don’t get all tied up and twisted over this at this point. This was simply a “symbolic” move, there aren’t mints all over the world rushing to get these coins minted and out the door… But, if you get the “symbolic” part, then you understand what Medvedev was attempting to do here… He was simply showing the G-8 attendees that if they really thought about it, they could see the need to move from a dollar reserve system, and to help them visualize it, he had a coin to pass around!

I can’t believe that right now, with the whispering campaign to get an alternative reserve currency, that the dollar isn’t getting sold, as I like to say, like funnel cakes at a State Fair! I guess the whispering will have to get louder, for this to make any real waves….

You know, I’m not for this “global currency”… I just wanted to make that clear! I’m not for removing the dollar as the reserve currency, for I know all of the “perks” that go along with it being the reserve currency! I’m just here to report the facts, and give my opinion / market commentary on how I think it will affect things…

I do believe, however, that given our deficit spending, and every growing to the moon National Debt, that the dollar deserves getting whacked, it’s how things are done! Treasuries will get their comeuppance too one day… You can’t just keep printing and printing and thinking that “buyers” will be there at the auction every time you print more… It’s not going to happen that way… At least in my thoughts it won’t!

OK… Time to go to the Big Finish… I know, I know, little shorter than usual this morning… But Hey! It was still chock-full-o-news!

Currencies today 7/13/09: A$ .7750, kiwi .6225, C$ .8605, euro 1.3980, sterling 1.61, Swiss .9240, rand 8.2930, krone 6.4830, SEK 7.9025, forint 198.10, zloty 3.1475, koruna 18.62, yen 92.10, sing 1.4650, HKD 7.75, INR 49.08, China 6.8328, pesos 13.71, BRL 1.9965, dollar index 80.16, Oil $59.96, 10-yr 3.30%, Silver $12.50, and Gold… $912.70

That’s it for today… Went to the Futures Game yesterday, to sit through a 4-hour rain delay… UGH! Let’s hope the rain stays away for the next two days! Home Run Derby tonight, All-Star Game tomorrow night. The family is all going to the Fan-Fest today, while I’m at work… Hey! Somebody has to work! HAHAHAHAHA! My beloved Cardinals went into the All-Star Game break on a good note, winning 6 of 10 on the road trip to end the 1st half of the season… This will be a very busy week for me, lots of writing to get done, and all the All-Star festivities… I go to my new oncologist this afternoon for the results of my scans on Friday, so all that and doctors stuff on top! UGH! Oh well, next Monday I head to Vancouver for the Agora Financial Wealth Symposium, their 10th year anniversary of the conference! And then I head off to vacation! So… Busy, busy, busy… Time to hit send, Hope your Monday is absolutely Marvelous I tell you!

Source:  Back To Risk Aversion!

And Bank of America arbitrarily assigned a higher value to its Merrill Lynch assets. Earnings reports this quarter may also impress investors. Trade revenue is up on the big spread between treasury and other bonds. And the banks earned fees in May helping each other raise capital.

Bank of America was one of 10 banks told by the government to raise more capital following the so-called stress test. The government concluded that BofA faces a potential $136.6 billion in losses from troubled loans and investments in 2009 and 2010. The bank’s $34 billion capital shortfall was more than twice that of Wells Fargo & Co. (NYSE: WFC), which had the second greatest capital need.

BofA Chief Executive Officer Kenneth Lewis said Thursday that his company will start closing the capital shortfall by raising $17 billion in common equity, both by selling new shares and converting a portion of its privately held preferred shares into common shares, MarketWatch reported. The bank said this could involve the issuance of 1.25 billion common shares of stock.

The company intends to raise $10 billion by selling off some of its assets, including its First Republic private-banking unit and asset manager Columbia Management.

Citing people familiar with the matter, the Financial Times reported earlier this week that BofA is considering selling an $8 billion stake in China Construction Bank (CCB). BofA currently holds 39.09 billion H shares of CCB, or 16.73% of the company’s total stock capital.

BofA was free to cut a third of its stake as of Thursday, as it marked the expiration of a lockup period for the holding. But as of Friday, CCB had not received any notice from BofA.

“China Construction Bank hasn’t received a notice from Bank of America on the stake sale,”Yu Baoyue, an official at the bank’s news department, told the Dow Jones Newswire.

In addition, Yu said that even if the sale takes place in coming days, he believes “Bank of America will sell down its stake in several steps instead of offloading the holdings in one go.”

When asked if he had any plans to part with any of Merrill Lynch & Co.’s investment banking operations, Lewis said: “Absolutely not.”

In addition to selling assets BofA is “in discussions to terminate and abandon” an insurance policy it purchased from the government to guard against $110 billion in troubled assets. Terminating that policy will would free up an additional $4 billion, Lewis said.

The company also expects to add another $7 billion from earnings and “various other items.”

“Our game plan is designed to get the government out of our bank as quickly as possible,” Lewis told reporters on a conference call. “Frankly, there’s been a lot of noise around our company. We hope these changes will help quiet some of that noise.

Source: Bank of America Planning Stock and Asset Sales to Appease Government Requirements

In our eyes, there has always been something strangely stage managed about this rally, which sent the badly wounded S&P 500 zooming up about 31% from its March 6 lows. First, the ‘leaked’ memos… then the earnings report press releases… then the bogus earnings reports themselves – filled with once-off items, FASB accounting hocus-pocus and missing months.

But the massive increase in program trading (computer trading of large baskets of stocks) by Goldman adds an even stranger dimension. The bank has fed the rally with a massive increase in its principal program trading at a time when other quant funds and program traders have been quickly deleveraging. One billion shares principal traded is becoming the weekly norm for Goldman.

There’s a neat quid pro quo here, if you care to look for it. The government bails out AIG using taxpayers’ money. The idea supposedly being to provide enough liquidity to AIG to allow it to make credit-default-swap settlements to counterparties at significant haircuts to avoid “systematic risk.” But what happened? These trades were settled at 100% – handing massive profits to counterparty banks.

The bank in receipt of the biggest AIG settlement, Goldman Sachs, then uses these funds (or part thereof) to feed the rally in stocks via its massive principal program trading operation, thus relieving pressure on the Obama administration as it completes its significant 100 days in office milestone.

Look close enough and what you see if a massive taxpayer-financed rally orchestrated by the banks and their government sponsors. First, the AIG conduit: the counterparty CDS unwinds were taxpayer financed. Ditto the PPIP, which proposes using tax dollars as leverage for private funds who want to buy toxic assets from banks. The banks have also been raising money via government-backed debt issuances – something very few mainstream investors understand or even know about.

Luckily, there are alternatives to trusting your luck in this kind of market. For instance, Money Morning’s Geiger Index trading program has maintained a 100% success rate this year.

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“Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators,” Geithner said in testimony to a congressional oversight panel on the government’s financial rescue program.

One of these banks, Bank of America (BAC), the world’s second largest in terms of market capitalization, booked a first-quarter net income of $4.247 billion – 6% more than it made in all of 2008.

So is this the turnaround Geithner et al. have been willing to beggar our nation’s future for?

Before calling your broker and placing a big order for bank stocks based on all this “good” news, it might be prudent to answer a couple questions first.

For starters, just where did all this income come from? And has credit quality really improved?

The answers to both can be found buried in a company press release bearing the encouraging title “Bank of America Earns $4.2 Billion in First Quarter.”

I’d like to draw your attention to the four most telling excerpts from this release.
1. “Equity investment income includes a $1.9 billion pretax gain on the sale of China Construction Bank (CCB) shares.”
2. “Noninterest income included $2.2 billion in gains related to mark-to-market adjustments on certain Merrill Lynch structured notes as a result of credit spreads widening.”
3. “Credit quality deteriorated further across all lines of business as housing prices continued to fall and the economic environment weakened.”
4. Nonperforming assets were $25.7 billion compared with $18.2 billion at December 31, 2008 and $7.8 billion at March 31, 2008, reflecting the continued deterioration in portfolios tied to housing.”
Now we see that out of its $4.2 billion in profits, a total of $4.1 billion came from a one-time sale of CCB stock and marking up Merrill’s book of mortgages. If you subtract these one-time gains from net income and include preferred dividends, Bank of America actually lost $1.286 billion.

As far as credit quality goes, I think number 3 above makes the situation as clear as can be.

Importantly, Bank of America is not the only big bank engaged in accounting sleight of hand.

As The New York Times article “Bank Profits Appear Out of Thin Air” by Andrew Ross Sorkin points out:
With Goldman Sachs, the disappearing month of December didn’t quite disappear (it changed its reporting calendar, effectively erasing the impact of a $1.5 billion loss that month); JP Morgan Chase reported a dazzling profit partly because the price of its bonds dropped (theoretically, they could retire them and buy them back at a cheaper price; that’s sort of like saying you’re richer because the value of your home has dropped); Citigroup pulled the same trick.

So what’s the takeaway?

When the Treasury secretary tells you banks are well capitalized and you read in the press that financial institutions have turned a corner, don’t buy it. And don’t buy the stocks of these companies either.

These days, smart investors are well advised to carefully watch the investment as well as the political landscape… because Washington’s movers and shakers’ influence on the markets has never been greater. The Casey Report investigates and analyzes those influences and trends – to find the best investing opportunities with maximum gains. You can try it completely risk-free – check out our 3-month trial with 100% money-back guarantee. Click here to learn more.

Source: Are Banks Going Bankrupt? “NO!”, say Banks

We have this crazy, old-fashioned idea that shareholders actually own public corporations – not management teams and certainly not the government. We believe the owners of a business have the right to decide whether or not to go forward with important changes to the capital structure – like mergers and acquisitions. It is, after all, their property. So when Bank of America’s management team decided to buy Merrill Lynch despite Merrill’s enormous $15 billion fourth-quarter loss and its decision to accelerate billions worth of employee bonuses, we think Bank of America’s rightful owners should have been appraised of these significant developments before shareholder vote.

You probably heard what happened instead: The government leaned on Ken Lewis to keep quiet about Merrill’s losses. And he caved. Then in a move of utter cowardice, Ken Lewis tried to blame the affair on Merrill’s former CEO. We hope shareholders sue the government for tortuous interference with the contract. They’ll win. We hope Ken Lewis goes to jail for securities law violations – for which he is clearly guilty. We hope Bank of America’s rightful owners will one day have their property returned to them. So I guess you could say we’re on the side of property owners and against the endless number of leeches who try to con, steal, and muscle in on them.

Reassurances over the health of the U.S. banking industry have sparked something of a recovery in investors’ appetite for risk and Wall Street looked set to join Asia and Europe with strong gains at the open.

Executives from Citigroup , Bank of America and JPMorgan Chase said last week their banks had been profitable for the first two months of the year.

Federal Reserve Chairman Ben Bernanke also said on Sunday that he sees the U.S. economic decline moderating and recovery beginning in 2010, though he said risks remain that politicians will lack the will to do everything needed to fix the fractured financial system.

Global stocks as measured by MSCI rose more than 1.3 percent, bringing gains to more than 11.5 percent since hitting a low a week ago.

“The eternal battle between the bulls and the bears will intensify this week,” said Chris Hossain, senior sales manager at ODL Securities.

“Whilst it is hard to say if we have seen the worst, we certainly haven’t seen a week like last week in a long time.”

European shares also rose for a fifth straight session, led higher by financial stocks.

The pan-European FTSEurofirst 300 and 14 percent this year after plunging 45 percent in 2008.

Earlier, Japan’s Nikkei average gained 1.8 percent to post its highest close in a month, with banks such as Mitsubishi UFJ Financial Group  jumping amid the easing fears about the health of U.S. lenders.

The benchmark rose 134.87 points to 7,704.15, its highest finish since Feb. 16. The broader Topix  climbed 2.4 percent to 741.69.

BONDS FOR SALE

The equity charge undermined demand for government bonds with June Bond futures down 73 ticks, two-year Schatz yields rising 5 basis points to 1.381 percent, and 10-year Bond yielding 3.127 percent, up 8 basis points.

“At least risk aversion is decreasing and there was no disappointment on the back of the G20,” said Patrick Jacq, interest rate strategist at BNP Paribas in Paris.

“Clearly, as financial stocks still remain the driving force, this is helping stock markets to rebound further.”

Over the weekend, finance ministers and central bankers from Group of 20 countries pledged to use their full fiscal and monetary firepower to combat the economic crisis, but the decisions taken focused more on funds for the IMF and regulating hedge funds.

The dollar fell broadly, reversing earlier gains made in the Asian session, as stock markets rallied.

The currency market was also looking ahead to policy meetings by the Federal Reserve and the Bank of Japan later in the week.

The dollar fell 0.65 percent against a basket of currencies to 86.687, while the euro rose 0.8 percent from U.S. trade on Friday to $1.3022 .

The U.S. currency, however, gained 0.49 percent to 98.43 yen .

March 16 (Reuters)