Saturday, April 25, 2009
Bank of America announced earnings of $4.25 billion for the first quarter – more than it made in all of 2008. Mmmn... Where did the money come from?
Well, $1.9 billion in net income came from the sale of China Construction Bank (CCB) shares. And $2.2 billion came from marking up Merrill's book of mortgages. If you subtract these one-time gains and special accounting adjustments, Bank of America actually lost $1.3 billion.
It has always seemed strange to me that public investors put up with all of the accounting nonsense that goes on in public companies. I'd never own a stock whose CEO couldn't tell me in plain English whether or not the company had made or lost money. I mean, Warren Buffett, who controls an enormous holding company and some of the world's largest and most complex insurance companies, somehow manages to explain what's happening each year using plain English and remarkably few numbers – all of which are simple and intuitive. Why can't everyone else?
Here's what Bank of America (and the government) don't want you to know: Credit quality deteriorated across all of its businesses and loan portfolios. Nonperforming assets increased to $25.7 billion from $18.2 billion last quarter and $7.8 billion year over year. To protect itself from future losses, the bank increased its provision for credit losses to $13.4 billion from $8.5 billion, including a $6.4 billion net addition for loan and lease losses.
Over the years, we've warned investors many times about the accounting problems and the gross corruption of Fannie Mae and Freddie Mac. Congress wants to point the finger at Wall Street for the housing mess... but it was Fannie and Freddie that made the whole thing possible by subsidizing and guaranteeing mortgages. (And paying out millions and millions of dollars to politicians along the way.) You can bet Chris Dodd and Barney Frank won't allow any investigation into the corruption at Freddie Mac or Fannie Mae.
But the suicide of Freddie Mac's longtime accounting executive and CFO, David Kellermann, sure does raise a lot of tough questions. Like... why would someone hang himself in his own home, while his family was asleep upstairs?
If I could teach my subscribers one thing, it would be how to sell puts. There's no better strategy in the market for anyone who wants to be a long-term owner of equities. You can literally make 20%-30% per year, without using any leverage, simply by promising to buy stocks you want to own, at a price that's below the market. I can't explain it any simpler than that. That's exactly how it works. We just put on three new trades this week in my Put Strategy Report – all of which should make us better than 15% gains in a few months without buying a share of stock.
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Gold sure is popular these days... Investment in gold exchange-traded funds (ETFs) jumped to an all-time record in the first quarter, according to the World Gold Council.
Investors bought 469 tonnes in gold ETFs, more than tripling the previous record of 145 tonnes set in the third quarter of 2008. Total bullion holdings currently sit at 1,658 tonnes. And SPDR Gold Trust (GLD), the largest gold ETF, holds a majority 1,105.98 tonnes... It is now the sixth-largest gold holder behind the government of Italy. It saw its holdings jump 75% in the past six months.
If you're interested in gold investing, be sure to check out the most current stories and investment articles about the yellow metal on The Daily Crux's "Gold Page." We've collected opinions from some of the world's foremost experts... expressing both sides of the gold argument. Some of the most popular topics include, The No. 1 reason gold could enter mania phase soon, Gold is for suckers... buy this instead, and Gold on the verge of major breakdown.
In his latest issue of the S&A Oil Report, editor Matt Badiali noted that oil service companies were the cheapest they've been in 20 years and could easily return hundreds of percent in the next few years. He recommended three companies... and they're up between 20% and 45% in a matter of weeks. To learn more about the S&A Oil Report, click here.
Date Range:4/16/2009 to 4/23/2009
Date Range:4/16/2009 to 4/23/2009