Intel predicts a bull market

The big news today is the hugely bullish numbers from Intel, one of Dan Ferris' Extreme Value World Dominators. Intel is the world's largest semiconductor manufacturer, and semiconductors power computers... so you could argue (as S&A editor in chief Brian Hunt often does in DailyWealth) Intel powers the world. When the world is bullish, people buy more computers. According to Intel's recent numbers, the world is very bullish.

Intel reported a second-quarter profit of $2.9 billion (51 cents a share), compared to a $398 million loss last year. Revenue was $10.8 billion, up from $8.02 billion a year ago. The semiconductor giant beat analyst expectations on earnings and revenue, which were 43 cents a share and $10.25 billion, respectively.  Intel rose more than 3% on the news.
 
Intel CEO Paul Otellini said "strong demand from corporate customers for our most advanced microprocessors helped Intel achieve the best quarter in the company's 42-year history."

For the current quarter, Intel expects revenue of $11.6 billion, plus or minus $400 million... Analysts are expecting $10.92 billion.

The market has risen for the past six days (reversing a six-day decline), and these numbers from Intel only strengthen the bull case.

While businesses are feeling bullish, it seems the U.S. consumer is staying on the sidelines. Demand for loans to buy U.S. homes fell to a 13-year low last week. Refinancing demand also fell – surprising, considering near record-low mortgage rates. Requests for loans dropped 3.1%. Refinancing applications fell 2.9%. Loan applications have fallen nine out of the 10 weeks since the April 30 homebuyer tax credit expiration. Refinancings currently account for 78.7% of all applications. Also, on the consumer level, retail sales fell 0.5% in June, following a 1.1% decline in May.

"Who's on the other side, who's the idiot?" is the question frequently posed in Michael Lewis' subprime-crisis saga, The Big Short. Greg Lippmann, the Deutsche Bank trader who peddled subprime credit default swaps around the world, always answered... "Düsseldorf. Stupid Germans... They take the ratings agencies seriously. They believe in the rules."

The Düsseldorf bank in question was Deutsche Industriebank AG (IKB). The bank was created to lend to Germany's middle-sized businesses, but started loading up on mortgage assets (and selling subprime credit default swaps – a long bet) between 2002 and 2007. IKB was left holding the bag when the credit markets froze in 2007. It took huge losses on its subprime holdings.

Today, IKB's former CEO, Stefan Ortseifen, was convicted of misleading investors as to the bank's exposure to the mortgage crisis. According to German news agency DDP, the Dusseldorf state court issued Ortseifen a 10-month suspended sentence and a $127,000 fine.

The case centers around a profit warning IKB issued on July 30, 2007, saying it had "felt the impact of the crisis in the U.S. subprime mortgage market." Ortseifen resigned the same day. But 10 days before the warning, Ortseifen released a statement painting a deliberately rosy picture of the bank's earnings.

Imagine if the U.S. courts put executives and politicians in jail for lying about a stock. Every Wall Street CEO would probably be in prison. Hank Paulson, Ben Bernanke, and Barney Frank would all be put away for life for telling U.S. citizens Fannie and Freddie were adequately capitalized in July 2008... months before both companies fell to less than $1 a share.

New highs: Keyera Facilities Income Trust (KEY-UN.TO), Anheuser-Busch InBev (BUD), HMS Holdings (HMSY), Enterprise Products (EPD), AmeriGras Partners (APU), Entergy Texas (EDT).

Lots of blowback from Dan's comments on government land seizures yesterday... What else do you disagree with? feedback@stansberryresearch.com.

"I am writing from Canada, so we are talking a different political jurisdiction, but I have to say thank God that people like you are not in charge of land use. Otherwise we would be up to our asses in condominiums, resorts, etc., etc. One reason I love Canada is that we have a lot of wilderness and relatively untouched natural areas. We need to have these areas so that we can be in touch with nature and sense something greater than ourselves. If everything was reduced to economics and how to make the most amount of money, there would be little worth being in the world for. I like the idea of government owned land (here it is called Crown land) because there are some controls on how it is used. If it was all privately owned, access would be denied to those less fortunate than the wealthy and speculators would be free to do whatever they wanted. Reading your newsletter has made it clear that for you profit comes first and that money has greater value than other values. I am sorry for you, but I do not want people like you determining the future of our wilderness." – Paid-up subscriber Mel Stangeland

"Yeah for all that land seized by the Feds (don't forget the Feds are the states) for National Parks, should be twice as much. Here in Idaho we have an area, The Sawtooth National Recreation Area, which has wilderness status. Recently some rich bastard developers tried to get legislation passed so they could develop inside the area. Idaho, the most republican state, surprisingly put a stop to the attempt. Here are some other thoughts you can choke on. The underlying cause of all the world problems is overpopulation and the 10% +/- thugs. In the US it's the LACK of regulations especially of the financial/investment industry. WE, in the middle class, think your and Porter's commentary on politics, wealth distribution, science (global warming etc), stinks. But to end on a good note, you and Porter and others are VG with investing recos." – Paid-up subscriber John Steger