Would You Buy Bank of America Common?

These guys either prove that their is no sentient life at the upper management levels of Bank of America (BAC) or have received the tip of the year from the federal government.

BofA CEO Kenneth Lewis and several directors of the company bought 513,000 shares of common stock of the bank yesterday. Lewis bought 200,000 shares and board member Robert Tillman bought a like amount. Various directors purchased the balance.

Just a guess, but they probably have a pretty good sense that the government is not going to nationalize them. If that’s the case and the government is going to keep them on life support until they get back on their feet, then it’s probably a pretty good buy. Of course, there’s always the chance that they are kept on life support, don’t improve and the government changes its mind.

Got the stones to take a flyer on this one?

Comments

[mngordo:]

This question has more to do with investing "style" than substance but in terms of risk/reward it is a no-brainer.
You can buy 1000 shrs of BAC @ 5.50 to 6.50 during the coming days. So risk is that BAC goes under you lose approximately 6K.
On the other hand, BAC doesn't go under, and in the ensuing years it recovers and soars from 6 to 60...that'd be 5.50 X 1000, or a gain of 5,500 dollars. In the vernacular, not too shabby. you risk six K to gain 5,5K.
If BAC should prove to be successful with its acquisition of Countrywide and Merrill. Even if only one of these acquisitions proves successful......BAC should do fine in the price per share arena.

Jan 21 07:05 PM

[texalope:]

I am amazed how lightly people discuss the prospect of nationalizing our banks. I , for one, do not invest in foreign countries because I worry about their governments stability and the prospect of nationalization of my investment. Suddenly I find this is freely discussed and contemplated in the US.
Color me distressed. I own plenty of bank stock and will be very disappointed if our government chooses to nationalize my investment.

Jan 21 07:14 PM

[investor88:]

Super logic on potential of BAC but the risk is still there. Now do you want to take this risk? Not for me under present economic conditions.

Jan 21 07:14 PM

[User 207572:]

BAC was trying to withdraw from the MER deal. Government pushed BAC. The action of taking BAC was the proof that share holders helped the fed. Now BAC is in trouble because of that. Do you think BAC's share holders will be punished? I don't think so, if so, they can sue the fed.

Jan 21 08:14 PM

[ozcutty2:]

I wouldn't take insider buying too seriously. Insiders owned alot of BSC and LEH and it didn't help.
Banks are way too risky, i'm looking at financial companies with similar upside but less risk like asset managers.

Jan 21 09:04 PM

[retired but...:]

I already own a lot of BAC, but i also owned a lot of WB and didn't have the sense to sell when it was in the 50's.

Ken Lewis may have purchased more shares of BAC, but that doesn't mean anything. His prior poor decisions already demonstrate that he's a greedy idiot.

more telling, just remember that Bob Steel spent $16 million buying shares of WB after he was persuaded to try to steer that leaky (and ultimately sinking) ship. To paraphrase Ken Lewis..."I've had enough fun with banking".

One final observation...CEOs named Ken may be inherently dangerous to shareholders...Ken Lay, Ken Thopmson, and Ken Lewis.

Jan 21 09:39 PM

[weiwentg:]

Ken Lewis did indeed say that he'd had enough fun with investment banking.

Having the government execute the original TARP plan and buy bad securities seems to be gaining more traction than having the government nationalize the banks. It would also be pretty hard for the government to nationalize all the big US banks. If the government doesn't nationalize, I don't see BoA being worth in the single digits.

That said, I don't have the stones to buy BoA.

Jan 21 09:46 PM

[dumbguy@10:]

BofA is currently the nation's leading mortgage company - by a longshot. If you are negative BofA you are assuming the USA economy will never recover. The earning potential of this company is astronomical, and it's trading below tangible book. All this talk of bankruptcy is overblown after one quarter of losing less than a dollar. Think about what's going to happen (positives) when Merrill is figured into BofA's balance sheet. I bought it at ten and thought it was a deal then.

Jan 21 10:44 PM

[Urbane Gori...:]

If the taxpayer (that's me) that under normal circumstances would **never** buy bank stock (or auto manufacturers for that matter), are obliged to foot the bill to save the butts of the CEOs of these companies, then I **do** want the taxpayer to own them. Heck! We're paying for them!!! My money, my bank!!! **If** they recover, why shouldn't the taxpayer benefit???

jegan ;-)


On Jan 21 07:14 PM texalope wrote:

> I am amazed how lightly people discuss the prospect of nationalizing
> our banks. I , for one, do not invest in foreign countries because
> I worry about their governments stability and the prospect of nationalization
> of my investment. Suddenly I find this is freely discussed and contemplated
> in the US.
> Color me distressed. I own plenty of bank stock and will be very
> disappointed if our government chooses to nationalize my investment.

Jan 21 10:54 PM

[who:]

Relatively speaking, their purchases of stock is probably a fraction of their existing wealth, so does it add up to much? I would be more impressed if they spent +30% of their wealth into the stock.

Looks like they came together and decided to show some support for their stock. Another dead cat bounce? Should the government buy the toxic assets they will want some collateral in return and they will be forced to lend more hence take on even more risks.

Or are they acting on insider information?

Jan 21 11:28 PM

[thesnowjob:]

Come on people!! It's another smokescreen!!

I wouldn't be surprised if those insider purchases were paid for using MOneyMart advances on imminent TARP money bonuses.

Jan 22 12:47 AM

[icandoitdon:]

insider purchases of BAC are irrelevant in this circumstance. it's like the coach (lewis) giving his losing football team a pep talk before the big game they're destined to lose yet again.

in any case, it's pocket change to a robber barron. if he bought 10 million shares i might pay attention.

Jan 22 01:50 AM

[Moon Kil Woong:]

Ugghh bankrupt them, break them up and investigate them. They already got one chance bailout years ago from the government when they were going bankrupt. Too bad they were saved.

They will cry that it's not fair, after all Citibank is worse. That is fine, liquidate Citibank first please. Citibank will cry that they were better than Fannie Mae and Freddie Mac. That's fine, wipe out the last vestiges of their equity first please. Fannie Mae and Freddie Mac will say that's not fair. It's not their fault people took out loans they couldn't afford. In fact, it is.

It's called due diligence. If the Fed and Treasury did due diligence on them before TARPing them they would never have gotten a penny. I guess they were lucky TARP was being run by their parrot friend Paulson.

Even after that what did BoA do? Spent that money trying to grow even bigger so they could hold the US hostage for more bailouts. They should have been more worried their capital reserves were racing towards 1-2% and will be zero in 2009 without more capital infusions. Gee, did these guys go to business school?

Jan 22 02:24 AM

[Glitch:]

No, its like the coach stopping at the bookie's on the way to the game, to lay down a wager on his team equal to his annual salary.

And millionaires didnt become millionaires by thinking of a million dollars as 'pocket change'.


On Jan 22 01:50 AM icandoitdon wrote:

> insider purchases of BAC are irrelevant in this circumstance. it's
> like the coach (lewis) giving his losing football team a pep talk
> before the big game they're destined to lose yet again.
>
> in any case, it's pocket change to a robber barron. if he bought
> 10 million shares i might pay attention.

Jan 23 06:56 PM

[jdl51:]

If the government sets up an aggregator bank to relieve these institutions of their toxic debt, it could very well be possible to make a small fortune on a $60,000 investment. It's always darkest before the dawn, as they say.

Jan 24 08:07 PM

[WMBANZAI7:]

KENNY THE BAILOUT MOOCHER
(Minnie the Moocher, Cab Calloway)
WilliamBanzai7

Sing along link: hk.youtube.com/watch?v...

Hey folks here's the story bout Kenny the bailout moocher
He was a low down Charlotte BAC hoochie coocher
His was the roughest toughest banking sob tale
But Kenny had an appetite as big as a TARP subsidized whale

Hidehidehidehi (hidehidehidehi)
Hodehodehodeho (hodehodehodeho)
Hedehedehedehe (hedehedehedehe)
Hidehidehideho (hidehidehideho)

He messed around with a bloke named Thain
He wanted the Merrill Bulls or he'd go completely insane
Thain took him round to Chinatown
And showed old Kenny how Wall Street gangstas kick the gong around

Hidehidehide-LEVEL 3 (hidehidehidehi)
Whoah (whoah)
Hedehedehede-GREED (hedehedehedehe)
A hidehidehideho CDO (hidehidehideho)

Kenny had a dream bout yet another financial supermarket
It would give him things that he was needin
It would give him a palace built of gold and steel
A diamond studded Learjet with platinum wheels

A hidehidehidehidehidehi... (hidehidehidehidehidehidehi)
Hodehodehodehodehodeho... (hodehodehodehodehodehodeho)

Thain sold Ken a herd of mad cows and a boatload of subprime manure
Each meal Ken ate was full of surprising new derivative courses
Had a billion dollars worth of taxpayer nickels and dimes
He sat around and counted them all a million times

Hidehidehide-LEVEL 3 (hidehidehidehi)
Hodehodehode-CDO (hodehodehodeho)
Hedehedehede-GREED (hedehedehedehe)
Hidehidehide-HOSED (hidehidehideho)

POOOOOOR MAN
POOOOOOOOOOOOOOOR MAN
POOOOOOOOOOOOOOOOOOOOO... MAN

Jan 25 06:07 AM