Eight Reasons Bank of America Is Going to $20 222 comments
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We are experiencing an overreaction of historic proportions when it comes to the financial sector and specifically Bank of America (BAC). In case you haven’t noticed, these extreme overreactions are becoming the norm; a thorough understanding of the reasons for the overreaction are paramount to generating great investment returns. The market has gotten Bank of America terribly wrong in the short run as the ‘cloud of uncertainty’ has collided with the ‘sea of negativity’. Governmental uncertainty combined with the market’s negativity are the contributing factors for Bank of America plunging below $4 a share. After riding Apple (AAPL) calls to triple digit gains in 2007, and then riding oil puts to triple digit gains in 2008, I am making Bank of America my #1 holding for 2009. By next year this stock will be back to $20 a share. Consider the following:
1) The market is running wild on some hyped up article written in the Financial Times that claims Obama is considering nationalizing the banks. If you actually read the article you’ll notice the anti-American sentiment at the very beginning when they say that ‘nationalization has long been regarded in the U.S. as a folly of Europeans...’ Ok, I get it, Europe has been right all along. Whatever. Obama’s true feelings on nationalization came out in his ABC interview after Geither’s banking speech when he laughed out loud and said, “Sweden had like five banks. We’ve got thousands of banks...managing and overseeing anything of that scale...wouldn’t make sense. And we also have different traditions in this country."
2) Obama understands that the markets will determine his success. He has been very upfront in his stance that the success of this financial plan will depend on how the markets respond over the next few months. The idea of killing off current shareholders and taking Bank of America off the market during a nationalization phase is unthinkable.
3) Tim Geithner does not believe in nationalizing the banks either. Mr Geithner last week said: “Governments are terrible managers of bad assets.” He went on to outline a plan that will seek help from the private sector, will maintain a market for these toxic assets, and will increase transparency. Nationalization accomplishes none of these three.
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This article has 222 comments:
Honesty disclosure: Long BAC.
The abhorrent short-seller's chorus is WAY out of pitch with their disgusting lies and innuendo.
They are totally amoral and sociopathic.
Idiots like Cramer claiming BAC will be dropped from the DJIA, etc.
This Nationalization crap.
Sure, Paul is dead and one should play Beatles albums backwards to learn deep and hidden truths.
One merely has to peruse the Yahoo BAC board to get a whiff of the vomit and lies being spewed.
SEC?
SEC?
1. Ban short selling. This is the game for the gamblers, disregarding all the facts: strength, brand name, 9% Tier 1 assets, US$118B to backstop toxic assets of US$99B, , history, succcess, good management, paying out dividends to Treasury, obediently follow intstructions to take over ML, etc, etc, etc. This game is becoming a self-fuling prophecy and words gets around on how to make money by shorting BAC, more jumps onto the bandwagon, and BAC price continue to drop, despite it strong fundmanentals. But at some point, it will reverse course, may be now at $3. All the gamblers will have to cover their shorts and gamblers will go Long to make money.
2. Asked Obama to say that he is not going to naitonalize a national icon like BAC. Ken Lewis mentioned that yesterday after he speaks to Washington for assurance which he gotten. If he keeps mum for too long, our financial systems and market will collapse; all the banks will end up like BAC because of fear, speculation, and no assurance from him. He needs to give assurance more than using the word CRISIS. It will create undue public panic. Even asia banks which are very strong are also dropping like shit this week because Obama kept quite. It can lead to a global crisis and depression. The whole needs assurance from America, and not continue to create fear.
3. Ban journalists from publishing untrue opinions without evidence or facts to support what they claim.
Doing these 3 will stop all the speculation and gambling. BAC will then be left on its own to prove to the world that it is a good bank after all and not subjected to herd gambling. Please find a way to send this to him.
I'm so confused...
On Feb 20 07:27 AM FirstManagingDirector wrote:
> The problem is Merrill Lynch, the executives from the last 8 years
> have taken all of the cash out of the company and left an unquantifiable
> amount of losses. Its not worth taking a chance.
On Feb 20 09:22 AM klarsolo wrote:
> Proximo, can you lay out BAC's lethal credit exposure for us so that
> we understand that nationalization is a given?
Everyone here that is against Nationalization needs to write the President and their congressional delegation and tell them to take Nationalization off the table, NOW!
Maybe this is all the administration's plan to teach the shorts the same lesson the longs have learned...at some time your game changes and dramatically!
On Feb 20 08:29 AM BAC Bull wrote:
> Why can't BAC do a stock buyback ? The total market value is less
> than $20B with an EV of $274B. This would put a floor on the stock
> and let BAC execute their recovery plan. It would relieve the pressure
> from the rating agencies, govt, counterparties because of the low
> stock price. I agree that BAC is a great bank with the best talent
> if it can get pass this point. A few billion$ stock buyback would
> do it.
Our interest was piqued by reports from Berlin that the German cabinet had approved a bill that would seem to allow for the "forced" nationalization of financial institutions. This action is the beginning of what we see as the eventual framework for government intervention during the subsequent stages of this economic fallout. Granted, public statements made by Bernanke/ Geithner/Congress would seem to indicate that nationalization is off the table. However, please allow us to share with the readers a selected quote from the great Dr. Bernanke himself, taken from comments he made while speaking at a conference in Chicago, on May 18th, 2007.
"We believe the effect of the troubles in the sub-prime sector on the broader housing market will likely be limited, and we do not expect significant spillovers to the rest of the economy or the financial system"
This comment tells us one of two things, that those in charge are either hopelessly incompetent forecasters, or have purposely misinformed the public throughout this entire debacle. Regardless of which assumption you make, one can conclude that any official pronouncements from the Governments as to its future course of action can safely be disregarded. Any assessment of potential investment within the financial sector must be viewed through the lens of nationalization. How long the US Government allows its largest financial institutions to remain insolvent is unknown. However, we can say with some conviction that the balance sheets of the major US banks are impaired beyond the point of repair via private capital raising, accounting trickery, and even Government capital "injections". That being said, our stance should be clear in terms of whether common equity even exists for this country's largest banks.
*no it isn't its going in one direction, nothing wild about it
2) Obama understands that the markets will determine his success.
*if he did he would have hit the PPT button and turned 942 into support, instead we are 200 points lower...thats S&P points..
3) Tim Geithner does not believe in nationalizing the banks either
*Timmy doesnt have a solid thought in his head
4) Any talk of banks would be incomplete without the opinion of the woman who has been right all along, Meredith Whitney
*wonderful, you have then completed the talk requirement, high 5's all around, now on to reality
5) Earlier this week, Bank of America actually paid back $402 million in a TARP dividend payment to the U.S. government.
*Ken Lewis wants his job....wants to keep eyes off his personal situation. The 402m, oh yeah is an M not a B....pretty close but anyway the 402 million was so highly regarded that
hedge and MF block buying has commenced and BAC will be soaring in no time..oh wait thats right down another 50% , well same difference
6) The Fed will be purchasing $500 billion of mortgage backed securities over the next six months.
*news, trade the news loose your house....risky, playable for a pop with disposable money
7) Bank of America will be the undisputed leader of the new economy.
alright settle down, the new economy has not even been conceived yet, you might even be dead by the time it happens
8) Huge insider buying.
*yawn, look for insider buying spikes in top stocks that were victimized by the sell off Sep-Nov -08
every conceivable support level has been shattered, a squeeze is the only hope
Let these people be wiped out along with holders of CDS's who are like arsonists buying fire insurance before they set the fires.
On Feb 20 09:24 AM HC wrote:
> Well written, Jason. If you can contact Obama, ask him to do 3 things:
>
>
> 1. Ban short selling. This is the game for the gamblers, disregarding
> all the facts: strength, brand name, 9% Tier 1 assets, US$118B to
> backstop toxic assets of US$99B, , history, succcess, good management,
> paying out dividends to Treasury, obediently follow intstructions
> to take over ML, etc, etc, etc. This game is becoming a self-fuling
> prophecy and words gets around on how to make money by shorting BAC,
> more jumps onto the bandwagon, and BAC price continue to drop, despite
> it strong fundmanentals. But at some point, it will reverse course,
> may be now at $3. All the gamblers will have to cover their shorts
> and gamblers will go Long to make money.
>
> 2. Asked Obama to say that he is not going to naitonalize a national
> icon like BAC. Ken Lewis mentioned that yesterday after he speaks
> to Washington for assurance which he gotten. If he keeps mum for
> too long, our financial systems and market will collapse; all the
> banks will end up like BAC because of fear, speculation, and no assurance
> from him. He needs to give assurance more than using the word CRISIS.
> It will create undue public panic. Even asia banks which are very
> strong are also dropping like shit this week because Obama kept quite.
> It can lead to a global crisis and depression. The whole needs assurance
> from America, and not continue to create fear.
>
> 3. Ban journalists from publishing untrue opinions without evidence
> or facts to support what they claim.
>
> Doing these 3 will stop all the speculation and gambling. BAC will
> then be left on its own to prove to the world that it is a good bank
> after all and not subjected to herd gambling. Please find a way to
> send this to him.
I was so happy to read this article. Finally a ray of light in this "Cloud of Uncertainty" as you so aptly wrote. I work for this great company and I have never been more proud to be a "Bank of American".
This “Sea of Negativism” does nothing but play into the hands of the socialistic doctrine of the left. The President’s inaction is fueling this fire of Nationalism. I have never heard of anything more irresponsible. Can you name me the last profitable government-run financial entity? Where is Social Security and Fannie Mae/Freddie Mac! What do Christopher Dodd and Nancy Pelosi know about Commercial Banking?
I am fully confident in Mr. Lewis’ leadership and I know he will lead us back to profitability. It has already begun. We just paid $480 Million back to the government but where is the press on this positive news? Just wait until you see the windfall from our mortgage refinancing.
I would love to see a Preferred Stock Sale to our associates. I am confident we can rally around our leadership and raise enough money to pay off our TARP Loan and get the government off our necks.
Dave Ferrara
I actually remarked today about how insane people shorting BAC are right now. Even if their right, risk-reward is not in their favor. At most, they pocket a 100% gain; on the flip-side, they could absorb a loss in the 300-1000% range. Unless one thinks the odds of nationalization are 95%+, that's not a very wise investment based on risk-reward principles.
On Feb 20 08:11 AM NITRAM wrote:
> I agree. But accepting anything that Obama and Geithner say is risky.
> These men want more socialism. To say that Obama cares about the
> markets is absurd. He uses nothing but doom and gloom in his speeches.
> This week he used the word "CRISIS" twenty five times. Do you think
> these speeches give confidence to the american people. As far as
> Geithner goes, why would you believe the word of a tax cheat? Let
> the banks that are sick fold.Better yet, we have millions of great
> business people in this country. instead of giving these crooks more
> money throw them out. Throw out the officers and the boards. Replace
> them with some of the good people who could help repair the damage.
> Obama had the choice to work with the only man who had the experience
> to work with the banking crisis, Mr. P. volker. Not not our incompertant
> car salesman he picks L. Summers. Yeah he knows what he is doing.
1) Yes the market is running wild and the USA is not the same as socialized Euro-land. However, We have already witnessed the de-facto nationalization AIG, FNM & FRE.
2 & 3) Yes, but none of this addresses the issues of BAC & C’s credit card and commercial mortgage portfolios which are potentially ticking time bombs
4) Meredith Whitney has proven to be a very savvy analyst. However, her opinion(s) on the price of any given stock should not influence public policy which does, and should take into account, a great deal more than stock prices.
5) Yes, BAC paid $402 mm to the US Government. This is a contractual obligation and was a dividend payment on the preferred stock purchased a few weeks ago. This IS NOT a repurchase / repayment of that principal. If defaults tick up higher than Ken Lewis & his team forecast, then the likelihood that BAC needs more capital increases with that uptick.
6) The Fed’s purchasing of $500 bn of MBS will not influence the near term risks of increasing defaults in the credit card & commercial Mortgage portfolios – the risks that are driving BAC to record lows.
7) Maybe – I’d make odds better that 50/50 that some form of Glass Steagall is put back in place as part of the ‘new economy’ making a MER spinout or sale likely – at far less than was paid a few weeks ago.
8) Huge insider buying? Check your math – Ken Lewis bought less than $1 mm worth of stock a few days ago. A handful of other insiders also purchased a relatively insignificant amount.
How do you get to $20.00 p/s?
Go back to doing something more productive Jason, just not trying to give really bad fiancial advice.
Regards
Re: RE: Non-Mandatory/Reorg Tender - BAC <<
Thank you for your e-mail.
This tender offer is completely voluntary. Bank of America is offering to purchase back odd lot shares (99 or less) of record date 7/1/08 at a weighted average price minus any fees. The expiration date is 6/17/2010.
Please let us know if we may be of further assistance.
Sincerely,
Rhonda Deeney
National Service Center
Scottrade Inc.
On Feb 20 10:55 AM Long & Painful wrote:
> BAC BULL - BAC cannot buy back ANY stock at this point in time. Every
> single $ it has will be needed for reserves against future bad loans.
> The reason why the stock is being pounded is the Street thinks the
> loan book at BAC will be destroyed as defaults on the credit card
> & commercial mortgage book rise to levels which exceed historicals
> norms, wiping out book equity. Also the rating agencies HATE stock
> buybacks as do the regulators at the Fed.
The author has based every point on hopes, supposed thoughts and intentions, and belief in the good will of government types and bankers.
Nobody really knows what these people believe or understand about the current situation, because it changes daily, if not hourly. Attributing real intentions or plans to politicians and bureaucrats floating trial balloons and testing public reaction is the road to ruin.
There are financial bombs all over the world that could explode any day and it is unlikely that any one of the explosions would be good for BAC or any other financial institution.
And do not assume that "nationalization" only comes in one flavor. There are countless possible permutations that would effectively have the government in control for years while not wiping out shareholders completely. We have absolutely no idea what the final version will look like. Nobody has any idea what convoluted scheme these people might come up with. And there are no shortages of schemes in Washington.
.
On Feb 20 03:31 PM User 347440 wrote:
> I didn't see the 10/1 reverse split option in the article. That's
> one easy way to $20+.
On Feb 20 08:29 AM BAC Bull wrote:
> Why can't BAC do a stock buyback ? The total market value is less
> than $20B with an EV of $274B. This would put a floor on the stock
> and let BAC execute their recovery plan. It would relieve the pressure
> from the rating agencies, govt, counterparties because of the low
> stock price. I agree that BAC is a great bank with the best talent
> if it can get pass this point. A few billion$ stock buyback would
> do it.
How can you call BAC at $20 when you can barely hope for 5 bucks in 2011? You must be joking. And you just lost those calls.
Post again in a year and follow-up on this every year...that is, if BAC is still listed anywhere.
Regards.
Look at page 23 on this report to the US Tresury.
$4 trillion in assets, $34 trillion in exposure to Derivatives. Reported Sept. 2008 before the BAD aquisitions.
www.occ.treas.gov/ftp/...
I think you're too focused on finding your next triple digit return to assess the situation rationally.
If he was really concerned about the market he would stop throwing those "worst economic crisis ever" hand grenades. Right now we are having an Obama rally in the wrong direction.
It will be put into "receivership".
That smell is your brain cells frying on the cognitive dissonance. You can't rationally view Dubya's bashing of the US economy as OK but Obama's as socialist. They both did it. It's called building your political cover, nothing more sinister. Politicians frequently do it to socialize the masses towards lower expectations so that if things don't come out all rosy, the politician can say, "I told you things were bad already." If things come out well, the politician takes credit for it and gets to be told he did a "Great job[, Brownie.]"
Socialist Obama? Right. *EVERY* POTUS is subservient to the elites, and the inviolable history of that statement negates your theory that ANY POTUS has been or is a socialist. 99% of the people understand this through their simple common-sense observation of politics. You can't seem to see it through the smoke of your smoldering brain cells, trying to rationalize Obama as 'socialist' when his approach so closely mirrors that of Dubya eight years ago.
On Feb 20 08:11 AM NITRAM wrote:
> I agree. But accepting anything that Obama and Geithner say is risky.
> These men want more socialism. To say that Obama cares about the
> markets is absurd. He uses nothing but doom and gloom in his speeches.
> This week he used the word "CRISIS" twenty five times. Do you think
> these speeches give confidence to the american people. As far as
> Geithner goes, why would you believe the word of a tax cheat? Let
> the banks that are sick fold.Better yet, we have millions of great
> business people in this country. instead of giving these crooks more
> money throw them out. Throw out the officers and the boards. Replace
> them with some of the good people who could help repair the damage.
> Obama had the choice to work with the only man who had the experience
> to work with the banking crisis, Mr. P. volker. Not not our incompertant
> car salesman he picks L. Summers. Yeah he knows what he is doing.
On Feb 20 10:02 AM monday1929 wrote:
> It is apparently more fashionable to blame the shorts than the negligent
> (to be generous today) management and Boards.
>
>
> On Feb 20 07:27 AM FirstManagingDirector wrote:
My track record? Went from mostly in cash to all in cash in June 2007. No debt. The market has been cut in half and I've lost almost nothing.
I am amazed how popular articles about this stock or that stock or this commodity or that remain as the prices for everything but precious metals have collapsed.
Delusion is not a path to prosperity.
Neither you nor anybody on this board has ANY way of knowing what BAC's exposure is relative to its toxic assets and derivative risk. Unless and until you know what that risk is (so you can price it in), any valuation you place on the stock is just a guess.
Do you not know how ridiculous this article appears to financially responsible, prudent persons?
seekingalpha.com/artic...
and it did. I'm listening this time, and bought FAS at $4 today.
I am buying BAC like mad and will laugh all the way to the bank in 2010.
On Feb 20 06:30 AM lucky lenny wrote:
> Jason, i agree w/ all your points except the one about Barrack Hussein
> Obama wanting the stock market to go up. I just don’t see how Obama’s
> plan to drive up the national debt is going to fix anything. Let
> alone result in higher stock market values. If deficits were an economic
> cure, given all the years of running up the national debt, then how
> come we’re in a recession?
===========
Why wouldn't Obama want the stock market to go up? That comment sounds like a comment from the fat man on right wing radio. Why don't you run that question about running up the national debt by GWB? You know according to Moodys the biggest return on a dollar spent and a dollar returned is food stamps. Go figure!
> Jason, you are short on facts and long on opinion. We will know if
> you are right or wrong, very soon. My guess is it will become apparent
> right after they fire Ken Lewis, which will probably happen in the
> next 30 days.
Tom, Tom, Tom....how can the author be short on facts when he really didn't give any facts? He said "Consider This", which means exactly that.... consider his opinions of some things that have actually occurred, one thing that is a bit speculative regarding the Fed being "friendly" to B of A, and one bold prediction of B of A being the undisputed leader of the new economy. His article is merely an opinion since at no point did he say to go buy BAC or recommend it in any way. The article, much like your call about Ken Lewis being fired, is purely conjecture.
+1
2. for those with any memoryof last Fall, the fear and horror in Bernanke's and Paulson's eyes and voices showed that this crisis was deeper than could be described without taking down the entire system.
3. those basic facts of #2 above are still true. for the partisans among us, Bush didn't even dare go near this entire problem, and tonight is hanging family photos on the walls of their new home in some homogenized neighborhood in Dallas.
4. BAC 'should' become a $20 stock, but only if we get somewhat lucky.
5. don't nationalize.
6. create an entity to take over and trade the toxic assets, and re-capitlaize the good banks that might need short-term assistance.
7. allow the pros and the joes to buy into and trade risky assets before they are fully valued and it's game-over.
8. establish regulatory guidelines related to liquidity, capitalization and assets that essentially force banks to lend when they are strong enough to do so.
9. back up the interbank lending with guarantees and temporary government oversight.
10. if we do these things, BAC will be 20, JPM will be 50, STT will be 70 and BBT will be 45, and many others will follow.
Bank of America will be back to top again quickly.
Our fund is long on BoA.
Anyway as for BofA, yes, it could rebound with the rest of the economy 30%-40% or more but $20 a share seems a bit much. Even if it does reach that plateau the chances of another economic vacuum like October would be likely.
BAC is insolvent. It ate 2 really big tape worms, Merrill Lynch and Countrywide. Does anyone remember a tool named Richard Bove? He was praising BAC a week or two ago. That is the exact same Richard Bove who hyped Lehman Brothers every single day before they imploded. He is personally responsible for luring people into an unsafe investment.
For those who want a better idea of zombie banks, check out this article:
www.marketoracle.co.uk...
seekingalpha.com/artic...
"For Bank of America the key figure is the fact that the bank only had $1.3 billion of reserves tied to $255 billion in first lien mortgages or about .56%."
You do the math..
Pass your own judgement.
See you $20? LOL
See you at twenty CENTS!
Jason, did they really have a choice? If they didn't pay the Preferred Div to the G, they would most certainly be a prime candidate for nationalization regardless of the political and socioeconomic tenets espoused by the administration.
I have several hundred thousand dollars in CD's maturing this week and if BAC does not offer competitive rates I will be re-directing those funds elsewhere. Assuming I am not alone, I believe that there will be other depositors who will do the same thing as me, and when they all do it in concert, it will adversely affect BAC's capital ratios.
Disclosure: I hold BAC stock and am a long term client. I love the services they render and believe in them for the long run; but, I need to protect my money and get a decent rate of return with as little risk as possible.
> One thing about this writer Jason Schwartz: In summer of 2008 when
> oil was still above $100 and the news was totally "demise of the
> dollar," Jason wrote an article here on SA essentially saying "Oil
> is Going to $30 and Dollar to Strengthen Dramatically" (or something
> like that). He said he was Long USO and UUP. Of course, about 50
> people jumped in and ripped him to shreds, but I guess Jason kind
> of got the last laugh on that one! Point is, every once in awhile,
> a good contrarian analysis can help us see things from a different
> perspective. I have no idea if Jason is correct in his BAC comments
> here, but I hope he keeps writing to express out of the box views.
Good for you to point that out, Jason. But next time just let it go. Blowing one's own horn is so unseemly.
The Fannie Mae preferreds issued in May '08 at $25 have paid NO dividends and sold yesterday at 95 cents. 'Nuff said!
On Feb 20 12:50 PM Alex Filonov wrote:
> BAC may go to $20. Eventually. Unless it goes to $0, gets nationalized
> or taken over by FDIC and sold in parts. If you wanna play BAC, buy
> preferreds, they have more chance of surviving and dividend is safer
> (but not by much)
Jason,
I think you are probably right here, that it would be quite nasty for the Fed to basically require that B of A rescue Merrill, then turn around and seize it, and wipe out the common and pfd AND some of the weaker bonds - just because Merrill was such a basket case. It seems now that the conversation is turning toward some sort of workout.
However, I disagree with your conclusion that Merrill is somehow an asset to the company going forward. It will be years, perhaps decades, before the old Merrill will ever be able to generate revenues like before. The public trust in brokers has been DESTROYED - not just temporarily suspended. The massive frauds, outrageous promotions of worthless companies, and now the utter wasteland of failed CDOs and the like (not to mention huge hedge fund frauds, etc) have changed the game in a very negative way for stockbrokers and "financial advisers."
Most of these 'advisers' are a complete joke, and are just looking to get your account, if it has any substantial money left in it, so they can charge fees and try to gamble their way toward a market profit with your money. Most of them don't know cr*p about the stock market, or investing in general. The training programs are much more about racking up sales numbers and retaining accounts, at all costs, that they are about doing good for the clients.
This is a totally failed model, and I don't see it coming back in a meaningful way. Ditto for Countrywide - their infrastructure has value, but the aggressive mortgage underwriting obviously will never return - they are toast in that regard.
No, B of A will have to make it as a retail bank, and also a corporate lender, and it may do just fine. I'm not a buyer yet, but I agree that the calls a few years out may pay off very nicely, especially if we re-flate BIGTIME and get the economy working again. Time will tell, and good luck.
A whole lot of misinformation has been bantered about by the talking "heads", much I would presume initiated by "Short Raiders".
But the retail shorts always keep me humoured though.
Presumably, they are the one's that cannot discuss the merits of your opinion without denegrating themselves with cheap shots about your suit.
But then again, that is what (far too) many people in this country have come to, further your agenda at ANY cost.
Bring back the 1940's and 1950's, where people actually cared for other people and their country.
I remember airlines right after 9/11 undergoing a similar crisis, although it didn't affect the whole economy as much as the financial industry.
Bottom line - there were many bankruptcies, but if you got into AMR at $1, you saw that rise to over $20 within two years.
Good luck with your calls, Jason.
On Feb 21 12:53 PM dividendmachine wrote:
> I NEVER own financials but if I did i would buy BAC preferred NOT
> common
Kidding aside, if they survive the next two years without almost complete dilution, they certainly could rise to 20 in the next cycle. Probably way too early to place that bet, and I expect some serious further dilution.
Must be a young Angelo Mozilo in the making.
Further, him saying it's not a crisis doesn't help. We all know it's a crisis.
It makes more sense to be truthful in issues of this magnitude. Obfuscation doesn't change reality. Wasn't that learned in the last 8 years? How about in our lives? When is it better to not face the facts?
G
G
On Feb 20 06:48 PM Kinabalu wrote:
> "Obama understands that the markets will determine his success."
>
>
> If he was really concerned about the market he would stop throwing
> those "worst economic crisis ever" hand grenades. Right now we are
> having an Obama rally in the wrong direction.
While I am ranting -- why not just let Countrywide fail and let the folks who owe them money keep their houses! I know it would be unfair , but it seems to solve a whole bunch of problems at once -- BAC looses whole bunch of nasty stuff from it's balance sheet -- lots of folks get to keep their homes and a whole bunch of people suddenly have lots of additional money to spend.
On Feb 20 09:24 AM HC wrote:
> Well written, Jason. If you can contact Obama, ask him to do 3 things:
>
>
> 1. Ban short selling. This is the game for the gamblers, disregarding
> all the facts: strength, brand name, 9% Tier 1 assets, US$118B to
> backstop toxic assets of US$99B, , history, succcess, good management,
> paying out dividends to Treasury, obediently follow intstructions
> to take over ML, etc, etc, etc. This game is becoming a self-fuling
> prophecy and words gets around on how to make money by shorting BAC,
> more jumps onto the bandwagon, and BAC price continue to drop, despite
> it strong fundmanentals. But at some point, it will reverse course,
> may be now at $3. All the gamblers will have to cover their shorts
> and gamblers will go Long to make money.
>
> 2. Asked Obama to say that he is not going to naitonalize a national
> icon like BAC. Ken Lewis mentioned that yesterday after he speaks
> to Washington for assurance which he gotten. If he keeps mum for
> too long, our financial systems and market will collapse; all the
> banks will end up like BAC because of fear, speculation, and no assurance
> from him. He needs to give assurance more than using the word CRISIS.
> It will create undue public panic. Even asia banks which are very
> strong are also dropping like shit this week because Obama kept quite.
> It can lead to a global crisis and depression. The whole needs assurance
> from America, and not continue to create fear.
>
> 3. Ban journalists from publishing untrue opinions without evidence
> or facts to support what they claim.
>
> Doing these 3 will stop all the speculation and gambling. BAC will
> then be left on its own to prove to the world that it is a good bank
> after all and not subjected to herd gambling. Please find a way to
> send this to him.
Nationalisation is a tool just like any other and should be used if the circumstances require it. Mr Geithner may not like using it but he may have no choice.
We are where we are so we have to deal with it. Set aside party politics and think clearly about bailing out Wall St for a very long time without rectifying the systemic problems at their core. A poor choice.
A short period of nationalisation will act as a time out for the financial institutions to get their houses in order with the government acting as honest broker.
You can detest nationalisation all you want but the truth is The American system of banking is insolvent and bankrupt at this time, only the taxpayer is propping it up.
The much vaunted unregulated free market failed because of licentious, immoral and reckless greed and I see a lot of apologists for it in these comments.
The time for idiotic unregulated greed and avarice will come again in the not to distant future the thieving unregulated b@#$%^&*s in Wall st will return in force. In the meantime it time for the good guys to step in with common sense and do what needs to be done. If nationalisation does it then so be it.
American free enterprise turned out to be a giant Ponzi scheme run by a gang of thieves under the National Socialist (NAZI) regime of Bush and Cheney.
I cant help but think of the boys in the landing craft going into Omaha Beach to liberate Europe so their grandchildren could live in peace and freedom. What would they think of a regime that allowed the enslavement of the American people to debt.?
Give Paulson & Bernake credit for something, they put all of the trash in big piles to make it easier to liquidate. Nationalization, Chapter 11 or 7, or an FDIC takeover, the result will be same. BofA will be liquidated.
"Renowned investor George Soros said on Friday the
world financial system has effectively disintegrated, adding that
there is yet no prospect of a near-term resolution to the crisis.
Soros said the turbulence is actually more severe than during the
Great Depression, comparing the current situation to the demise of the
Soviet Union.
He said the bankruptcy of Lehman Brothers in September marked a
turning point in the functioning of the market system.
"We witnessed the collapse of the financial system," Soros said at a
Columbia University dinner. "It was placed on life support, and it's
still on life support. There's no sign that we are anywhere near a
bottom."
His comments echoed those made earlier at the same conference by Paul Volcker, a former Federal Reserve chairman who is now a top adviser to President Barack Obama.
Volcker said industrial production around the world was declining even
more rapidly than in the United States, which is itself under severe
strain.
"I don't remember any time, maybe even in the Great Depression, when
things went down quite so fast, quite so uniformly around the world,"
Volcker said.
And also this report:
S&P Report Says There's Evidence That The Credit Contraction Is In Its
Early Stages
www.bondsonline.com/Ne...
No thanks. I'll pass on financials.
As we progress through the various stages of financial deterioration, the Government is left with an increasingly weaker hand. An appropriate analogy may be that of a chess game, with the Government on one side of the table, and the Market on the other. As any chess player knows, the key to victory is the ability to see several moves ahead, and to assess your opponent's most likely reactions. We liken the Government's varied reactions to our current predicament to the actions of a novice chess player. A beginner tends to deploy his crucial pieces for attack, despite having only planned the assault one or two moves in advance. In addition, a novice chess player will generally fail to recognize a threat until it is too late. This current match against the Market has not gone favorably for the Government. Each attack has led to a more sophisticated counter-attack. Repeatedly, the Government has claimed victory over the capture of a pawn, only to realize that it has lost a rook in the process. We now stand in the latter stages of the game, and the Government's pieces are few.
It has become painstakingly clear that the end game will involve some form of nationalization of a number of major financial institutions. We feel that nationalization is, and has been, a necessary evil given the current predicament. However, we remain skeptical as to whether the Government is capable of crafting a strategy that will save the banks without triggering profound global repercussions. We focus specifically on Citigroup, as it is both the weakest and the most systemically significant institution. Citigroup operates in over 100 countries worldwide, and does so under numerous ownership structures. For example, Citi "controls" the second largest bank in Mexico by assets.
Obviously, the global reach of Citi obfuscates any Government nationalization scenario. We are concerned primarily due to the Government's inability to think or act with any degree of nuance. If the Government did not anticipate the consequences of the decision to allow Lehman Brothers to fail, we are gravely concerned about its ability to effectively nationalize an insitution such as Citi, whose tentacles reach to every corner of the globe.
Your feable attempt to mock the authors call on the oil bubble only heightens my suspicions of you and your knowledge of the market and your maturity level. If you disagree with the B of A article why attack the author? Why is it that so many people on SA including you, feel a need to bash the authors who are simply sharing their ideas and thoughts on a free forum? I suspect that you simply do not have the courage to share your opinions, or you have such a lousy record in your own investments that you are ashamed to make a call of any sorts. If you would take the time to read any investment book ever written, you would learn that all investors are not the same; some like low risk, some like high risk. I prefer a little crazy/high risk in my investing; does that mean I go around bashing every author on SA who is talking bonds or low risk "safe" investment ideas? No, it doesn't! If the article isn't your cup of tea, state your opinion and move on without calling out the author like some bratty little kid. As far as your quotes from Soros and Volker and the article on credit contraction, thanks to the internet and financial television, I can quote you a thousand other people who would disagree with both of them and the article.
On Feb 21 05:24 PM Sober Realist wrote:
> "Yes I remember that oil bubble article that our illustrious analyst
> Jason wrote about last year. But what is so funny is that the oil
> bubble popped for reasons other than what Jason had feably tried
> to write about, namely that the wheels of the global economy would
> fly completey off. Jason had a Forrest Gump moment there, at the
> right time and right place in history."
Yesterday, I covered and dabbled on the long side but went home flat. I've been truly frightened by the volume on these banks that everyone's talking about (C,BAC,WFC). When you see hundreds of millions of shares trade and the volume is outstripping average daily volumes by three or four times it sharpens my attention.
I know nothing about fundamentals but Jason, there's a turn going on.
Does cutting sarcasm and a silver tongue have a place in SA? I believe it does. Continue on with your high risk bets. I'm no enemy of Jason; I enjoy his off-the-wall analyses.
Hey, I'm all for sarcasm and wit and if you are saying your response was meant that way, I apologize. But, you have to admit it is becoming all too common in the comments section on here for people to attack the author instead of debating the topic or providing any valuable insight. I don't base my investments off of the articles on SA, but I sure do like the "intelligent" responses that open up a lot of things I don't think of, or reveal things that I may not be aware of. It's sort of like a community forum for us to share insight. A response that does nothing but attack the author has no merit whatsoever and does not add to the discussion nor provide any help to home investors looking for input from fellow investors. You did provide some great comments from Volcker and Soros and your link took me to a place I found very interesting and I now have it in my favorites; nice job by you!
On Feb 21 07:19 PM Sober Realist wrote:
> Dear Douglas,
> Does cutting sarcasm and a silver tongue have a place in SA? I believe
> it does. Continue on with your high risk bets. I'm no enemy of Jason;
> I enjoy his off-the-wall analyses.
That advice alone will save / make you $$ - give a bit to the poor n needy will u?
If you can predict 2009 and 2010 earnings for banks, you are supernatural. If you can't, then you really can't predict the stock price going to $20 per share.
Good Luck
On Feb 20 08:29 AM BAC Bull wrote:
> Why can't BAC do a stock buyback ?
On Feb 21 09:46 PM TurkT wrote:
> I am confused about why you would buy 2001 calls at a $5 strike when
> you could buy the stock for about the same cost on Friday. Doesn't
> sound like a smart move to me no matter what the stock does.
>
> If you can predict 2009 and 2010 earnings for banks, you are supernatural.
> If you can't, then you really can't predict the stock price going
> to $20 per share.
>
> Good Luck
What Douglas said about you is correct.
So, admit it.
But we love BAC here and can't live without it.
BAC's international services are excellent and no others
can match that.
On Feb 20 08:29 AM BAC Bull wrote:
> Why can't BAC do a stock buyback ? The total market value is less
> than $20B with an EV of $274B. This would put a floor on the stock
> and let BAC execute their recovery plan. It would relieve the pressure
> from the rating agencies, govt, counterparties because of the low
> stock price. I agree that BAC is a great bank with the best talent
> if it can get pass this point. A few billion$ stock buyback would
> do it.
On Feb 22 04:41 AM Guruprasad V wrote:
> One of the funniest article to read in this blog. An investor would
> certainly loose money if he invests in BAC. BAC would remain private
> to utmost max for next 2 qtrs(if it happens, it'd be miracle). It
> would be nationalized or would file chapter 11. I don't hold any
> position in any stock.
You said, "At a time when a seasoned market veteran should be preaching the benefits of diversification and patience to overcome the tough times, this guy sounded more like a rookie -- telling everyone to sell out after the S&P 500 had already dropped 30% for the year."
Well the S&P is now down about 53% comparatively. (38.5% in 2008 and 14.75% in 2009). Who's the Rookie!
On BAC, who knows-- it's in the most dangerous part of the market and may survive. Your opinion is clouded by political stances. BTW, at least10 banks have been nationalized this year, so your Geithner comments need some context.
"I am making Bank of America my #1 holding for 2009." What does this mean Jason?-- Does this mean BAC 2011 calls are the largest holding in your personal account? That would be my interpretation. I wonder if you actually have done what you say. I would like to hear an answer.
It's not enough to say that nationalization is off the table. If you're looking at the common stock, you've got to make a case or present a scenario in which existing shareholders are not terribly diluted.
Unfortunately, despite the author's optimism, he make no such case. There is absolutely no rigor to this argument.
Huh??? How do you go from that to your comment? I dont read it that way at all....I read it as saying that we in the US think the crazy Europeans do something this mad all the time (nationalize the banks).....which we do, and they do.....
I agree with you and understand your frustration as an employee. I am a customer and a shareholder and I have to admit I am scared .
Mr. Lewis did say that investing in BofA is going to be very profitable in a few years and I hope he is right. Do you agree with that and recommend staying invested despite all the media bashing ?
I would appreciate a comment. (pmhufner@yahoo.com)
On Feb 20 12:39 PM Dave Ferrara wrote:
> Jason,
>
> I was so happy to read this article. Finally a ray of light in this
> "Cloud of Uncertainty" as you so aptly wrote. I work for this great
> company and I have never been more proud to be a "Bank of American".
>
>
> This “Sea of Negativism” does nothing but play into the hands of
> the socialistic doctrine of the left. The President’s inaction is
> fueling this fire of Nationalism. I have never heard of anything
> more irresponsible. Can you name me the last profitable government-run
> financial entity? Where is Social Security and Fannie Mae/Freddie
> Mac! What do Christopher Dodd and Nancy Pelosi know about Commercial
> Banking?
>
> I am fully confident in Mr. Lewis’ leadership and I know he will
> lead us back to profitability. It has already begun. We just paid
> $480 Million back to the government but where is the press on this
> positive news? Just wait until you see the windfall from our mortgage
> refinancing.
>
> I would love to see a Preferred Stock Sale to our associates. I am
> confident we can rally around our leadership and raise enough money
> to pay off our TARP Loan and get the government off our necks. <br/>
>
> Dave Ferrara
In your lifetime with many years to spare. Too big to fail? Irrelavent. It will end up being the core upon which the sector will stabilize.. It is AMERICA's bank. With the recent history of this country (frontier mentality...as the Americans love to perceive of themselves.) imbedded in its well honed image . Lehman Bros/Bear Sterns were
perceived vaguely by the bulk of the US population as elitist Wall Streeters. Average Joe, the one who banks with BAC, only cared that the two failed because the media had to first educate the population about who these folks were......an upon that foundation ....build their continued house of fear.
The population is tired of this......it does not fit into the 60 minute reality and attention span.......this is a bad reality program. And they want to change channels
The collective WANTS BAC to do well.They NEED it to do well, in order for themselves to feel well. And so it shall. It's that simple.
You have good reason to be scared. I'd love to believe that BAC would go to $20, but that's not reality. If you look at when the housing bubble started (1999) and then imploded (2007), then you can get an idea of when the bottom of the recession/depression will occur - around 2015. History shows that economic bubbles take as long to deflate as they did inflating. Our growth during that time was fueled by credit on steroids. If you could walk, talk, and had a pulse, then you could get a loan. The US financial sector has over 17 trillion of debt which still climbs double digit percent each year.
The financial sector is only a fraction of the US economy and its size is above one GDP. It's debt grows faster than the US GDP so this produces gigant sizes of so called 'toxic loans'.
See here(bottom of next to last collum):
www.federalreserve.gov...
Also here:
https://customers.reut...
and
https://customers.reut...
The private sector debt has become unsustainable.
And finally here:
rassegnastampa.mef.gov...
"...one compelling truth cannot be evaded. It is going to be very hard to generate substantial net borrowing by households and non-financial corporations in the high-income countries with high internal debt. It is unimaginable that they will return to levels of private-sector borrowing, spending and increases in debt that characterized these countries for so long."
www.globalpolicy.org/s...
Facing reality is much harder that living in fantasy.
You see, even the fiddler is broke and can't play while Rome burns.
Yeah, BAC is at 3 and change but going back to 20, just like WaMu did when it was at 3 (*cough*).
If you don't sell now, the government will make your shares worthless within two weeks.
Otherwise, smoke the hookah with Jason.
Sorry to 'fart on your French toast' but your #3 doesn't matter.
Geithner can 'NOT' believe in nationalizing banks all day long, but that hasn't stopped them from making HORRIBLE decisions in the past...
his quote, “Governments are terrible managers of bad assets.” yeah? really? then why Fannie Mae and Freddie Mac? hmmm... "That wasn't on his watch" I'm sure many will say...
True enough. Though from my vantage point it doesn't look like much has "changed" in washington...
Get ready cause the bottom is going to fall out SOON and if you want to hold on to your Titanic Inc. stock thats your choice...
prepareforandgainfrom....
I am indeed smoking the hookah...
On Feb 22 01:56 PM ebworthen wrote:
> The government will have no problem wiping out the common shareholders.
>
>
> If you don't sell now, the government will make your shares worthless
> within two weeks.
>
> Otherwise, smoke the hookah with Jason.
Go BAC and all the financials.....the turn is coming soon, maybe this week.
On Feb 20 12:39 PM Dave Ferrara wrote:
> Jason,
>
> I was so happy to read this article. Finally a ray of light in this
> "Cloud of Uncertainty" as you so aptly wrote. I work for this
> great company and I have never been more proud to be a "Bank of American".
>
>
> This “Sea of Negativism” does nothing but play into the hands of
> the socialistic doctrine of the left. The President’s inaction is
> fueling this fire of Nationalism. I have never heard of anything
> more irresponsible. Can you name me the last profitable government-run
> financial entity? Where is Social Security and Fannie Mae/Freddie
> Mac! What do Christopher Dodd and Nancy Pelosi know about Commercial
> Banking?
>
> I am fully confident in Mr. Lewis’ leadership and I know he will
> lead us back to profitability. It has already begun. We just paid
> $480 Million back to the government but where is the press on this
> positive news? Just wait until you see the windfall from our mortgage
> refinancing.
>
> I would love to see a Preferred Stock Sale to our associates. I
> am confident we can rally around our leadership and raise enough
> money to pay off our TARP Loan and get the government off our necks.
>
>
> Dave Ferrara
Spare cash has become an oxymoron.
On Feb 22 01:33 PM Roman_Fiddler wrote:
> I don't honestly know what to make of this. If I had a bit of spare
> cash though, I'd probably buy a few hundred BAC shares though, just
> to be in on the joke either way.
Spare cash has become an oxymoron.
On Feb 22 01:33 PM Roman_Fiddler wrote:
> I don't honestly know what to make of this. If I had a bit of spare
> cash though, I'd probably buy a few hundred BAC shares though, just
> to be in on the joke either way.
Spare cash has become an oxymoron.
On Feb 22 01:33 PM Roman_Fiddler wrote:
> I don't honestly know what to make of this. If I had a bit of spare
> cash though, I'd probably buy a few hundred BAC shares though, just
> to be in on the joke either way.
I called him an idiot on this. I was wrong. He may be wrong this time, or maybe not.
On Feb 20 05:29 PM JKC1967 wrote:
> One thing about this writer Jason Schwartz: In summer of 2008 when
> oil was still above $100 and the news was totally "demise of the
> dollar," Jason wrote an article here on SA essentially saying "Oil
> is Going to $30 and Dollar to Strengthen Dramatically" (or something
> like that). He said he was Long USO and UUP. Of course, about 50
> people jumped in and ripped him to shreds, but I guess Jason kind
> of got the last laugh on that one! Point is, every once in awhile,
> a good contrarian analysis can help us see things from a different
> perspective. I have no idea if Jason is correct in his BAC comments
> here, but I hope he keeps writing to express out of the box views.
There's an endless supply of sheep for the next Jonestown.
Ban short selling - great idea! If the market is not going in our favor lets make rules against the way its going - this is the f--king bul--hit that has contributed to the crises we have right now. Let the market look after the market - thats is what the f---king market is designed to do.
BAC is INSOLVENT - can you guys understand this??!! The only reason they are a dead bank walking is government interference and friends favoring them. Were would they be with the BULLSHIT Bailouts - where - WHERE.....yeah don't worry about answering that question - its fucking obvious.
Wow I have to say its hard commenting about things like this without blood pressure rising.
Anyway - please continue to be long BAC and hopefully it will run up substantially from here - so I can short it again.
On Feb 20 09:24 AM HC wrote:
> Well written, Jason. If you can contact Obama, ask him to do 3 things:
>
>
> 1. Ban short selling. This is the game for the gamblers, disregarding
> all the facts: strength, brand name, 9% Tier 1 assets, US$118B to
> backstop toxic assets of US$99B, , history, succcess, good management,
> paying out dividends to Treasury, obediently follow intstructions
> to take over ML, etc, etc, etc. This game is becoming a self-fuling
> prophecy and words gets around on how to make money by shorting BAC,
> more jumps onto the bandwagon, and BAC price continue to drop, despite
> it strong fundmanentals. But at some point, it will reverse course,
> may be now at $3. All the gamblers will have to cover their shorts
> and gamblers will go Long to make money.
>
> 2. Asked Obama to say that he is not going to naitonalize a national
> icon like BAC. Ken Lewis mentioned that yesterday after he speaks
> to Washington for assurance which he gotten. If he keeps mum for
> too long, our financial systems and market will collapse; all the
> banks will end up like BAC because of fear, speculation, and no assurance
> from him. He needs to give assurance more than using the word CRISIS.
> It will create undue public panic. Even asia banks which are very
> strong are also dropping like shit this week because Obama kept quite.
> It can lead to a global crisis and depression. The whole needs assurance
> from America, and not continue to create fear.
>
> 3. Ban journalists from publishing untrue opinions without evidence
> or facts to support what they claim.
>
> Doing these 3 will stop all the speculation and gambling. BAC will
> then be left on its own to prove to the world that it is a good bank
> after all and not subjected to herd gambling. Please find a way to
> send this to him.
On Feb 22 07:37 PM Sober Realist wrote:
> Blowing sunshine up people's a**es in these times is easy to do,
> but not an admirable thing to do. I noticed the BAC believers are
> looking for any ray of sunshine to pierce the absolute darkness they
> find themselves in. Offering up statistics, numbers, and unbiased
> reports is refered to as "media bashing" to the die-hard believers
> of BAC.
> There's an endless supply of sheep for the next Jonestown.
I think you seem to be forgetting their purchase of Merrill, which isn't going to do anything to improve their long term value. Lewis wanted the brokers, but they all left (post bonus) which left BofA SOL.
BofA has a massive lending base, which can only hurt them in the long term as we continue to through this downturn. This will cause unemployment and thus loan deliquency to rise. Remember, Obama's own economic team (I'm not sure if that's appropriate) projected the unemployment rate was going to reach ~10%.
Your point on Obama understanding the market and Geithner not wanting to nationalize the banks is all well and good, except that it lacks support. Geither doesn't really have any options left. Paulson went the pref. route and "the people" didn't believe they got a fair share for their buck. So, if the government is going to invest in the banks they will have to take some form of ownership (note the recent announcement concerning Citi). It might just be me, but I don't think the market is going to respond too well to a 1:1 dilution ratio.
If you're going to long BAC wait until after the socialists announce their nationalization plans.
Bank of America was a major player, holding $39.7 trillion in derivative bets, with 93.4% traded outside of any exchange.
Another artilce I read mentioned about Citibank and BAC, that the US government has already committed half a trillion dollars to these two firms which is more than 10 times the amount it would cost to buy and control both companies.
Will Citibank and BAC be nationalized?
www.rqincome.com/banks...
Having said all that, between now and your $20 bet on BAC, a lot can happen. I have no doubt you're right and it will get there (and even beyond). But in the mean time, there are a lot of folks out there shouting fire and running for the exits, and some of us have already had our toast burned in the panic. Hopefully some logic will ultimately prevail.
All your info can be read in either direction. Its nothing more than gambling with your money trying to make a buck. There is no more investing.
I think (neigh.. hope) you know squabbling about the deficit is pointless. In our fiat currency system policy makers have little power to do any but inflate the money supply. Obama knows full well over the long term deficits are harmful. But in the short term it's all they can do. Doing nothing isn't an option. At least if it gets worse he can shovel all on Bush, and if it gets better he can take all the credit.
If you need any proof that deficits can be useful just look back at WWII. Pretty much just a fiscal stimulus with a national cause. Just cross your fingers the fed isn't pushing their luck playing chicken with inflation.
On Feb 20 06:30 AM lucky lenny wrote:
> Jason, i agree w/ all your points except the one about Barrack Hussein
> Obama wanting the stock market to go up. I just don’t see how Obama’s
> plan to drive up the national debt is going to fix anything. Let
> alone result in higher stock market values. If deficits were an economic
> cure, given all the years of running up the national debt, then how
> come we’re in a recession?
On Feb 20 05:44 AM Respirate wrote:
> Excellent article, Jason. I agree with you that much could go right
> for BoA. Thanks for making that case. The sheer terror of these admittedly
> frightening times and unprecedented turmoil (Lehman, Bear, GM, Countrywide,
> ...) has investors overlooking BoA's underlying strength. BoA will
> be a survivor and will not be nationalized.
>
> Honesty disclosure: Long BAC.
BAC - Huge significant buys over the last month Feb and Jan.
RF - Large significant buys over the last month of FEb.
USB - Large significant buys over the last month Feb
STI - Large significant buys over the last month Feb.
WFC - Large significant buys over the last month Jan
C - Large significant buys last Dec 2008
JPM - Two buys this Feb
GS - Significant buys Dec and Jan.
On the other hand there were very few sells in any of these. Pessimists love to say the banks need to come clean because we don't know what's on the books. The point is that WE DON'T KNOW. Is it possible the bankers are telling us that this latest sell-off is over done? I realize that insider buys can be a false signal, in this case I don't thinkso and wouldn't be a seller of banks at these prices. If I had any extra money, I'd be a buyer.
Be honest, shorts were correct in shorting banking stock - the banks were in terrible shape.
BTW, I have no short positions.
Hahaha...no...he clearly does NOT. Or he wouldn't be imposing Marxism on the country -- massive spending and control grabs by the government in the so-called "stimulus" plan, and then the mortgage bailout plan -- forcing the wise to subsidize the unwise.
Countrywide? Merrill? Good luck with that!! As I recall, Countrywide is NOT the largest mortgage lender -- Fannie/Freddie have 2/3 of all mortgages. And Chris Dodd took "sweetheart" loans from Countrywide -- why should I want in on a company that has corrupt management and association to corrupt politicians like Dodd??
Indeed, it was easy to be long on oil the past summer and it's easy now to be short on the market. But that's not where investors make money. Warren Buffet kept his money in treasuries for years and has only now started really investing in companies.
So, do any of the 90% of commenters here have any reason that BoA is definitely insolvent, other than a general "economy sucks" point of view? I have seen very little real analysis on this thread. And accusing Jason of not doing real analysis does not count as real analysis in itself.
On Feb 23 08:50 PM User 362982 wrote:
> A lot more vitriol than substantive argument in this thread. Apparently
> having the audacity to say a bank just might be solvent makes you
> Hitler. Can people disagree about something without drawing knives?
> It seems like people are too stubborn to believe their point of view
> might be wrong, and many people since Bush have tied their star to
> the American economy imploding (as opposed to having a typical, if
> bad, recession).
>
> Indeed, it was easy to be long on oil the past summer and it's easy
> now to be short on the market. But that's not where investors make
> money. Warren Buffet kept his money in treasuries for years and has
> only now started really investing in companies.
>
> So, do any of the 90% of commenters here have any reason that BoA
> is definitely insolvent, other than a general "economy sucks" point
> of view? I have seen very little real analysis on this thread. And
> accusing Jason of not doing real analysis does not count as real
> analysis in itself.
It is increasingly likely the stock will either plummet or rise sharply. The razor is getting too thin for it to stay balanced between mass bulls and mass bears. Either government action will save it or the destruction of it's reserves and the realization of all its off balance sheet liabilities will doom it. If you can predict the government in this market you are going to be a very rich man.
(Surfin U.S.A., the Beachboys)
WilliamBanzai7 and the Bailout Boys
Singalong link: www.youtube.com/watch?...
Listen everyone there's a Bailout ocean
Across the U.S.A.
Greedy bankers n CEOs are surfin'
Like its gold rush Californ-i-a
You'd seem 'em wearing their Hermes ties
Bespoke brogues too
A big flashy French jet will do
BAILOUT U.S.A.
You'd catch 'em bailout surfin' at CITI
(Inside outside U.S.A.)
AIG's bottomless line
(Inside outside U.S.A.)
Detroit City and Charlotte
(Inside outside U.S.A.)
Why won't someone draw a line
(Inside outside U.S.A.)
All over East Side Manhattan
(Inside outside U.S.A.)
Goin down the faux capitalist way
(Inside outside)
Everybody's gone bailout surfin'
BAILOUT U.S.A.
We'll all be planning out a TARP get away
We're gonna take real soon
We're waxing down our slippery surfboards
We can't wait for Dr Doom
We'll all be gone for the summer
We're on a Ponzi safari to stay
Tell the shareholders and taxpayers we're bailout surfin'
BAILOUT U.S.A.
Everybody's gone bailout surfin'
BAILOUT U.S.A.
Everybody's gone bailout surfin'
BAILOUT U.S.A
Here why...
"We have committed to recommencing dividend payments during the second half of 2009. Thereafter, and as previously announced, dividend payments will be made on a quarterly basis. We will set out our dividend policy
at the Annual General Meeting in April."
Barclays Bags Best Of Lehman, On The Cheap
Tina Wang, 09.16.08, 10:19 PM ET
Barclays has circled back to pick up the pieces of Lehman Brothers Holdings, agreeing to acquire business operations and real estate holdings from the failed investment bank for about $1.75 billion.
The British bank will buy Lehman's North American investment banking and capital markets operations, with a 10,000-strong staff, for the fire-sale price of $250 million, Barclays said in a statement Tuesday.
It will also pay close to current market value for Lehman's New York headquarters and its two data centers in New Jersey, estimated to be worth a total of $1.5 billion. Barclays President Robert Diamond called the proposed acquisition a "once in a lifetime opportunity" for his company.
Barclays valued the Lehman (nyse: LEH - news - people ) trading assets it plans to acquire at $72 billion and Lehman's trading liabilities that it will take on at $68 billion.
Barclays (nyse: BCS - news - people ) waited for Lehman's parent company to file for bankruptcy protection and then moved in on the securities unit while it was still operating and with its staff mostly intact, allowing it to dictate terms.
Barclays said that some shareholders were supportive of the proposed transaction and expressed interest in upping their holdings, which would inject at least $1 billion in additional equity to the firm. The company had withdrawn an earlier bid over the weekend because the federal government refused to provide a backstop for the deal the way it had for Bear Stearns.
Waiting until Lehman Chief Executive Dick Fuld had filed for chapter 11 bankruptcy protection was a shrewd move because it allowed Barclay's to take only the parts of the company it wanted, essentially the talented personnel, and leave behind the remaining holding company and its toxic balance sheet. However, there was still a rush to close the deal, because if Lehman employees began abandoning ship as the clock ticked, the firm's operations wouldn't be worth as much.
The risk to Barclays was that by waiting for the Lehman parent company to file for bankruptcy protection, it opened the door for another bidder to come in and set a deal for the entire firm. But the only serious competition seems to have been Bank of America, which decided it would rather own the less-troubled Merrill Lynch instead. (See "Shrewd Buy For BofA" )
Barclays buys Expobank for £373m
By Sean Farrell
Tuesday, 4 March 2008
Barclays has agreed to buy Russia's Expobank for £373m in its first international acquisition since losing out in the battle for ABN Amro.
The British bank is paying cash for 100 per cent of Expobank to expand in retail and commercial banking in Russia, where its Barclays Capital investment bank already does business. Expobank was founded in 1994 and has 32 branches in western Russia, including Moscow and St Petersburg.
Analysts said the price, at four times Expobank's net asset value, was hefty but that the acquisition was relatively small and gave Barclays a place in an increasingly important market. Russia is in the middle of a consumer boom driven by its 10th straight year of economic growth. The economy expanded by 8.1 per cent last year.
Barclays wants to increase its business in high-growth emerging markets. It lost out to Royal Bank of Scotland last year in the battle for ABN Amro, which would have given it a retail banking business in Russia as well as highly desirable licences in Asia.
Frits Seegers, chief executive of Barclays' global retail and commercial banking business, said: "Expobank is a well-run bank with a good track record of innovative distribution and represents a great opportunity for Barclays.
"Its existing relationships and infrastructure create the ideal platform for us to become one of the leading retail and commercial banks in Russia."
Barclays is buying the stake from Petropavlovsk Finance. The deal is expected to close in the summer and Barclays expects to generate economic profit and a return on equity significantly above the cost of equity by 2011.
Barclays completes acquisition of Bank Akita
3rd February 2009
By Staff Writer
UK-based Barclays has completed the acquisition of Bank Akita, which was announced initially in September 2008, following the approval of the Central Bank of Indonesia.
Barclays said that Akita will form part of Barclays global retail and commercial banking (GRCB) emerging markets business. Barclays intends to rebrand Akita as Barclays Bank Indonesia, at an appropriate date, subject to the necessary approvals.
Following the acquisition, and subject to regulatory approval, Samir Gupta has been nominated as the managing director of Barclays Bank Indonesia and will report to Ahmed Khan, CEO of Barclays GRCB emerging markets. Prior to this appointment, Mr Gupta held the position of retail director for Barclays GRCB emerging markets.
Mr Khan said: "The acquisition of Akita is an excellent fit with Barclays strategy of increasing its presence, over time, in emerging markets with good growth characteristics. Indonesia is a very attractive market, with the fourth largest population in the world, strong economic growth and a low penetration of banking products. It is an exciting opportunity, not just for Barclays, but for the Indonesian consumer who will have access to the global scale and skills of one of the world's leading universal banks."
Morgan Stanley bought Goldfish from Lloyds TSB for $1.7bn in 2006.
NOW Barclays bags Goldfish for £36m ($70m) WOW!!!
Barclays also bought Lehman's good assets for $1.75B
THIS IS BETTER THAN JAMIE DIMON DEAL...!!!LOL
Barclays bags Goldfish for £36m ($70m)
By Sean Farrell
Friday, 8 February 2008
Barclays HAS bought the Goldfish credit card business from Discover Financial Services of the US for a knock-down price of $70m (£36m).
Britain's biggest credit card lender will get 1.7 million accounts with about $4bn (£2.1bn) of customer borrowings in the cash deal.
Antony Jenkins, chief executive of Barclaycard, said yesterday: "Goldfish has similar credit characteristics to our existing UK business. The combination provides an attractive opportunity to deploy our expertise across a larger number of cards and customers."
Discover was spun off by Morgan Stanley, the investment bank, in June. Morgan Stanley bought Goldfish from Lloyds TSB for $1.7bn in 2006.
Goldfish has not been good for Discover. The UK business posted losses in 2006 and 2007 as bad debts mounted. The US company said it would take charges of $190m to $210m in the first quarter of this year. It wrote down$391m of goodwill for the business before tax in the fourth quarter.
Discover said the deal would free capital that it could use in its US business, and that it would get out of the UK after the deal closed by the end of May.
Barclays is understood to have bought the business in an opportunistic move. It did not say whether it would keep the Goldfish name or wrap the operation into its Barclaycard brand.
Have you ever thought why all the money is being poured into BAC or AIG or C? Is it to really give out loans/credit ? There are not many people/companies with good credit standing left.
Do you think the money is more likely used to prevent defaults, which will immediately slam down their credit rating, which will trigger a sell-off, which will trigger the collapse of the entire industry? Is that the real reason for the funds injection / bailout ?
I am pretty sure BAC will die, but as Constructe said, it's a razors edge just now. Heck, spare cash is for gambling, no? This is why I don't have any right now :)
On Feb 22 06:58 PM a believer wrote:
>
> Spare cash has become an oxymoron.
>
If there are 20 reasons BAC goes to $20 then there are 20 reasons it goes to $0.00. The problem with the back and forth on this subject is that the most appropriate THIRD option is always ignores, specifically:
STAY AWAY FROM BAC!!! Don't buy it, don't short it. 'Just say no.' Find a new drug.
If BAC goes to $20 in its current form, then great. If it (and C, JPM…) goes to $0.00, then the U.S. financial system will be just fine, thank you.
Disclosures: No positions (short or long) in BAC. Cash is king. 100% cash.
Disclosures2: Praying for the return of Glass-Steagall and the 'up-tick' rule and suspension of mark-to-market.
If there are 20 reasons BAC goes to $20 then there are 20 reasons it goes to $0.00. The problem with the back and forth on this subject is that the most appropriate THIRD option is always ignores, specifically:
STAY AWAY FROM BAC!!! Don't buy it, don't short it. 'Just say no.' Find a new drug.
If BAC goes to $20 in its current form, then great. If it (and C, JPM…) goes to $0.00, then the U.S. financial system will be just fine, thank you.
Disclosures: No positions (short or long) in BAC. Cash is king. 100% cash.
Disclosures2: Praying for the return of Glass-Steagall and the 'up-tick' rule and suspension of mark-to-market.
What I'm saying is why buy BAC now wait till it goes below 3 or even 2. Right now Cash is king and I'm waiting alittle longer before I go in.
If we find the dollar is linked to the same governing principles of the Law of Supply and Demand as every other commodity, then we can anticipate the future value of the dollar going down, because supply will be high and demand will be low. Who wants a dollar tied to the debt of the American people?
On Feb 24 02:29 PM Tony.S wrote:
> I remember going through the DOW chart 2 months ago and the trend
> was downwards, I thought we would hit 7600 but did not expect the
> market to hit 7100. Anyways the chart is still showing a downward
> trend, the government has no clue what it is doing other than throwing
> wasted money here and there. We may even see the DOW hitting 6500
> to 6700.
>
> What I'm saying is why buy BAC now wait till it goes below 3 or even
> 2. Right now Cash is king and I'm waiting alittle longer before
> I go in.
I think silver is undervalued, and I say that in the face of today's down-tick. However, it's gone up 35% since early January, so it probably will experience some corrections. I'd rather it follow a slower, steady course up than making 3-5% gains daily like it has been....makes me nervous! :)
So far, the best place I've found for physical silver and gold is apmex.com. Another place you may want to check is learcapital.com. Occasionally, you can find some reasonable prices on EBay, but it tends to be overpriced since most of those guys have bought it through a dealer.
Keep investing with both eyes wide open and don't believe everything the media tells you. After all, they own shares of stock, hold 401(k)'s and like driving nice cars too. Blessings!
On Feb 24 02:46 PM Tony.S wrote:
> I'm looking into ETF's , Gold is just to expensive and went up to
> fast, so might buy silver.
Nice try.
Too bad you were not around when they bought Countrywide (which still is not close to being fully priced in) and were forced into buying Merill (which has tens or hundreds of billions in overvalued assets still not priced in).
Looking more like as not it will be nationalized and, guess what?, stock will fall to zero unless the Fed pulls out some stopper that puts a phony floor under the price. And if it does when hyperinflation hits in 6 to 12 months and if BofA survives that tsunami, it could hit $20 in 2 years, but then $20 will be worth a dime.
You are way off. Sorry.
Both the 'Stress test' and the AIG problem will only exasperate BAC's problems.
This, JS, I believe you're right about, but I can't pick through the financial crash heap and pick out anything that fits my criteria for buying.
I wish you well with BAC and do indeed hope you're right, mainly because I don't want to see the government any more involved in the financial sector than it already is. Which is too much for me.
Paranoid AND delusional.
On Feb 24 10:49 AM rich c wrote:
> Jason, markets need youthful optimists so I appreciate your.... wishful
> opinion (vs logic). BUT....
>
> If there are 20 reasons BAC goes to $20 then there are 20 reasons
> it goes to $0.00. The problem with the back and forth on this subject
> is that the most appropriate THIRD option is always ignores, specifically:
>
>
> STAY AWAY FROM BAC!!! Don't buy it, don't short it. 'Just say no.'
> Find a new drug.
>
> If BAC goes to $20 in its current form, then great. If it (and C,
> JPM…) goes to $0.00, then the U.S. financial system will be just
> fine, thank you.
>
> Disclosures: No positions (short or long) in BAC. Cash is king.
> 100% cash.
>
> Disclosures2: Praying for the return of Glass-Steagall and the 'up-tick'
> rule and suspension of mark-to-market.
The scenario with BAC can play in several ways. If it gets partially nationalized, kiss that baby goodbye. We see a share price around 40 cents within a few months. Or, if BAC survives, starts to write down some debts, make 'em easier to repay, enhance the credit quality of those smaller loans, take some tax deductions, you know, in time, BAC can go somewhere, rebuild some business, eat some of Citibank's lunch. Back up to $20? Maybe in ten or twenty years - again, assuming the happy scenario plays out and they don't get eaten by the Feds.
The author is dangerously happy go lucky. My advice is if you can afford to take a 100% loss on something, and want some ultra big time risk on your balance sheet, buy a small amount of BAC, and add JPM, Wells Fargo to the mix too, if you want. This will be the most speculative investment you will ever make in your lifetime, and it might go well, but there is a HUGE chance you walk away with a goose egg. And you might want to add a short financials ETF to avoid the 100% goose egg scenario.
Bet - as it will be difficult to return to profitability within the next 2 years given the depth of current crisis. But, these companies will not fail as the government will not allow it. American nationalisation (no control) is possible as the companies will find it hard to pay the interest or the principle. RBS has to pay +$6 billion for the insurance from the British government by only doing business in Scotland!?
www.freewebs.com/rumor...
.....gone!
Your mindset is of sentiment play, and given that BAC's assets at BV vs. what they are probably worth, basically makes it obama's call. MBS purchases are coinciding with this silly stress test nonsense for obvious reasons, mainly to determine what price will clear the market without killing all the equity in any given bank. Its going to be one or the other unless they just decide to pay par for everything. The will have to take someone with them, and maybe citi is the only one.
But you're eluding to something that no one knows, though i'm just speculating you're looking for dumb money bait.
You sound just as pro-Obama as Nitram is anti-Obama.
Based on your misuse of the term cognitive dissonance, I hope you're not employed in the mental health field as a therapist.
In an oversimplification, cognitive dissonance means having contradictory thoughts. You accused Nitram of blind prejudice and that is a monolithic belief. Cognitive dissonance would be if Nitram thought Obama was the greatest man in the world while simultaneously believing his economic policies would destroy America. I don't see anything indicating Nitram thinks Obama is a great man.
On Feb 20 07:05 PM SimpleAnswer wrote:
> NITRAM - You are a typical political extremist. I say it because
> you are clearly willing to put your politics ahead of the cognitive
> dissonance that occurs as a result. To my point, you are complaining
> about Obama wanting to drag down the economy by using the word 'crisis'
> too many times. Say what? Et tu Brute! Remember when Dubya took
> over from Clinton? Both during his campaign *and* after he took
> office, Dubya was none too shy about bashing the economy and telling
> us how things were going downhill. Using your logic that a President
> who is talking down the economy is a socialist, then Dubya was a
> socialist. Your logic, not mine. However, I'll bet you were *not*
> singing that same song for Dubya as you are now for President Obama.
> That's called cognitive dissonance. You can't process reality -
> you can only process emotion.
>
> That smell is your brain cells frying on the cognitive dissonance.
> You can't rationally view Dubya's bashing of the US economy as OK
> but Obama's as socialist. They both did it. It's called building
> your political cover, nothing more sinister. Politicians frequently
> do it to socialize the masses towards lower expectations so that
> if things don't come out all rosy, the politician can say, "I told
> you things were bad already." If things come out well, the politician
> takes credit for it and gets to be told he did a "Great job[, Brownie.]"
>
>
> Socialist Obama? Right. *EVERY* POTUS is subservient to the elites,
> and the inviolable history of that statement negates your theory
> that ANY POTUS has been or is a socialist. 99% of the people understand
> this through their simple common-sense observation of politics.
> You can't seem to see it through the smoke of your smoldering brain
> cells, trying to rationalize Obama as 'socialist' when his approach
> so closely mirrors that of Dubya eight years ago.
>
> On Feb 20 08:11 AM NITRAM wrote:
On Feb 27 11:56 AM Alex Trias wrote:
> When pigs fly. Listen, I just wrote an article suggesting potential
> for a nasty situation for short sellers, and mentioned B of A as
> a possible candidate for a bank with some upside to it. But the problem
> is that the United States is perfectly willing to step in an partially
> nationalize BAC, as they did with C and AIG. And today's stock market
> should tell you what happens over the short and near term when the
> US steps in as a big co-investor. It's ugly. The USA will buy up
> a bank or an insurance company ONLY because they know the magnitude
> of future losses is so severe, the government needs to put the company
> on the US balance sheet to avert bankruptcy and a collapse of the
> financial system. In other words, when the Treasury invests, it is
> not because they are bullish on the company. And they know more than
> we do.
>
> The scenario with BAC can play in several ways. If it gets partially
> nationalized, kiss that baby goodbye. We see a share price around
> 40 cents within a few months. Or, if BAC survives, starts to write
> down some debts, make 'em easier to repay, enhance the credit quality
> of those smaller loans, take some tax deductions, you know, in time,
> BAC can go somewhere, rebuild some business, eat some of Citibank's
> lunch. Back up to $20? Maybe in ten or twenty years - again, assuming
> the happy scenario plays out and they don't get eaten by the Feds.
>
>
> The author is dangerously happy go lucky. My advice is if you can
> afford to take a 100% loss on something, and want some ultra big
> time risk on your balance sheet, buy a small amount of BAC, and add
> JPM, Wells Fargo to the mix too, if you want. This will be the most
> speculative investment you will ever make in your lifetime, and it
> might go well, but there is a HUGE chance you walk away with a goose
> egg. And you might want to add a short financials ETF to avoid the
> 100% goose egg scenario.
Valuation We are cutting our fair value to $16 from $30 as we incorporate a range of likely dilution from the government's third helping hand. At this point, we think it is unlikely Bank of America can pass the stress test's downside scenario with its current capital base. Consequently, the company will likely be forced to raise additional capital in the next six months. Depending on the results, we can see the dilution from being just the burden of additional preferreds that never convert to common stock on the low end to the government owning a 49% stake in the banking giant on the high end. These give us a range in fair value estimates from between $9 to $19. Additionally, we have increased our loan-loss assumptions for the next two years to 3.05% in 2009 and 2.5% in 2010 and reduced our assumed long-term value of Merrill Lynch from $20 to $10 per old Merrill share. If you assume Merrill is worthless, our fair value estimate would decline an additional $4 per share.
“The Citi deal has everyone on Wall Street suddenly talking about a measure of financial strength called tangible capital, which is a bank's tangible common equity divided by its tangible assets. Citi ranks as one of the worst institutions by this measure, with a tangible-capital ratio of 1.5%. Now that Citi has announced that the government and private investors will have the opportunity to convert their preferred shares into common shares, Citi's tangible capital ratio looks likely to jump to 4%. Many analysts and investors think 4% will emerge as the government's targeted minimum.
Prior to the Citi deal, regulators had focused on Tier 1 capital, which includes preferred stock and has been criticized for overstating banks' financial strength.
Citi's Tier 1 capital appears healthy at 11.9%, double the regulatory minimum despite the bank's major problems. Because all Tier 1 capital cannot be easily used to absorb losses, investors are looking beyond that measure to tangible common equity. Now it appears that regulators are doing the same.
As shown on the table below, the change shouldn't pose a problem for many of the nation's large regional banks, many of them with tangible-capital ratios exceeding 5%.
Among the largest banks, JPMorgan Chase (JPM) is nearly at the 4% threshold, with a tangible-capital ratio of 3.8%. JPMorgan could easily hit the 4% mark by building capital over time. It took a step in that direction last week, announcing plans to cut its dividend 87%. This should add $5 billion to Morgan's tangible capital this year, pushing it to the 4% mark.
The new emphasis on tangible capital is a thornier issue for Bank of America (BAC), with a 2.6% tangible-capital ratio, and Wells Fargo (WFC), with a 2.8% ratio. Like Citi, they could meet a 4% minimum by having the government or private investors convert some preferred shares to common. The problem is that such a conversion would leave current holders of common stock owning less of Bank of America and Wells Fargo.
Fears of this dilution pushed Bank of America stock down 25% Friday to 3.95, while Wells shares fell 16% to 12.10.”
If you notice the one's that have been promoting the nationalization talk (as if it's a done deal) are the one's that got us in this mess in the first place.
Stick with Obama.
Ah, hah hah hah hah hah hah!
BofA is going DOWN DOWN DOWN !!!!!!!!! One of the worst perpetrators in the sea of pirates! You reap what you sow; it isn't
only Countrywide. BofA was already in the water sinking when it
insanely decided to catch that sea anchor called Countrywide.
Die, BofA, Die!
SAVE YOUR MORTGAGE, SAVE YOUR LIFE AND OF THOSE YOU LOVE!
www.nytimes.com/2009/0.../
www.newdawnlaw.blogspo...
livinglies.wordpress.c...
______________________...
On Feb 20 08:45 AM PROXIMO wrote:
> "After riding Apple (seekingalpha.com/symbo...) calls to
> triple digit gains in 2008, and then riding oil puts to triple digit
> gains in 2008, I am making Bank of America my #1 holding for 2009."
> What you did or didn't do with Apple calls or oil puts last year
> has utterly no relevance whatsoever to the risk/reward profile of
> Bank of America in 2009. None. Your laying out a case against nationalization
> in no way addresses the issue of BAC's lethal credit exposure. And
> to further your rosy outlook for BAC by citing, of all things, Countrywide
> and Merrill, deeply undermines your already severely flawed analysis.
There are similarities in stock picking. Great call (no pun...)!
I think that some comments about this article needs to be edited, you were recommending BAC at 3....now is 6.60, so saying sorry is good idea....for some of them.