Rafael Grillo

Memo to Bank of America's Directors: Shame on You!

A brave and courageous article. No matter how tough the economic scenario, no Board should tolerate a CEO under whose leadership the company has lost 90% of its value. The Boards are supposed to represent the shareholders interests, but more often than not, they've turned to be just good ol' boys clubs covering each other's backs and treating the companies they have a fiduciary reponsibility to manage as if they were there for their own benefit. At the end, the CEO of a company is a board member of a pal's and viceversa. It is a small oligarchy that is self-preserving and that scavenges on the thousands of owners whose only saying is through a yearly mockery were fixed proxys leave little chance but to timidly express one's disatisfaction by withholding one's vote. While strategically the purchase of ML by BAC made sense, it is clear now that it was haphazardly negotiated and worsely executed. Lewis might have a vision, but his ultimate responsibility is to create value for his shareholders. If the goal is not met, he has to be held accountable. The Board can't keep blaming the poor performance on external factors, for it is exacltly in these sort ofconditions that management must excel and demonstrate prudence and careful, well-thought-through and meticulous decision making.

If Only Hope Were an Investment Strategy

Great comments! There are no bullish signs out there. None. There is not reason for the stock market to go up. More and more, the not-so-long-ago unthinkable scenario of Dow 6500 becomes a possibility. At some point, I even considered the 8000's very unlikely. Yet, I have to agree that some stock prices have reached an almost surreal level. It feels like we are heading towards a dramatic depression. And yet, folks, I truly believe a depression like the 30's has been averted. The recession will follow its course: people will curl in their homes waiting for end of the times, a few strong companies will take the opportunitiy to strengthen their positions, and after a few months, we will realize the sun still come up everyday and we will go out and re-ignite the economy again. I am not trying to under-estimate the challenges ahead. But I think the worst part of the financial crisis is behind us. It is re-construction time. Taxes will have to raise, we will have to curtail our consumption, interest rates will have to go up (think 3%) and a few inefficient companies will have to disappear (think auto industry). This has been an economic earthquake. The plaques had to reacommodate and the pressure liberated. The pain is not over. But tthe overall stock prices, at these levels, are pricing this adjustment. We will be in a 7500-9500 trading range until next summer. Dow 10,000 by third quarter next year, and then, slow growth. Expect the new Government to launch a national initiative to re-energize the country behind renewable energy. Get positions in wind, solar and nuclear at some point during the next quarter, but be prepared to sell. That is going to be the next short-term bubble; after that, they'll become a solid investment for the long haul. Pollyannish? Perhaps. But I think we are rather rattled by the violence of this correction. We've had in a couple of months what took two years and a terrorist attack to unravel in 2000-2002. There is light at the end of the tunnel. And, by the way, Toro and I must have the same portfolio: I am sure if I sell now, this was the bottom; and if I don' sell, we will get to Dow 6,500 :-).

Bank of America: Bank on This Opportunity

Thank you, Bingie. Indeed, I am writing about a strategic move that will have significant impact over the long-term, not the next-day trade. Having said that: juan77, this article was originally posted in my blog on September 17th, when BAC share price was at around $28! Be patient, though: we might still revisit that price point in the weeks to come.

The Mess on Wall Street: $4 Trillion Down the Drain

And yet, at the end of all this mess, there will be a few winners that will take it all. I am particualrly interested in Bank of America. They are taking some gutsy risks, but if they pay off -and I think they will-, BAC will come out of this turmoil as a financial power house. Some people have said they are reckless; I think they are being cleverly aggressive.