Despite its problems, Bank of America (BAC) can be (and is being) fixed, says MarketWatch's...


Despite its problems, Bank of America (BAC) can be (and is being) fixed, says MarketWatch's Hilary Kramer. Its just a matter of streamlining costs, shoring up its consumer unit - a critical component of the banks future - and rebuilding its public trust. She sees the bank doing just that, and anticipates the stock moving back up to $12 in 2012.

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Comments (19)
  • rgperrin
    , contributor
    Comments (1646) | Send Message
     
    And a dead man can be brought back to life. It's just of matter of restarting his heart, reversing brain damage (i.e., from having been dead), restoring oxygen flow to collapsed lungs by renewed breathing, and a few other easy-to-accomplish tasks.

     

    Still, thank you for your upbeat analysis. We all love happy endings, even if they sometimes require what Coleridge called the "willing suspension of disbelief."
    11 Nov 2011, 07:31 PM Reply Like
  • Native Texan
    , contributor
    Comments (276) | Send Message
     
    Die BAC, just die already!
    11 Nov 2011, 08:07 PM Reply Like
  • Bouchart
    , contributor
    Comments (1160) | Send Message
     
    What is their PIIGS exposure?
    11 Nov 2011, 08:08 PM Reply Like
  • bbro
    , contributor
    Comments (11234) | Send Message
     
    Read page 118 of the 10q...
    12 Nov 2011, 02:51 AM Reply Like
  • Eric Stalee
    , contributor
    Comments (88) | Send Message
     
    Yeah, definitely sounds reasonable, especially with their 72.4 Trillion dollar derivative exposure. LOL Once Italy goes (or just a few of its banks), so goes BAC (Bankruptcy of America)
    11 Nov 2011, 08:38 PM Reply Like
  • Financial Insights
    , contributor
    Comments (928) | Send Message
     
    Where do you get that number? I am guessing you saw the 72 trillion in notional derivatives on a headline, and you think that translates into exposure. Wrong.
    11 Nov 2011, 09:48 PM Reply Like
  • Eric Stalee
    , contributor
    Comments (88) | Send Message
     
    While you are correct that it is notional value and not actual risk, does it really matter? The 'risk' may as well be 999 Trillion. How do they calculate their risk? With complex mathematical equations that can easily have a single mistake inside them that goes unnoticed until the bets they made on derivatives go against them? And then they realize, whoops, estimated the risk incorrectly. Instead of 1 billion, it was actually 10 trillion. We forgot a few zeroes in the equation. Unless I'm missing something. I would love an explanation if I am indeed wrong about the probability for calculated risk mistakes. If a bank deals in actual material physical things that have value they can truly calculate risk exposure instead of betting on things that 'should materialize based on current conditions'.
    11 Nov 2011, 10:51 PM Reply Like
  • Financial Insights
    , contributor
    Comments (928) | Send Message
     
    So you are basing the validity of your statement on the chance that someone forgot to put a few zeros in the calculation of notional derivative value? Very weak. Due to the fact that the majority of derivatives have counter-parties, the bank is not on the hook for anywhere near the notional amount if either party defaults. Total Credit Exposure (this is exposure based on potential fluctuation of interest rates, fx rates etc.) for the five biggest banks is 1.2 trillion. Current exposure is a little over $350 billion. Keep in mind that during the financial crisis the largest loss/quarter, associated with derivatives, was around 400 million in the aggregate. Read the OCC report.
    12 Nov 2011, 08:24 AM Reply Like
  • Uber Vandal
    , contributor
    Comments (296) | Send Message
     
    Of course the stock price will get to $12, then 24, 48, 96 and so on, thanks to the wonders of inflation.

     

    Unfortunately, the actual buying power of the $12 share might be $6, then $3, $1.50, $0.75 and so on.

     

    Keep in mind that the Zimbabwe stock market had possibly the largest rally in history, but the inflation rate was about 20 TRILLION percent.

     

    http://bit.ly/tqxgVk
    11 Nov 2011, 09:30 PM Reply Like
  • The EconomicJoker
    , contributor
    Comments (958) | Send Message
     
    Criminals! If you own their stock, you are enabling them!
    11 Nov 2011, 10:32 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    Stocks that everyone hates are worth a second look. I bought a lot of oil stocks back in 2002 on that principle. And they have done VERY well.

     

    Hate can make people irrational and $12 from here is 100% return!

     

    And if you can own MO then owning a bank should not even require a second thought.
    11 Nov 2011, 11:26 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9903) | Send Message
     
    It might get to $12, but it will go lower from current levels first.
    12 Nov 2011, 12:01 AM Reply Like
  • dividend_growth
    , contributor
    Comments (2895) | Send Message
     
    BAC's fate may well be that of Mitsubishi UFJ, Japan's largest bank.
    12 Nov 2011, 02:18 AM Reply Like
  • OpusNephilim
    , contributor
    Comments (182) | Send Message
     
    Its all speculation. Italia cannot fail; simply put, they're too big to have any one allow it. PIGS thusly will lead to mitigated losses, if any. On top of that, the CW problem is a big one, but it is posting some improvements. None of us know if people will pay their mortgages or not, if employment rates will bounce back, or if inflation will set it. All we know is that a lot of people hate BAC thus there are less people willing to buy and the share price goes down, for now. "Blood in the streets" sounds applicable here.
    12 Nov 2011, 02:21 AM Reply Like
  • bbro
    , contributor
    Comments (11234) | Send Message
     
    Does anybody read a 10q?? Blah Blah Blah...
    12 Nov 2011, 02:52 AM Reply Like
  • MexCom
    , contributor
    Comments (3075) | Send Message
     
    Inflation still exists and the economy is growing albeit slowly. When this starts effecting the housing sector you'll see the turn. Mortgage delinquencies and foreclosures will start to decline with the turn and the Fed will start increasing interest rates when inflation heats up. Then there will be a panic among prospective home buyers to lock in rates before they rise further. Homes languishing on the market will be snapped up before price rises further.

     

    The asset values carried on BAC's balance sheet will then be understated and their income and profit margins will increase allowing a large increase in their dividend. A normal dividend on the stock could easily double its value.
    .
    12 Nov 2011, 07:16 AM Reply Like
  • jstratt
    , contributor
    Comments (4014) | Send Message
     
    The author makes a good point.

     

    BAC could very well go to $12 or higher next year. Just recognize that investing in a troubled bank is a risky proposition.

     

    My guess is that Mortgage issues will come to a resolution. If derivative issues arise it would a similar long and complicated legal process.

     

    Trading BAC has made me a lot of money in the past 5 years. My most likely scenario is that BAC settles the Mortgage issue with states probably before year end. Other expectations

     

    - Moynahan will be gone after the worst legal issues are resolved
    - BAC will be broken up with at least Merrill Lynch sold off providing capital. They also have several other non core assets with significant value

     

    Conclusion

     

    An investment in BAC would likely provide an excellent return. However after a Mortgage settlement with Fraud taken off the table an investment would still be very profitable with much less risk.
    12 Nov 2011, 07:25 AM Reply Like
  • topbeancounter
    , contributor
    Comments (127) | Send Message
     
    Ignorant article. No mention of Moynahan's biggest problem, that being B of A's own mortgage portfolio, not the Countrywide one that he continues to point to. It may get to $12, but it may also get to $3 first. Warren robbed them blind with that $5 billion infusion Moynahan said didn't need the preceding weeks. All that did was allow the bank to not yield to the feds demanding B of A lighten the load on the bad mortgage loans- theirs, not Countryside's!
    12 Nov 2011, 01:10 PM Reply Like
  • Tombaum eister
    , contributor
    Comments (203) | Send Message
     
    BAC is run by incompetent morons. They should negotiate much more aggressively with attorneys - or accept the compensation or file Countrywide into banktruptcy. Moynihan and Lewis should be jailed!!
    14 Nov 2011, 01:15 PM Reply Like
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