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Todd Sullivan's look at investing in the big banks reveals the potential for "very healthy"...

Todd Sullivan's look at investing in the big banks reveals the potential for "very healthy" double-digit returns, especially for Bank of America (BAC), whose litigation risk is "massively overstated... as if they will lose every case against them and be forced to pay the whole amount they are being sued for." While perceptions are dictating valuation for now, "over time fundamentals will win out."
Comments (15)
  • connorj21
    , contributor
    Comments (24) | Send Message
     
    Yuck
    17 Nov 2011, 05:31 PM Reply Like
  • Ted Bear
    , contributor
    Comments (577) | Send Message
     
    If fundamentals win out, B of A is a zero. They will never get out from under their derivative load once TSHTF.
    17 Nov 2011, 05:36 PM Reply Like
  • GoingLong
    , contributor
    Comments (123) | Send Message
     
    Ted Bear - again, irresponsible comments.
    18 Nov 2011, 06:40 PM Reply Like
  • jschroe36
    , contributor
    Comments (66) | Send Message
     
    I beg to differ.
    18 Nov 2011, 07:03 PM Reply Like
  • jschroe36
    , contributor
    Comments (66) | Send Message
     
    BAC equity is worthless. Wake up, people.
    17 Nov 2011, 07:18 PM Reply Like
  • Angelo George
    , contributor
    Comments (25) | Send Message
     
    BofA is not going away. And this too shall pass! In the meantime, selling covered Calls is a "no brainer" IMHO
    18 Nov 2011, 05:06 PM Reply Like
  • bkpark
    , contributor
    Comments (325) | Send Message
     
    At the current stock levels, it sounds like covered call is the worst thing to do (BAC might rally sharply in which case you'd lose out much of the rally; BAC might go bankrupt in which case your equity position---which will be worth initially much more than whatever options premium you got---will get wiped out).

     

    I mean, if you're *sure* that BAC will survive this and want to short the implied volatility, why not rather sell cash-secured puts instead?
    18 Nov 2011, 09:41 PM Reply Like
  • GoingLong
    , contributor
    Comments (123) | Send Message
     
    It seems like we have quite a few people out there rooting for B of A to fail... I am sure they are short. The truth is B of A acquired Countrywide and Merrill, two companies that had a lot of issues. B of A is trying to do the right things to turn it around. The way I see it is... we should be rooting for companies like these to survive and prosper... not fail. But i am a glass half full kind of person... not a glass half empty.
    18 Nov 2011, 06:40 PM Reply Like
  • connorj21
    , contributor
    Comments (24) | Send Message
     
    You're glass will soon be completely empty.
    18 Nov 2011, 07:08 PM Reply Like
  • bkpark
    , contributor
    Comments (325) | Send Message
     
    I'm kinda rooting for BofA to fail (or at best, I'm apathetic), but not because I'm short BofA (I don't short sub-$5 (or soon to be) stocks; the risk-reward ratio just isn't there). I'm not rooting for BofA because I count myself as one of their dissatisfied former customers.

     

    On the other hand, after all the shenanigans BofA has been involved in (foreclosure robo-signing, that ATM Debit card usage fee, and, as far as misbehavior towards stockholders go, their insistence a couple months ago that they didn't need to raise additional capital), I can't see who could possibly be rooting for BofA (other than, I guess, the BofA employees that BofA hasn't laid off yet and BofA stockholders who haven't liquidated their position yet).
    18 Nov 2011, 09:45 PM Reply Like
  • klarsolo
    , contributor
    Comments (705) | Send Message
     
    So you want lots of people to lose their jobs just because former management did huge mistakes? You're awesome.
    19 Nov 2011, 12:07 PM Reply Like
  • bkpark
    , contributor
    Comments (325) | Send Message
     
    I figure if they are good people other, better functioning banks like JPM (or WFC) would hire them in a heartbeat.

     

    If losing their job at BAC amounts to a huge setback for some people, well, maybe they shouldn't have been in banking industry to start with.

     

    Anyways. My ill will towards BAC is closer to apathy than anything else. I simply refuse to do business with them.
    19 Nov 2011, 10:35 PM Reply Like
  • klarsolo
    , contributor
    Comments (705) | Send Message
     
    Yes, we all know that good people are not unemployed in this economy. Competitors have unlimited capacity to hire, especially in an easily scalable field like banking & finance.

     

    For how many people does losing their job not amount to a huge setback? What kind of argument is that?

     

    It's one thing to not do business with a bank you don't like, it's another to want it to fail, just so that you can say "Yeah, serves them right". The people who hurt BAC in the past through their incompetence are for the most part no longer there; the only people who will be hurt are the ones trying to clean up the mess.
    25 Nov 2011, 04:39 PM Reply Like
  • bkpark
    , contributor
    Comments (325) | Send Message
     
    "It's one thing to not do business with a bank you don't like, it's another to want it to fail, just so that you can say "Yeah, serves them right"."

     

    Really? Because economically speaking, I'm fairly sure BofA would rather have me do business with them; they couldn't care less if I want them to fail or not.

     

    If you really had practical interests in mind (rather than some knee-jerk emotional response to inconsequential comments), you'd be far more offended that I refuse to do business with BofA, not that I'm kinda rooting for BofA to fail (or, as I said from beginning, at best apathetic towards their success).

     

    But anyways. You are arguing from emotion; and I'm not one to reason with the irrational.
    26 Nov 2011, 01:07 PM Reply Like
  • Deltascared
    , contributor
    Comments (289) | Send Message
     
    Buy B of A. Just get Buffet's deal. Remember MF Global! It looked like a real bargain at $1.60.
    19 Nov 2011, 08:42 AM Reply Like
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