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Word that BofA (BAC -4.8%) trades below $5 could test the mettle of value investor Warren...

Word that BofA (BAC -4.8%) trades below $5 could test the mettle of value investor Warren Buffett as his paper loss on warrants pushes over $1B - presumably a big number even for the Oracle. But cushioning the blow for Buffett will be the $300M in dividends he rakes annually no matter how far down into the abysss BAC falls.
Comments (20)
  • Rickthegeek
    , contributor
    Comments (118) | Send Message
     
    Buffet will dump his shares of BAC. So will Donald Trump. It is not whether they will or not, it is a question of when they will. Another 10% down will be 4.50 a share. When it gets to this point, massive selling will ensue and BAC will be right back to where it was in 2009, around 2.00.
    19 Dec 2011, 03:50 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2482) | Send Message
     
    Buffet got special preferred shares when he made that public investment in BAC, not the common stock.
    19 Dec 2011, 07:01 PM Reply Like
  • Glocks-n-Gold
    , contributor
    Comments (189) | Send Message
     
    Hey Warren and Charlie - suck this up!
    19 Dec 2011, 03:50 PM Reply Like
  • AlphaVolume
    , contributor
    Comments (243) | Send Message
     
    what is BAC goes bankrupt? what happens to Buffett then?
    19 Dec 2011, 03:51 PM Reply Like
  • The_Hammer
    , contributor
    Comments (3810) | Send Message
     
    buffett warned and warned of WMD's how it was near impossible to unwind the modest derivative book at gen re but he goes in on these TBTF financials whom have massive book of illiquid derivatives. will buffett finally take a big hit on one of his financial investments?
    19 Dec 2011, 03:54 PM Reply Like
  • Stone Fox Capital
    , contributor
    Comments (5790) | Send Message
     
    Stupid. Buffett will buy more with the dividends.
    19 Dec 2011, 03:55 PM Reply Like
  • User 487974
    , contributor
    Comments (1105) | Send Message
     
    Couldn't happen to a bigger hypocrite, Merry Christmas Warren!
    Here's a thought on your dividend play, what happens when they CUT the dividend?
    Poor little Warren fall down, go boom!
    What comes around goes around!
    Jerry
    19 Dec 2011, 03:55 PM Reply Like
  • AlphaVolume
    , contributor
    Comments (243) | Send Message
     
    his div is preferred. pretty sure they can't cut his div.
    19 Dec 2011, 04:52 PM Reply Like
  • bkpark
    , contributor
    Comments (325) | Send Message
     
    Or rather, they can't cut Buffett's dividend before cutting the common share dividend. So he has that 1 cent common share dividend as a margin of safety, but that's not much of a margin.

     

    Also, I don't know exact terms of Buffett's preferred share, but if it follows the usual norm these days, any deferred dividend on his shares will have to be paid before any dividend on the common share can resume.
    19 Dec 2011, 05:39 PM Reply Like
  • Vlad77
    , contributor
    Comments (131) | Send Message
     
    Sounds like you are really butthurt about someones success
    20 Dec 2011, 01:39 AM Reply Like
  • dieuwer
    , contributor
    Comments (2255) | Send Message
     
    Me thinks part of the deal was that Buffett got some long term BAC puts on his BAC stock. In that case, he would not loose a thing. Taxpayers on the hook for the premium.
    19 Dec 2011, 03:56 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2482) | Send Message
     
    He got warrants with a 10 year time frame to BUY 700 million shares in BAC at roughly $7.14. No puts were part of the deal.
    19 Dec 2011, 07:10 PM Reply Like
  • dieuwer
    , contributor
    Comments (2255) | Send Message
     
    You don't know the details of the deal unless you were part of it. The puts could be secret.
    20 Dec 2011, 08:53 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2482) | Send Message
     
    Keeping secrets on SEC filings is called fraud. I doubt both sides would knowingly and willingly commit fraud, when Buffet could have bought the puts on the open market, without doing anything illegal.
    20 Dec 2011, 11:20 AM Reply Like
  • dieuwer
    , contributor
    Comments (2255) | Send Message
     
    Hahahaha. Like if the SEC has any teeth these days! Fraud is rampant, up to Congress itself! Insider trading anyone? Big-buddies-with-Corzine anyone?
    20 Dec 2011, 11:29 AM Reply Like
  • bkpark
    , contributor
    Comments (325) | Send Message
     
    If you mean what you are saying, then the real question is: why participate in the market at all?

     

    If open fraud---designed to protect the big guys while hurting the small investors---is the norm, not the exception (although one that is known to happen occasionally), why play the game at all?

     

    As far as Buffett's deal goes, if it goes badly, well, it would be one of those bets that he didn't win. Buffett's been known to make mistakes, you know; for one, he bet in 2008 that oil prices would continue to go up (or be high, at least). He was wrong about that.
    20 Dec 2011, 12:00 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2482) | Send Message
     
    Paranoia about the banks and the rich is also rampant. What benefit is there to hiding puts? Buffet has preferred shares in Bank of America paying a 6% dividend, in addition to the warrants. So if he has puts on the common, that would be an aggressive hedge on his position, since the preferred shares are higher up on the capital structure than the common. It would also mean that he would be long both calls and puts, and is therefore assuming that BAC will be highly volatile over the next decade.

     

    Assuming that everything is a lie can only lead to to the question bkpark is questioning, what is the point in participating in a market that you feel is clearly rigged?
    20 Dec 2011, 12:49 PM Reply Like
  • wage slave investor
    , contributor
    Comments (21) | Send Message
     
    If you think WB didn't consider the worst case scenario(s) than you are fooling yourselves.
    19 Dec 2011, 06:11 PM Reply Like
  • sses
    , contributor
    Comments (42) | Send Message
     
    i am willing to bet $4.99 that BAC will still be around after you guys are long gone.
    19 Dec 2011, 07:54 PM Reply Like
  • nafar
    , contributor
    Comments (217) | Send Message
     
    Can any one provide figure for additional capital requirement as a result of implementation of Tier 3 Basel. I feel the cost of borrowing will go up marginally (in absolute amount) for all major banks. Wisdom says that Fed should not push fast and wait till the economic return is achieved atleast say 4% GDP or 5% unemployment level is reached.
    19 Dec 2011, 10:24 PM Reply Like
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