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  • Brokerages get tough with advisers who break rules [View news story]

    Brian Moynihan has been consolidating BAC and all the acquisitions made by previous CEOs. He is a lawyer by training and probably was the right guy (if I remember correctly the only one reported to really want the CEO job when Ken Lewis was forced out) as CEO to settle the major lawsuits and shrink the firm by selling non core operations and reduce headcount. Actually, they set this plan in motion five years ago and named it "New BAC" and have been executing since.

    In my opinion, BAC will never sell Merrill Lynch Wealth Management since it is a cash cow for them and gives them a global footprint for distribution of product/services and for gathering assets (fee based income) and compliments nicely with their core banking business. They also reorganized it by splitting it from Merrill's institutional investment banking business by combining it with U.S. Trust and other similar businesses under a new executive with direct report to CEO.

    To give an example of how they are integrating banking and brokerage, I still have my accounts at Merrill Lynch and have a Bank of America credit line on one account (~55% available as LTV) that costs me nothing unless I use it. The rate charged is based on LIBOR plus 300 bps, very attractive currently, but it floats, bad for me if rates rise, but good for bank since their 300 bps of interest has no market risk and principle is secured by a portfolio that can be sold quickly to cover loan. It is not a margin loan to buy stocks, since when it was set up you are asked if it will be used for financial assets or other purposes. My point is, it is good business (secured lending) for BAC and what they do, lend money.

    Institutional businesses they acquired with Merrill Lynch are now organized under another executive with direct report to CEO and include BAC's corporate banking and businesses that fall under an institutional type rather then retail. Again, the point is it doesn't seem they will sell Merrill Lynch since it was reorganized to a new structure as well as banded on the BAC platform. If you wanted to sell it someday, it would be better to operate it as wholly owned subsidiary.

    All this is happening under Moynihan, he has done a good job consolidating the BAC acquisitions and reducing costs. Is he the guy to lead the bank with a new growth strategy? I don't know, but it seems history shows that there are basically two types of CEOs, the cost cutter and the visionary. Brian Moynihan is clearly a cost cutter, can he pivot to a growth strategy if overall economic conditions justify it and regulatory restrictions allow it? I honestly don't know as I stated above, but history isn't on his side.

    I still own BAC stock, like joanpete, but also own UBS stock since I believe the old Merrill management will be better at growing a wealth management business since it is what they know and did, something current BAC management is, hopefully, learning.
    Apr 8, 2015. 10:39 AM | Likes Like |Link to Comment
  • Brokerages get tough with advisers who break rules [View news story]

    You are right about former Merrill Lynch management, it was excellent, but that was up until 2001.

    In 2001 Stan O'Neal was promoted to CEO by sabotaging his competitor for the job, Jeff Peek. Peek was in charge of MLAM (eventually sold by O'Neal to Blackrock to help pay for his mistake of a mega push into subprime) and had his henchman Ahmass Fakahany (CFO of MLAM at the time) present awful numbers regarding MLAM (at the board meeting to decide the next CEO) and therefore Peek's ability to manage. That the numbers were later corrected and admitted that they were all mistaken, didn't matter since O'Neal was promoted to CEO of Merrill Lynch.

    It was his gross incompetence that led to the downfall of Merrill Lynch with it eventually needing Bank America to buy the firm. O'Neal was despised by most of the old time Merrill management team and eventually many left the firm, or were forced to leave by the dictatorial O'Neal. He brought in his own guys like Dow Kim and Osman Sermerci to do what they were told by O'Neal since he knew better then anyone else.

    When Merrill's best bond trader and head of fixed income trading, Jeff Kronthal, told O'Neal that the subprime was risky and needed to be reduced, at the time the firm had only ~$5 billion in exposure, O'Neal basically told him you are either one of my guys or you are out. Kronthal was not an O'Neal guy so he was fired (link below). Sermerci was put in charge of bond trading and subsequently increased the firm's subprime exposure to ~$50 billion and dooming Merrill Lynch as an independent firm. O'Neal also bought First Franklin, a sub prime lender, to further ensure the demise of the firm as we knew it.

    I am also retired from Merrill Lynch, after working eighteen years as a trader in the International Equities Department. It is a sad story of what happened to Merrill Lynch, which in my opinion was the quintessential American brokerage/investment bank and that had a client first focus/mentality (both retail and institutional) that was very real. Other firms, our competitors (Goldman and Morgan Stanley in the U.S. / all the U.K brokers/bank as well), I believe only paid lip service to this principle and as has been reported in many investigations, traded against clients whenever an opportunity presented itself.

    Finally, I will point out that many of the former Merrill executives that left in the years after O'Neal became CEO, have slowly gotten back together over the past five years or so to rebuild the original model that worked very well prior to the O'Neal years. The firm they are now at is UBS. I believe UBS will become more like Merrill Lynch used to be as they put the problems from UBS's prior management behind.
    Apr 6, 2015. 01:04 PM | 3 Likes Like |Link to Comment
  • Bank Of America: Capital Concerns Driving Share Price Down [View article]
    What I find ironic is the estimated capital shortfall mentioned in article (if it comes to pass) is almost equivalent to what the bank has paid out in legal settlements, mostly for Countrywide which will be a case study example of the worst acquisition ever made in financial services (nice job Ken Lewis).

    Backing out of the Merrill deal by Lewis was not allowed by Fed and Treasury. However, Merrill Lynch Wealth Management was contributing the only real profits the bank was making in the early years coming out of the 2008 meltdown and has been a good acquisition for the Bank America which I believe they will never sell. Bank America Merrill Lynch, the investment bank, may be something they eventually sell, although it seems unlikely if they want that universal global bank status.

    Finally, the bank has too many shares outstanding (over 10 billion) and many were issued during the crisis at lower prices, therefore dilutive. Any sustainable rally in the share price will require heavy lifting and meaningful change in profitability to support higher share price levels and perceived capital needs going forward, which at this point seems elusive for the very average management team this bank has. Currently, dead money seems to be a good description for BAC, although as one comment said a move back toward $17.00 wouldn't be a major surprise and would represent an adequate return, providing you sell the shares if the move materializes.
    Mar 24, 2015. 05:05 PM | Likes Like |Link to Comment
  • Bank Of America: Why The Stock Just Got Hammered [View article]
    and getting worse.
    Mar 23, 2015. 10:14 AM | Likes Like |Link to Comment
  • BofA rainmaker returns after a year at Goldman [View news story]
    Montag is ex-Goldman Sachs, the force must still hold sway, anything to help the Deathstar. He likely still has stock in Goldman.
    Feb 3, 2015. 02:53 PM | Likes Like |Link to Comment
  • Bank Of America - New Preferred Stock Issuance [View article]
    Boosting tier one equity. I believe non-cumulative perpetual preferred counts as equity. B of A really can't issue more common with over 10.0 billion already outstanding. The question is, does this issue indicate another large settlement of a lawsuit is coming? Or a large write down on some illiquid assets?
    Jan 22, 2015. 08:22 AM | 1 Like Like |Link to Comment
  • Bank Of America - New Preferred Stock Issuance [View article]
    I believe Moynihan also said that most of the energy loans were to big well known diversified companies, so risk of default will be lower.
    Jan 22, 2015. 08:10 AM | Likes Like |Link to Comment
  • Oil Tankers - The Brightest Spot In The Gloomy Energy Sector [View article]
    Streetwise, I agree, their financial statements are straight forward and very easy to understand which is welcome given how complicated some reports can be.

    The dividend announced yesterday of $.22 is a little disappointing, but if they are paying down debt, it is probably prudent.

    I am tired of this company issuing shares every time the share rallies. The real test for future share price appreciation will be if CEO Hansen can refrain from another secondary when the price enters into the teens. If he can, and the day rates hold, you can the make the case NAT can trade toward $20.00.
    Jan 9, 2015. 10:10 AM | 2 Likes Like |Link to Comment
  • Bank Of America: Breaking Up Is Hard To Do [View article]
    BAC should not be broken up. It is still digesting (more like indigestion) Countrywide and Merrill with settling lawsuits caused by their (Merrill and Countrywide) bad behavior (one reason BAC doesn't get Wells valuation).

    Isn't higher capital a good thing, especially when you factor in derivatives? Sure, higher ROE/ROA will be tougher to achieve, but the balance sheet will be stronger and dividends (as mention by a another commenter) should be allowed to increase further (a main reason to buy bank stocks).

    An argument to allow U.S. banks to become universal mega banks at the end of the last century was to compete better against foreign banks that have always had the universal model. This hasn't changed and doesn't appear to be on the docket in other countries, so any forced reduction in size could hurt the U.S. mega banks when dealing internationally where size matters especially for counterparty risk.

    Finally, didn't Goldman call for the break-up of J. P. Morgan Chase? That in itself should be questioned since they were ground zero for triggering the crisis in 2008 with their dealings with AIG. I would never trust Goldman Sachs advice on their competition since they are the most self serving firm on Wall Street and in my opinion do not provide recommendations that are independent of their own self interests.
    Jan 8, 2015. 09:37 AM | Likes Like |Link to Comment
  • My Failure With Peabody Which Has Become A Speculative Position [View article]
    Stocks always go lower then expected when you hold and believe the worst has past.

    I doubt BTU will be put into bankruptcy and I don't agree with the 50% probability assigned in this article. Peabody is a takeover target at these price levels and any buyer would have likely have to pay well above $12.00 per share, if normalized valuations are used and coal isn't dead as an energy source (any potential buyer would not believe coal is dead). Also, any takeover would not be easy for a foreign multi-national given Peabody's position in the U.S. and the fact that most of the PBR basin is federal land.

    If BTU and all coal stocks don't rally early next year (institutional year end selling has crushed the sector) takeover/consolidation talk, I believe, will begin to become more evident. Of course, any takeover talk will help the stock and sector rally, therefore this sector looks like a decent long trade into Q1 next year.

    If the losses for most investors in this stock weren't so severe, the article linked below would be funny. The article/award is from earlier this month, clearly no shareholders were consulted.
    Dec 29, 2014. 02:43 PM | Likes Like |Link to Comment
  • Update: Seadrill Q3'14 Earnings And Dividend Suspension [View article]
    They need to roll over debt next year, hence the dividend suspension to please creditors and bond market.

    The question is, will the lower re-pricing occurring in the oil sector be sustained or even push lower? If so, certain drilling isn't as profitable, so day rates will need to adjust lower as well. Seadrill is anticipating lower prices and will pay down some debt to lower their cost basis.

    Best you can say is stock will be dead money for awhile, along with whole sector.
    Nov 27, 2014. 03:42 PM | 1 Like Like |Link to Comment
  • Peabody Energy's Attempt To Get Coal Back On The Agenda: Not Successful [View article]
    Coal will never go away despite the wish by green environmentalists. This article would be better published in a Sierra Club newsletter rather then on an investment information website.

    It is almost comical to say "Peabody's attempt to get coal back on the agenda: not successful" Says who? The author, as far as I can see he has nothing to do with Peabody and clearly isn't privy to internal discussions within the company. I think it safe to say that Peabody will ALWAYS advocate coal and NEVER stop promoting the use as an energy source.

    Finally, was coal really off the agenda? I think not, so the whole article is based on false pretenses.
    Nov 20, 2014. 05:29 PM | 4 Likes Like |Link to Comment
  • Bank Of America: Buy Before Everyone Else Does [View article]
    MER was trading in the $90s at the time, talk was $110 to $120, it was January of 2007.
    Sep 12, 2014. 09:53 AM | Likes Like |Link to Comment
  • Bank Of America: Buy Before Everyone Else Does [View article]
    Merrill Lynch Wealth Management was the most profitable private client operation in the world, hopefully B of A doesn't change that, although I know it has changed (first hand knowledge), with regard to management, since the takeover.

    The book "All The devils are here" is a must read for all investors, especially B of A investors since it gives a very thorough description of the financial crisis and devotes two chapters on what happened inside Merrill and Countrywide. Merrill was destroyed by an incompetent CEO, Stan O' Neil, who refused to take advice of experienced traders and risk managers. Countrywide lost their way and like Merrill pushed aside executives who wanted to stop the madness when the signs of the eventual problems began to arise.

    One last observation, after you read the book it is obvious the total U.S. economy was on steroids of free and easy credit of amounts never seen before and certainly never to be seen again. Therefore, all the talk we hear about disappointing economic recovery is a little misleading since any comparison to the economy prior to 2007/2008 is always going to be disappointing when compared to that artificial high.

    However, there is a recovery, albeit not nearly good enough for many people, and given the level of interest rates, it should continue at subpar levels. The key, at least to me, is when QE ends next month will be the level of free reserves in the banking system (link below) which have been growing continuously as QE occurred. If the level of free reserves begins to decline as QE ends, it will be an offset to QE ending and should provide liquidity/credit to the economy and be good for the banking sector's earnings as they lend at better credit spreads. Inflation may begin to rise as a result of a decline of the free reserves, but that will is another discussion.
    Sep 11, 2014. 09:42 AM | 5 Likes Like |Link to Comment
  • Peabody Energy Corporation CEO Says Coal Is Still On Top, But Is It? [View article]
    All your points essentially are political and represent the liberal/left/environme... view. That's fine, but when investing economics matter as well. Coal is a cheap abundant source of energy with the United States having some of the largest reserves in the world. This is an asset that will be used despite the current administration's disregard (and attack) for anything fossil fuel related that would help the U.S. in trade and/or competitive advantages for industries based on the North American continent.

    Presidents and their appointees change, thankfully, and when the current harmful crew (harmful to our economy, international standing, rule of law to name a few, but not all) leaves, coal will recover and Peabody's stock will be higher.
    Aug 20, 2014. 07:41 AM | 16 Likes Like |Link to Comment