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  • Loving The Leverage: Bank Of America [View article]
    OK, so its not democrats in general you're concerned about (like Chuck Schumer, the senator from Wall Street, who has done a pretty good job maintaining the ultra-low "carried interest" tax rate that applies to incentive fees earned by hedge fund managers and PE firms). Its Elizabeth Warren, but given the deadlock in congress, its hard to see anything passing on TBTF, beyond the already enacted Dodd-Frank. My opinion on this is just my opinion, of course, but I think that with the latest settlement with BAC, the assault on the banks is just about over, and the negative hangover represents a buying opportunity.

    On TBV, BAC closed at $15.22 on Friday. TBV for the latest quarter is $13.62.

    I concede that forecasting the economy 4.25 years out is problematic. But forecasting the probability of a recession in the next 18 months is less so. The latest survey by the NABE (Nat'l Assn of Business Economists) sees "a low probability of a U.S. recession in 2014 or 2015. Almost 60% of the panelists put the odds at less than 10%, while nearly another third (32.7%) estimate the recession probability at between 10% and 25%. Only about 8% believe the probability is higher than 25%, with just 2% putting the odds at greater than fifty-fifty."

    Meanwhile, the Philly Fed's "Third Quarter 2014 Survey of Professional Forecasters" sees 3.0-3.1% growth for Q3 and Q4 of this year, and 3.1% for 2015.

    Of course, the final outcome will not come in precisely as forecast, and concerns about slowdowns in China, Russia, and Europe may not be fully factored in. What can be said, however, is that despite the fact that the US Fed has started easing up on the QE throttle, 2Q 2014 came in with a 4.2% gain, after being negative in Q1; plus, there are currently no excesses in the economy such as existed in sub-prime and in the housing market in 2007. This is a strong argument that no recession will occur this year or next year.
    Sep 1, 2014. 10:58 AM | 1 Like Like |Link to Comment
  • Loving The Leverage: Bank Of America [View article]

    """likelihood of a recession"""

    We have now had six straight months of job increases in excess of 200,000, the first time that has happened since 1997. What excesses do you see in the economy that would lead the Fed to start clamping down now? Unemployment is still as high as 6.2%, so there is still slack in the labor markets, and wages are not rising out of control. Inflation is at barely 2%. New single family housing starts are about 30% of what they were at the peak in 2005, yet the pressure to keep increasing family formations keeps building up with population growth and with job growth. My guess is that the current up cycle in the economy still has a few years to go.

    """a democrat controlled government"""

    The Dow has increased (not counting dividends) from 7,950 the day that Obama was inaugurated to 17,098 at its most recent close, a gain of over 115%. In contrast, from GW Bush's inauguration to Obama's, the Dow fell
    from 10,678 to 7,950. When it comes to economic performance or the stock market, history proves you should back the democrats!

    """I highly doubt the "B" warrants will be worth more than $0 at expiration."""

    Why should anyone take your word for it?
    Aug 31, 2014. 09:56 PM | 2 Likes Like |Link to Comment
  • Loving The Leverage: Bank Of America [View article]
    A little research confirms that on TDAmeritrade, the symbols are BAC+A and BAC+B.
    On Schwab, the symbols are BAC/WS/A and BAC/WS/B.
    On Yahoo, the symbols are BAC-WTA and BAC-WTB.

    Simple, right?
    Aug 31, 2014. 02:21 PM | 2 Likes Like |Link to Comment
  • Loving The Leverage: Bank Of America [View article]
    I think BAC has appreciation potential (and I am long), but I think that any projections that are based simply on book value are resting on a crumbly pile of sand. If you eliminate the $80 billion of goodwill and intangibles from BAC's balance sheet, you would reduce the current book value of about $21 per share by about 36%.
    Aug 31, 2014. 11:06 AM | 5 Likes Like |Link to Comment
  • Bank Of America Rated As Juicy: One Of The Few We'd Go Long In This Economic Climate [View article]
    Feckless, perhaps if you were to provide a bio we could put more credibility in your comment, which is so inane that I assume it was not to be taken seriously by anyone with an objective approach to the stock market. Your big "what if" has about a 0.000001% chance of actually happening!

    BAC (and Citigroup) still sell at relative discounts, due in part to negative vibrations such as those emanating from you. I say, get over it! Look ahead, not behind. What happened in 2006-2007-2008 is done. The rules have changed. The bankers acted recklessly in packaging sub-prime mortgages and it all happened under the Alan Greenspan Fed, which chose not to intervene, even though it had the power to do so. BAC and Citi were effectively recapitalized in the government bailout that was led by former Secretary of the Treasury, Hank Paulson. The adjusted shares outstanding rose to a level that was 6 times higher for Citi and 2.4 times higher for BAC. The old shareholders were diluted to all . . . ..

    BAC and C are now new banks operating under different managements and different rules. But the negative feelings remain, which, IMO, provides a buying opportunity!
    Aug 30, 2014. 01:45 PM | Likes Like |Link to Comment
  • Bank Of America - Free To Power Up To $20 By Next Year [View article]
    According to Yahoo, the mean EPS estimate (of 24 analysts) is $0.80 for 2014 and $1.50 for 2015, a gain of 87%. The current price is just 10.7X 2015 EPS, which makes BAC look attractive, if BAC can execute to the analysts' expectations.

    As for Josh's analysis, I question how he jumps from a fair value of $17.50 to a (target?) price of $20. I think the methodology and the assumptions, which can be manipulated to provide the desired outcome, are questionable. I understand discounted cash flow, but not discounted earnings, which is not cash flow. And how does the book value, which contains $80 billion of goodwill and intangibles (i.e. "fluff" that amounts to over $7 per share) get into the equation?

    For what its worth, Citi put out a recent report on BAC with a Buy rating and TP of $19. Here is their explanation of their valuation: ""Our $19 target price for Bank of America is derived from our discounted residual income model, which is an extension of a dividend discount model and values an enterprise based on its discounted excess returns over its cost of equity. We also consider a relative P/E analysis, which compares BAC's forward P/E multiple to that of a comparable bank group of large and mid-size bank stocks. Our residual income model incorporates our three-year forward earnings projection, a seven-year fade period, and a steady-state terminal value at year ten. The key inputs to the model assume ~10% cost of equity, including a risk-free rate of 2%, an equity risk premium of 7.5% and a beta of 1.1, and also incorporate a modified long-term ROTE estimate of 13.5%, which reflects Bank of America's unique business mix. We assume a perpetual growth rate of about 3%.""

    Disclosure: Long C. Long BAC.
    Aug 28, 2014. 03:19 PM | Likes Like |Link to Comment
  • Bank Of America And Merrill Lynch Avoid Death Penalty [View article]

    Here is a link to 2013 NAEP data that bears out my contentions above. Go to page 4, which is "Percentage of fourth-grade public and nonpublic school students at or above Proficient in NAEP reading, by state".

    Not sure what your table proves, but I would note that NY State has a higher percentage of gold medal schools than Texas. Connecticut, a highly unionized state, has the highest percentage of gold medal schools among all states, followed by MA and DC.

    My wife was principal at PS 171 at 103rd St and Madison from about 1979 to 1999. Almost all of the students were members of minority groups (black or Hispanic). In 1998, according to a NYS Dept of Ed report, the percentage of students at PS 171, only 7.8% of the students fell below the state Academic Standard, which the median for the East Harlem district was about 50%.
    Aug 28, 2014. 11:18 AM | Likes Like |Link to Comment
  • Rising Power Of ISIS, Concern For BP And Exxon [View article]

    Let me see if I have this right.

    You actually think that we should spend another $trillion to bring "democracy" to the Middle East? That we should save XOM' minor interest in some of that oil? That all ME oil supplies will be lost if we don't again put "boots on the ground" in Iraq? That we in the USA, with rising domestic oil supplies, could not cope with just another ME "oil crisis"?

    Well, my definition of insanity is doing the same thing over again and expecting a different result. That for me, defines the state of your mind.

    Here are some other things that might drive you insane. While Obama has been president:

    1. US oil production has increased from 5 million BPD to 8 million BPD, an increase of 60%.

    2. The DJIA has increased by from 7,500 to 17,000, which is over 125%, not including dividends.

    3. The US economy continues to improve -- job gains of over 200,000 in each of the past 6 months -- and all of the jobs lost in the Bush 2007-2008 recession have now been recovered.
    Aug 28, 2014. 10:11 AM | Likes Like |Link to Comment
  • REIT Valuation Part 3: Residential [View article]
    Wow! Terrific analysis and statistics.

    ""[U]nemployment is a leading indicator of household formation."" I would put it the other way, that job gains are a leading indicator of household formations. We now have 6 months of job gains over 200,000, while household formations have been lagging. This portends well for apartment rents and for housing starts, both single family and multi-family. I think the multi-family gains will be in less affordable MSAs such as DC, LA, NYC and SF, while single family will be strong in DFW, Atlanta, and California's Central Valley.

    Disclosure: I am long homebuilders SPF and UCP. I will be looking into low multiple REITs, IRT, BRG, and APTS.
    Aug 28, 2014. 08:55 AM | 1 Like Like |Link to Comment
  • AMD: The Long-Term Opportunity Is Still Strong [View article]
    The MACD is still on a positive signal, and the RSI remains above 50%. Tomorrow's action could bring a turnaround on the stock chart.
    Aug 27, 2014. 05:42 PM | 1 Like Like |Link to Comment
  • AMD: The Long-Term Opportunity Is Still Strong [View article]
    """AMD is technically INSOLVENT."""

    The investors, such as me, must be stupid. They are buying a stock with a $3 billion market cap.

    Negative TBV means nothing, of course. This is merely the accountants' record of the depreciated cost of the assets (less debt). It does not adequately account for intellectual property, which is considerable at a tech outfit like AMD. AMD is managing its cash flows quite well and debt repayment is unlikely to be a problem as long as AMD sells competitive products into the marketplace.

    Best of all, there are 140 million shares shorted. These shares will have to be bought back some time. If AMD comes in suddenly with favorable quarterly results, the shorts will be rushing for the door!

    I love shorts!
    Aug 27, 2014. 05:36 PM | 5 Likes Like |Link to Comment
  • Rising Power Of ISIS, Concern For BP And Exxon [View article]
    Yes! Lets get the troops on the ground in Iraq again so we can save the oil companies' private investments. It worked so well the last time. Remember? Cheney said the war would pay for itself when we took over the oil supplies.

    FYI: The Iraq war cost the US over $1 trillion, and probably added to your tax bill.
    Aug 27, 2014. 10:38 AM | 1 Like Like |Link to Comment
  • Rising Power Of ISIS, Concern For BP And Exxon [View article]
    """While the unrest continues, oil production of Iraq is expected to show disruption causing the crude oil price to rise. We can already see that Crude Oil Brent is picking up pace after the fighting started in Iraq, evident from the graph below."""

    Yet the graph in the article shows that the price of Brent oil has dropped from $114 at the end of June, to $102 at the current time. So what exactly does do the sentences above mean?

    This is only one example of a questionable conclusion in this article. In my opinion, this is a poorly written article with poorly drawn conclusions.
    Aug 26, 2014. 06:17 PM | Likes Like |Link to Comment
  • Bank Of America And Merrill Lynch Avoid Death Penalty [View article]

    What's your first language? Chinese? Its very hard to follow your posts, because of your contorted grammar.

    Anyway, teachers and teacher unions have been used as scapegoats in the whole education debate, when the real problem lies with politicians and administrators.

    When Bloomberg was elected mayor, he chose Joel Klein, a justice department lawyer as schools chancellor. Klein knew nothing about education so he hired Diana Lam, a "progressive" educator, as his deputy. For 80% of the schools, she prescribed a program called "balanced literacy", which was neither balanced nor literate. Balanced literacy lacked content and relied heavily on "whole language"; it did not work for kids from the inner city. So Klein gave choice of curriculum back to the principals. In all of the resulting chaos, many teachers and principals quit, or chose to work in the suburbs, leaving the city to manage with new, inexperienced staff. At the start of his mayoralty, Bloomberg had made it a point to improve the schools, but at the end of his tenure, there was hardly any improvement in math and reading scores.

    Of course, I do have some inside info on this. My wife was, for 20 years, the principal of a school in the East Harlem. While she was principal, the school, which was about 50% hispanic and 50% black, became the top school in the district i.t.o. math and reading scores.

    BTW, Massachusetts teachers are among the most heavily unionized among the states, and Massachusetts scores highest on NAEP tests. Mississippi has no teachers who are covered by union contracts, and its scores are about the lowest. New York State, which is highly unionized, scores better than Texas, where there are no union contracts.

    PS: I fully support the following from TeachEnglish: ""Charter schools as a whole perform no better than public schools and in many cases markedly worse. And, no; they don't have better teachers, but they do have high teacher turnover, which depresses teacher salaries and leaves more money for administrators."" For a while, my wife "assisted" at a charter school in Brooklyn, where the teachers were paid $30,000 p.a., and the administrator took home $180,000. Of course, most of the teachers quit after their first year, whereupon, the administrator hired a new batch at "minimum wage" of $30,000. Needless to say, there are some well run charters, but there are also some very bad ones. This one, in Brooklyn, was eventually closed down by the city!
    Aug 26, 2014. 03:56 PM | Likes Like |Link to Comment
  • Exxon Mobil: Why I Believe The Shares Are Modestly Undervalued [View article]
    This is a more careful and reasonable cash flow discount analysis than others on SA. It supports the conclusions well. As it happens, the mean target price of 19 analysts is 105, according to Yahoo.
    Aug 26, 2014. 02:19 PM | 1 Like Like |Link to Comment