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  • Bank Of America Still A Mess  [View article]
    Short-term profitability is clearly an issue. At this point, everyone is aware of the bevy of potential or pending suits and claims, and BAC's 10Q shows several billion in excess of reserves.

    However, I'm not sure how you make the jump from that to no evidence of long-term profitability or profit potential. There has been clear progress made in lowering debt/settling claims/increasing capital base. After (eventually) paying the remaining claims, taking the losses on the NPL's, and jettisoning or redeploying the thousands of excess employees who've been working on legacy/NPL's, future profitability at some level seems extremely likely. Now, if you said you're not sure how long-term that long-term might be, I'd agree--it could still take years to deal with the outstanding claims and liability.
    Nov 7, 2012. 05:14 PM | Likes Like |Link to Comment
  • Finding Bank Of America's True Value: Legacy Assets And Legal Risks Continue To Weigh Heavily On Its Market Price  [View article]
    I agree with almost everything in your analysis, except perhaps one point right at the top--was much of the fall in in revenue due to discontinued operations (such as discontinued mortgage operations or overseas credit card portfolio sale)? If so, I wouldn't see the revenue drop as troubling...whereas lower net income is always troubling.
    Nov 7, 2012. 05:00 PM | Likes Like |Link to Comment
  • Bank Of America Might Have A Big Earnings Surprise  [View article]
    Disappointed in the $1 bil increase in unreserved to $6 bil. That's enough to eat up a couple of quarters of healthy earnings...and the earnings right now aren't healthy. Looks like the return to normality is further down the road than I was expecting.
    Oct 18, 2012. 03:14 PM | Likes Like |Link to Comment
  • Google's (GOOG -8.4%) Q3 results are out early, and they missed estimates. EPS of $9.03 missed by $1.62, and revenue of $11.33B (+51% Y/Y, boosted by Motorola acquisition) missed by $530M. Shares are diving.  [View news story]
    Premature earnings relating is never a good thing.
    Oct 18, 2012. 03:06 PM | Likes Like |Link to Comment
  • Bank Of America Might Have A Big Earnings Surprise  [View article]
    I would rather see them use the cash to continue their buyback of the remaining trust securities (to the extent that they can), then switch to share buybacks/dividends and not play with a reverse split at all. A switch to the dividend tax rate may affect which one is more advantageous. I'd like to see both, but probably a bit heavier on the buyback at this share price, switching to heavier dividend at higher share prices. Of course, both would be subject to regulatory approval post-stress test--BAC hasn't requested (or been cleared) to do either yet.
    Oct 16, 2012. 12:40 PM | Likes Like |Link to Comment
  • Bank Of America Might Have A Big Earnings Surprise  [View article]
    Reverse split has no impact on the monetary value of the shares outstanding, although it can affect certain exchange listing or stock-fund requirements.

    A buyback cuts the total number of the shares outstanding by purchasing some of the float; therefore, the smaller number of remaining shares outstanding is normally immediately worth more. There are quite a few discussions as to whether stock buybacks or additional dividends are better for a company overall, but between a buyback and a reverse split there's just no comparison--reverse split should have no impact on the price, while a buyback should increase the stock price.
    Oct 15, 2012. 05:38 PM | 2 Likes Like |Link to Comment
  • Bank Of America Might Have A Big Earnings Surprise  [View article]
    I'm more excited to see progress in their expense reduction than anything else. Right now, their expenses are much higher than their competitors; if the "New BAC" project is effective, the new cost structure should greatly increase profitability, even in a low-NIM environment. Accelerating that program and buying back some of the trust securities (as previously disclosed) could give a near-term pop. Still a huge mortgage/litigation overhang, but overall status does appear to be improving.

    Disclosure: Long BAC.
    Oct 15, 2012. 11:20 AM | 1 Like Like |Link to Comment
  • Dimon: "We expect to continue to be challenged by high default-related expenses." Regulatory guidance (pg. 8 of the presentation) is forcing higher charge-offs - $825M, or $0.14/share in Q3 - on certain mortgage loans. Wells Fargo (WFC) reported an additional $567M in charge-offs due to this. Keep an eye on BAC and C reports. JPM -0.7% premarket.  [View news story]
    So two large banks report earnings that (blended) are about what was expected, reserve releases about what was expected, with projections about what was expected, and with the NIM down on WFC (but still better than most). Market spiked after JPM, fell after WFC, and now both are down along with all the other banks. Overreaction?
    Oct 12, 2012. 03:41 PM | Likes Like |Link to Comment
  • More on the BofA (BAC -0.9%) settlement: The $2.43B payment will be covered by existing litigation reserves and Q3 litigation expenses of $1.6B. Additionally, the bank expects Q3 pre-tax earnings to take a $1.9B hit as improving credit spreads force a DVA. The bank also tosses in an $800M charge thanks to U.K. corporate tax changes. All told, the expected hit to Q3 EPS is $0.28/share (the bank earned $0.19 in Q2). Previous (I, II).  [View news story]
    Note in the last quarter, the reserve release was....$1.9B. Will another reserve release offset much of this?
    Sep 28, 2012. 10:20 AM | Likes Like |Link to Comment
  • Stocks bounce back from early losses of nearly 1%, the S&P 500 now +0.1%, the Nasdaq +0.5%. The small caps put in an especially impressive move, the Russell 2000 moving 2% off the lows, now +1.4%[View news story]
    Any idea why? I haven't seen any Fed news, Draghi or Merkel comments, no data...other than Apple announcing a date for a conference.
    Sep 4, 2012. 02:58 PM | 1 Like Like |Link to Comment
  • With volatility (and the downside) seemingly vanquished, Sober Look provides the September "risk" calender. Dates standing out as having the best chance of throwing investors a curve ball are the Sept. 6 ECB meeting (what if no policy change is announced) and the Sept. 12 German Constitutional Court ruling on the legality of the ESM.  [View news story]
    Right now, good news is good (economy strengthening), and bad news is good (increased likelihood of QE). That just can't keep going over the longer term.
    Aug 16, 2012. 03:58 PM | Likes Like |Link to Comment
  • S&P 500 dividends hit $30.20 in Q2 (at a seasonably adjusted annual rate). It's a record high, while at the same time payout ratios remain near their lowest levels in 25 years. (via tradefast)   [View news story]
    I'd rather see the raw dollar number get adjusted for inflation--otherwise, "historical" high doesn't mean much.
    Jul 9, 2012. 01:29 PM | 2 Likes Like |Link to Comment
  • Stocks are rallying sharply from deep losses, the S&P -0.3% after being down about 1.5% less than an hour ago, the Nasdaq -1.2% after being down more than 2%.   [View news story]
    The only thing that could move the markets this fast at this time of day is a European rumor...emphasis on rumor.
    Jun 28, 2012. 03:50 PM | 1 Like Like |Link to Comment
  • It's a new record (inside 30 minutes by our count) as a German Finance Ministry spokesman denies a WSJ interview with finmin Schauble suggests a change of policy towards eurobonds. Schauble has now personally denied any policy change, reports Bloomberg's Mike McKee.   [View news story]
    1. It's closer to the next federal election in Germany.
    2. Progress in Greece has been minimal on their promised changes (reducing govt employment, privatizing, etc.). Italy has done a bit more, but it's a hard sell to the German public to keep sending money to southern Europe when systemic changes have not been made...and when the leftist opposition speaks of rolling back those changes which have been made.
    3. The promise (or even hint) of eurobonds or eurobills is their largest negotiating chip. They don't want to use it unless they get everything they want in return. Given the process to get everything they want is akin to a constitutional amendment in the US, it's far too early in the process to do more than drop the vaguest hint of the possibility if tighter fiscal union and political union are achieved.
    4. They'd rather patch the current euroboat than give the PIIGS a new eurobondboat to go out and wreck.
    Jun 28, 2012. 11:32 AM | Likes Like |Link to Comment
  • Maybe trumping disappointment over the Fed announcement is a leak out of Europe that European Council head Herman Van Rompuy has prepared a blueprint of reform that will include jointly issued short-term bills, reports Bloomberg.   [View news story]
    Seems pretty clear. At 1230, markets dived, 10year went up; a little later, Merkel comments and a leak on eurobills hits, bonds dived, markets up.

    But given the general German aversion to funding the euro-fringe, I wouldn't hold my breath. Any plan out of Germany will have restrictions, limitations, required targets (anti-sovereign or anti-spendthrift provisions, depending on your point of view), unless and until they are forced to 'eurobonds lite'.
    Jun 20, 2012. 02:26 PM | Likes Like |Link to Comment