ERICOPOLY

That's pretty funny considering most of the increase this year was GSE-related, and after talking with the GSEs (with whom they've held settlement talks) they come away with a worst case $1b additional liability.

14.45% annualized since 1974 is pretty solid, though many have done much better. http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/performance Many? You will struggle to come up with more than 5, maybe 10. Even if you would come up with 50 it will still make them a Superinvestor. They will certainly rank in the top 0.1% of the fund population. Great notes!! There are plenty of under-the-radar hedge funds/family offices that have done better; there's a guy out in California that has done 40% annualized since the early 80s. I can't confirm all of the records I hear about, but I hear enough scuttlebutt to make me believe that W.E.B. isn't entirely in a class of his own. With that said, Arnold Van Den Berg is a great investor. He was one of my recommendations to my parents when they were looking for a new asset manager. There are many good managers out there, but few go through the pains that CentMan takes to put clients' minds at ease. Customer service is usually the most neglected aspect of "value-focused" funds management. 40% annualized over 25+ years? surely this individual must be on one of those Forbes' list How do you get on the Forbes' list? Like if I just keep compounding my money as I've been doing the past 9 years, I'll surely qualify for the Forbes list at some point here. But do I call them up and tell them I'm rich so put me on your list? What's the etiquette there? Maybe some people are worth $5b but don't want everyone to know, so they don't tell Forbes.

They'll get at least 2/3 of the way from here to normalized by mid-2015. I say "at least" because while the expense reduction (2/3) is under their control, the yield curve is not (the other 1/3). The warrants take you well beyond that, and if the stock doesn't move then the buybacks will lead to astounding per-share earnings by 2019. So the stock will be higher, and the strike on the warrants will be low.

Same here, my A warrant purchase was filled easily, and I don't understand the price action -- I just get as much as I can :) Friday I tried swapping some of my calls for A warrants and it was hard to get them in volume without moving the price. Today the volume is really low in the warrants and the price is holding. Maybe the big seller is gone now???

What a crock of BS modesty. Just like 7.5% was the target for FYE 2012 B3 levels. They're easily to 50$B if we're talking about these numbers: $10b saved in LAS $7b saved in NewBAC $10+b increase revenue from normalized curve and lower non-performing loan balance $3b from retiring 100b LT debt and replacing with deposit funding ??? from legal expense savings

They are the same if the dividend isn't taxed and if the shareholder in turn uses the dividend to purchase more shares. Theoretically, the buyback can be substantially above intrinsic value and still be a better deal than cash dividends when a high dividend tax rate is involved. Berkshire Hathaway is taxed very little on dividends so you know what Warren's answer is going to be here before he even moves his lips. Eric, Correct me if i'm wrong, but wouldn't a buyback be slightly more accretive still, regardless of the tax issue? If you have a company with 100,000 shares outstanding, a stock selling for $10, BVPS of $20, and total equity of $2 million. Here are the effects of issuing $100,000 in dividends and reinvesting vs. $100,000 in buybacks, if you own 100 shares. Scenario A: Total dividends: $100,000 Dividends/share = $100,000/100,000 = $1 New equity base = $2 million - $100,000 = $1.9 million New BVPS = $1.9 million / 100,000 = $19 For 100 shares, that's $100 in dividends. $100/$10 = 10 more shares you can buy Total # of shares now owned = 110 % of company owned = 110/100,000 = 0.11000% @ BV, your total investment would be worth $19 x 110 = $2,090 Scenario B: Total buybacks: $100,000 Shares bought back = $100,000/$10 = 10,000 shares New shares outstanding = 100,000 - 10,000 = 90,000 New equity base = $2 million - $100,000 = $1.9 million New BVPS = $1.9 million / 90,000 = $21.11 % of company owned = 100/90,000 = 0.11111% @ BV, your total investment would be worth $21.11 x 100 = $2,111.11 Am I missing something? Your example works out in favor of buybacks because of the implicit assumption that the share price won't rise in concert with a dwindling share count. May or may not be a realistic assumption.

They are the same if the dividend isn't taxed and if the shareholder in turn uses the dividend to purchase more shares. Theoretically, the buyback can be substantially above intrinsic value and still be a better deal than cash dividends when a high dividend tax rate is involved. Berkshire Hathaway is taxed very little on dividends so you know what Warren's answer is going to be here before he even moves his lips.

New slide deck from today: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTYwMjM4fENoaWxkSUQ9LTF8VHlwZT0z&t=1 Also, 10-Q is out.

Yeah, like there haven't been any opportunities to buy cheap... like all year long already and the second half of last year...

BAC will probably get to 9.5% B3 ratio before they pay out their first elevated dividend in March/April? So that's a 100bps buffer. So a $15-$20b capital return for next year? The low range of that being what they can generate without dipping into their 100bps buffer. Yet it trades at $105b.

Perhaps he'll fire Greenspan.

Still laughing at John Paulson :D

No problem. Actually, the 300 million per quarter that Brian talks about is for their "core" LAS normalized non-interest expense, and doesn't include litigation expenses. The past 4 quarters the total LAS non-interest expense (inclusive of litigation expense) was: $3.441b in q3 '12 (includes 400m of litigation expense) $2.8b in q2 '12 (includes 200m of litigation expense) $3b in q1 '12 (includes 300m of litigation expense) $3.496b in q4 '11 (includes 1.5b of litigation expense) $12.737b total LAS non-interest expense for trailing twelve months $10.337b "core" LAS non-interest expense (excluding litigation expense) This $10.337b number is the one that will come down to $1.2b a year per the 300m per quarter estimate that Brian gave. The $2.4b annual LAS legal expense will come down to how much? I think with Jan 1, 2012 reorg the numbers need to be adjusted. Previously LAS used to service only legacy part of the servicing portfolio. See page 37 of 2Q, 2012. "Effective January 1, 2012, servicing activities previously recorded in Home Loans were moved to Legacy Assets & Servicing...." It looks like the new combined normalized quarterly run rate cost is $500 million and savings seem to be about $10 billion. See comments below from 3Q conf call. Minor change but adds a $1 billion to the overall savings :) Matt O'Connor - Deutsche Bank And maybe I’ll just toss some numbers out there, you are at $12 billion annual run rate right now, I feel like at one point you said $2 billion could be a more sustainable level as you move through all this, so that's a $10 billion decline. Any guess on, does it take two years to get through that, is it five years to get through that? Bruce Thompson - CFO I think we would look at it and say ‘13 and into ‘14 it would be through that base, and I think we noted that. But again, that’s subject to caveat and something change in rules, something change in the rules, but right now as we said, we would expect that as we move through next year, the year end numbers would still be elevated, but as we move into ‘14, you would see them come down to more normalized levels. Vinod Thanks for explaining what was going on there. Hey, there's $1b annuity that's fallen behind the cushions on my couch.

The DTA, when monetized, will boost future pre-tax distributable "earnings" (it won't be called earnings) by a total of $20b-$23b. I believe it was valued at about $15b after-tax in the most recently filed 10-Q, or about $1.30 per share. Enough to pad the numbers for the remaining potential legal reserve increases, temporarily elevated operating expense, and perhaps a little left over. Thus the stock should really already be trading at book value without a discount.

The book value has a very large goodwill item in it. Therefore, it is implicit in my message that I am valuing it as a going concern when I mention book value. I think it's probably worth more than that but I'm keeping it simple. There are no liabilities that are to be paid tomorrow for 20b in cash in excess of current reserves. It's only 6b more in the R&W bucket -- unless management is fibbing. They are fully at 9% B3 today. Anything earned in excess of this can be dividended up to the parent to pay any legal claims of CW. A company earning $2 per share with a 10x multiple is worth $20. Funny, that's what the goodwill says it's worth. Coincidence? I think not.

The DTA is very useful. You have these "unknown" legal hurdles, but the DTA is large enough to offset about $20b pre-tax worth of legal issues. That covers the $6b potential maximum from the R&W, and this latest $1b lawsuit, and about $13b more on top of that. That "should" cover it -- so one can look to the after-tax earnings as distributable to shareholders now that the 9% B3 has been met, and "maybe" some of the DTA will eventually get paid out too as it is monetized in excess of these legal hits. But wait, there's more. The company is also discounted $122b after-tax below book value (about $170b worth of pre-tax earnings). Part of that is the DTA. Fine, I get it... there will be some unknown charges. However this discount is ridiculous. There is no way they are going to under-earn by $170b. Perhaps it's like Berkowitz said and investors just believe that management is fibbing.

No problem. Actually, the 300 million per quarter that Brian talks about is for their "core" LAS normalized non-interest expense, and doesn't include litigation expenses. The past 4 quarters the total LAS non-interest expense (inclusive of litigation expense) was: $3.441b in q3 '12 (includes 400m of litigation expense) $2.8b in q2 '12 (includes 200m of litigation expense) $3b in q1 '12 (includes 300m of litigation expense) $3.496b in q4 '11 (includes 1.5b of litigation expense) $12.737b total LAS non-interest expense for trailing twelve months $10.337b "core" LAS non-interest expense (excluding litigation expense) This $10.337b number is the one that will come down to $1.2b a year per the 300m per quarter estimate that Brian gave. The $2.4b annual LAS legal expense will come down to how much?

What does QEIII have to do with party lines? Bernanke served as chairman of President George W. Bush's Council of Economic Advisors before Bush then appointed him in 2006 to be Chairman of the United States Federal Reserve. Love him or hate him, Bernanke is exactly the man that the Republicans put forward. Obama merely confirmed him for a second term in 2010.

I just took my number directly from Brian Moynihan. So I think it's a pretty good estimate. From the Q4'11 CC transcript Q&A section: Edward Najarian - ISI Group: You talked about the LAS costs coming down, you know, when you broke $3.5 billion down into sort of $1.5 billion of litigation in $2 billion core. Can you give us any sense of what you think, sort of a long-term run-rate or a normalized level is for that $2 billion core? I know you're probably reluctant to talk about the timing of getting there, but when you do get there, maybe even few years away, what would be the right number to think about that $2 billion going to? Brian T. Moynihan - CEO: I think Ed, to frame that, I think about the 60 plus delinquent units and the progress we made this year and then progress we ultimately got to get to, to get to a normalized level that will take the next six to eight quarters to get through that. But when you get down to that level, the number should be more in the $300 million a quarter versus a $2 billion from the operating cost side. And so, a reasonable amount, the servicers loans even under the heightened servicing duties that will be embedded in a way you service delinquent loans going forward to that kind of number. I just again say it's going to take us time to work through that. You see the progress we've made this year, you see the flows coming in slowing because on a whole servicing portfolio and in terms of improving delinquency, and then moving the stuff through the process. So I think that's what you should be looking for, from $2 billion down to maybe $300 million a quarter type of number.

A $1b lawsuit just seems like an annoyance at this point. More important is the ongoing $3b a quarter in expenses at Legacy Asset Servicing, and how that's going to wind down to only $300m a quarter in a year's time. A year's worth of that bleed is worth 10 of these lawsuits put together, and that's what the media ought to be focusing on, not this non-story of a lawsuit.

It won't outlast the warrants. The beta is calculated based on historical volatility anyhow. That's like saying it's been raining heavier on BAC than on the rest of the market, however if you look closely you'll note that the clouds were darker in the skies over BAC. Going forward, the skies look to be quickly clearing over BAC. So to expect it to continue to rain harder over BAC simply because that's what happened when the skies were darker? Doesn't make sense to me.

I was hoping to get lunch off the dollar menu for just .50 cents, but I was outbid! Damn.

But one can argue that BAC warrant A with his above .01$ dividend adjustment is worth more than the AIG warrant (which I think is above .37$). That's true, it should be considered while contemplating that AIG's warrants have 33% more time in them before expiry.

Last summer, '11, we had a discussion about how the AIG warrants looked to be very attractive but relatively speaking the A warrants for BAC looked quite a bit more expensive. Now the AIG warrant is priced at about 40% of the common price, and the BAC warrant is also now priced at about 40% of the common. And both stocks are priced fairly similarly relative to the warrant strike.

Last summer it was hard to purchase the A warrants without moving the price. Lately, if I put in a large order it fills easily. There is much more eagerness to fill my orders. Back in March the A warrants reached $5.50 on a $10.10 stock price. So that's like 5% higher stock price than yesterday, yet a 48% higher warrant price.