ERICOPOLY

With today's announcement they are back to 9% B3 Tier 1 ratio under the "Standardized" approach. They should be running at about 9.7% at end of Q2, unless they add to legal reserves again (which they will quite likely do given the talk of the big DOJ settlement . Of course, one could hope that they truly reserved for it in Q1). Then 10.2% by end of Q3. Here's to hoping they finally got their reserves straightened out, but I have no confidence in that.

Roughly 12% cost annualized to the warrants' leverage today.

I'll bet wescobrk is now cured of his self-loathing.

I just checked the news. Wow. This reminds me of the Fairfax "currency translation error" in July 2006, except in that case it was a much larger mistake relative to book value. It must be my bad luck to be invested in financials that make mistakes you wouldn't imagine possible.

Yes that's what I'm doing with them -- just the puts with common.

Shorter duration options can just be rolled out to a future date. So what you are effectively dealing with is: warrant has fixed-rate leverage costs for next 5 years LEAPS have fixed-rate leverage costs for next 2 years, and then it "floats" with the market when you roll them. Both are long-duration strategies... you can roll either one for the next 50 years if you wish. The only difference is the duration of the fixed term. It's like having a 5 year fixed rate mortgage, versus one where the rate resets in 2 years. You would be ecstatic to lock in a long term rate if the rate is good... but in this case the rate REALLY sucks, so I have no enthusiasm for it.

I don't understand your point about risk reduction. You have a longer term which just means you incur the high cost of the leverage for a longer period of time. But that doesn't reduce any risk versus the higher strike put that costs the same on an annualized basis. The higher strike ensures that you are risking less by going with the shorter term option -- and the leverage itself costs the same on an annualized basis. I think if you stress test it, you'll see my point. Let's say BAC goes to $0. Have you reduced risk by having $8 riding on the line in those longer term warrants? You'll lose the entire $8. That's more risk.

And being in the 8th inning doesn't tell us how many innings are left. May 8th, 1984. Chicago 7 vs Milwaukee 6 25 innings. However, personally, I feel like we're getting down to the end of this mess. Grand Finale.

It's strange how the owners can't get a straight answer out of the employees, yet the employees keep on running the show. Only in the stock market fractional-ownership structure is this allowed to happen.

This would put it around $9.7b: http://dealbook.nytimes.com/2014/04/24/justice-dept-offers-bank-of-america-a-mortgage-deal/?_php=true&_type=blogs&partner=yahoofinance&_r=0 In a move that raised the stakes for the government’s crackdown on banks that sold the troubled mortgage investments during the financial crisis, the Justice Department made Bank of America an opening settlement offer of roughly $20 billion several weeks ago, according to people briefed on the matter. But that amount is a somewhat inflated starting point for negotiations, and Bank of America has not yet made a counteroffer, according to the people who were not authorized to speak publicly. The initial offer, the people said, included money earmarked for a settlement with the Federal Housing Finance Authority, a regulatory agency. After the Justice Department made that offer, Bank of America reached a separate $6.3 billion cash deal with the regulator. Because of this, the Justice Department’s remaining request has shrunk significantly. By one measure, Bank of America will ultimately pay about $16 billion to settle every investigation into its sale of mortgage securities before the 2008 financial crisis. That estimate, widely circulated among bank executives and lawyers, would include the $6.3 billion pact already reached with the housing regulator. The remainder would cover penalties to the Justice Department, as well as to state and federal regulators, and a few billion dollars aimed at providing relief to struggling homeowners.

I admire how the Chinese are honest about the fact that their banks are state run enterprises.

A name change to People's Bank of America will do. How does one go about getting a shareholder resolution on the next proxy?

This will embolden Putin to invade Ukraine in order to keep it from falling to America's brand of communism.

It will be very annoying if this isn't already fully reserved for. Given that last week they announced an increase in reserves (perhaps for this lawsuit), and two months ago they claimed maximum additional liability for existing issues was $6.1b (of which they've already used up $6b).

I put in my zip code and it said there are no deals near me. I feel like they are going for a design that focuses on simplicity, on not overwhelming the consumer with choices. This should also take pressure off of their promotional budget, given that no SYW points are going to be spent based on this kind of offering selection.

It's a higher odds bet than the $12 price target he put on BAC.

Article is factually inaccurate: "Bank of America is valued at 13.7 times forward earnings" Unless "forward" includes the past quarter.

The Chinese want their Tesla car so badly that they've hired lawyers to negotiate with Tesla for earlier delivery: http://online.wsj.com/news/articles/SB10001424052702304049904579515434271348994?mod=WSJ_hps_sections_business&mg=reno64-wsj

That makes sense. I hope they are able to do so.

I wonder though -- last year they specifically were given permission (CCAR results) to retire $5b of preferred. This year there was no mention of it. Why were they given permission to retire $5b last year if you claim they can retire debt and preferred without needing permission? Second, I would rather they retire those 7% preferred rather than pay a dividend. I get taxed so heavily on the dividend that I only get roughly 70 cents on the dollar... So if I instead could force the company to use that money to retire preferred, why that would be the same thing as investing my after-tax dividend at 10% (taxable) yield. And you can't get 10% taxable yields anywhere. Second, it's not just the awesome yield I get on that money, it's also that it simultaneously reduces the risk to my common stock at the same time. So I definitely want them to retire preferred instead of paying dividends, but unfortunately they chose to pay dividends instead.

Regarding B3 capital ratios: At the end of Q4'13, they had 9.1% under "standard" and 9.96% under "advanced" (difference of 86 bps) At the end of Q1'14, they had 9.3% under "standard" and 9.90% under "advanced" (difference of 60 bps) So they converged by 26 bps. On the Q4 conference call they said it would take 12 to 18 months for most of the convergence to complete. I suppose if they pick up another 20bps in Q2, that would keep them on track for a 12 month convergence schedule. So if they build $5.5b of capital from pre-tax earnings, pick up the $2.9billion from the Buffett deal, and then return $1.5b to shareholders... That would leave them with about 70 bps increase in B3 Tier 1 capital ratio under "Standardized method". So they could therefore hit 10% B3 ratio "standardized" by the end of this quarter. That's pretty quick. And it would put them around 10.5% under "standardized" by the end of Q3 (assuming similar convergence pace, another $5.5b of pre-tax earnings, and another $1.5b capital return in Q3). So they would begin the CCAR process with 10.5% in hand. Possibly 11% by end of Q4. By the time next year's CCAR process is complete in late March, they would be maybe at 11.25% (but not yet reported at that time). So this time perhaps we'll get some sort of maximized capital return. Starting at 11% to 11.25% ought to justify that kind of scenario.

Maybe not your mistake. I think my mistake. From the conference call: I also want to remind you that our Tier 1 capital and supplemental leverage ratios will benefit by approximately $2.9 billion in the second quarter of '14 if we receive shareholder approval to amend our Series T, preferred stock. So the deal with amending Buffett's preferred stock didn't affect anything in this Q1 report. The higher B3 capital under the "standard" calculation likely happened due to that convergence between "standard" and "advanced" that I posted about earlier today. Therefore, we'll see a huge jump in B3 capital under "standard" method in the Q2 report. There will be more convergence, there will be this extra $2.9 billion help from Mr. Buffett's preferred deal, and then there will be very clean pre-tax earnings (they took such a huge legal charge in Q1, I bet Q2 will be clean). I wonder if it could be as much as 50 bps jump in capital ratios given all that happening in Q2. I don't know enough about it to comment. There must be some benefit to rolling some expensive maturing LT debt into cheaper new LT debt. There is a relatively vague debt maturity schedule on page 215: http://media.corporate-ir.net/media_files/IROL/71/71595/AR2013.pdf I say that it's "relatively" vague because it says for example that there are $22b worth of subordinated debt with the following description: Fixed, with a weighted-average rate of 5.83%, ranging from 2.40% to 10.20%, due 2014 to 2038 Alright, so my next question is when does the 10.20% debt expire? Well, they don't tell you that. It is probably in some other filing somewhere but I'm just not motivated to look for it.

Maybe not your mistake. I think my mistake. From the conference call: I also want to remind you that our Tier 1 capital and supplemental leverage ratios will benefit by approximately $2.9 billion in the second quarter of '14 if we receive shareholder approval to amend our Series T, preferred stock. So the deal with amending Buffett's preferred stock didn't affect anything in this Q1 report. The higher B3 capital under the "standard" calculation likely happened due to that convergence between "standard" and "advanced" that I posted about earlier today. Therefore, we'll see a huge jump in B3 capital under "standard" method in the Q2 report. There will be more convergence, there will be this extra $2.9 billion help from Mr. Buffett's preferred deal, and then there will be very clean pre-tax earnings (they took such a huge legal charge in Q1, I bet Q2 will be clean). I wonder if it could be as much as 50 bps jump in capital ratios given all that happening in Q2.

Sounds like a dead party guys. Can't we get "Uncle Jim" to provide the ladies for next year's party?

I agree. Anyone who is old enough to remember 1999 can tell the difference in atmosphere versus 2007. Stocks were the rage in the late 90s -- they weren't a "rage" in 2007. The late 1990s were all about the stock market, and once that blew up people were raging about real estate.