redskin Posted October 29, 2014 Share Posted October 29, 2014 Moynihan on Bloomberg... http://www.bloomberg.com/video/bofa-s-brian-moynihan-on-markets-economy-and-strategy-7KEjDwhSTFC1ZILhyeLpNg.html Link to comment Share on other sites More sharing options...
Liberty Posted October 29, 2014 Share Posted October 29, 2014 Moynihan on Bloomberg... http://www.bloomberg.com/video/bofa-s-brian-moynihan-on-markets-economy-and-strategy-7KEjDwhSTFC1ZILhyeLpNg.html Thanks for sharing. He's always a bit painful to listen to (which I don't mind as long as he does a good job running the company -- he's not an actor), but he actually got eloquent at the end this time, talking about how long BAC has been around and such. Quite clear that he truly loves his job and the company. Link to comment Share on other sites More sharing options...
Grenville Posted October 29, 2014 Share Posted October 29, 2014 good interview. I'm glad he's ready to stay there for a long time. Link to comment Share on other sites More sharing options...
CorpRaider Posted October 29, 2014 Share Posted October 29, 2014 I dunno about eloquent. I guess he's talking about First Boston going back 230 years? Link to comment Share on other sites More sharing options...
Liberty Posted October 29, 2014 Share Posted October 29, 2014 I dunno about eloquent. Well, that was eloquent for him :) Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 30, 2014 Share Posted October 30, 2014 Investors Chide Bank of America on Combining Chairman-CEO Roles Large Pension Funds Push Back on Move to Give Brian Moynihan Both Titles http://online.wsj.com/articles/some-investors-chafe-at-bank-of-america-combining-chairman-ceo-roles-1414698418?mod=WSJ_hp_LEFTWhatsNewsCollection Link to comment Share on other sites More sharing options...
fareastwarriors Posted November 6, 2014 Share Posted November 6, 2014 BofA Cuts Third-Quarter Profit $400 Million Amid Currency Probes http://www.bloomberg.com/news/2014-11-06/bofa-cuts-third-quarter-profit-400-million-amid-currency-probes.html Link to comment Share on other sites More sharing options...
benchmark Posted November 7, 2014 Share Posted November 7, 2014 Damn, when will BAC be out of law suits? BofA Cuts Third-Quarter Profit $400 Million Amid Currency Probes http://www.bloomberg.com/news/2014-11-06/bofa-cuts-third-quarter-profit-400-million-amid-currency-probes.html Link to comment Share on other sites More sharing options...
Uccmal Posted November 7, 2014 Share Posted November 7, 2014 Damn, when will BAC be out of law suits? BofA Cuts Third-Quarter Profit $400 Million Amid Currency Probes http://www.bloomberg.com/news/2014-11-06/bofa-cuts-third-quarter-profit-400-million-amid-currency-probes.html It would be nice if the culture at all of the big banks could be honest for a change. It begs the following question: Would any of these banks make any money at all if they were honest? Link to comment Share on other sites More sharing options...
Kraven Posted November 7, 2014 Share Posted November 7, 2014 Damn, when will BAC be out of law suits? BofA Cuts Third-Quarter Profit $400 Million Amid Currency Probes http://www.bloomberg.com/news/2014-11-06/bofa-cuts-third-quarter-profit-400-million-amid-currency-probes.html It would be nice if the culture at all of the big banks could be honest for a change. It begs the following question: Would any of these banks make any money at all if they were honest? What do you mean by "honest"? If you mean telling the truth, then no. In fairness, sometimes it's just a little white lie. "Yeah, that deal would work really well for you" is the same as "sure, honey, I'd love it if your parents could join us tonight". Link to comment Share on other sites More sharing options...
ERICOPOLY Posted November 7, 2014 Share Posted November 7, 2014 Damn, when will BAC be out of law suits? BofA Cuts Third-Quarter Profit $400 Million Amid Currency Probes http://www.bloomberg.com/news/2014-11-06/bofa-cuts-third-quarter-profit-400-million-amid-currency-probes.html It would be nice if the culture at all of the big banks could be honest for a change. It begs the following question: Would any of these banks make any money at all if they were honest? What do you mean by "honest"? If you mean telling the truth, then no. In fairness, sometimes it's just a little white lie. "Yeah, that deal would work really well for you" is the same as "sure, honey, I'd love it if your parents could join us tonight". I'm happy to do my part for the deficit. Link to comment Share on other sites More sharing options...
Uccmal Posted November 7, 2014 Share Posted November 7, 2014 Damn, when will BAC be out of law suits? BofA Cuts Third-Quarter Profit $400 Million Amid Currency Probes http://www.bloomberg.com/news/2014-11-06/bofa-cuts-third-quarter-profit-400-million-amid-currency-probes.html It would be nice if the culture at all of the big banks could be honest for a change. It begs the following question: Would any of these banks make any money at all if they were honest? What do you mean by "honest"? If you mean telling the truth, then no. In fairness, sometimes it's just a little white lie. "Yeah, that deal would work really well for you" is the same as "sure, honey, I'd love it if your parents could join us tonight". I'm happy to do my part for the deficit. Well that confused me Eric. You mean you are offering to go to Kraven's house the next time his in laws come over. I plan on being there. Link to comment Share on other sites More sharing options...
Kraven Posted November 7, 2014 Share Posted November 7, 2014 Damn, when will BAC be out of law suits? BofA Cuts Third-Quarter Profit $400 Million Amid Currency Probes http://www.bloomberg.com/news/2014-11-06/bofa-cuts-third-quarter-profit-400-million-amid-currency-probes.html It would be nice if the culture at all of the big banks could be honest for a change. It begs the following question: Would any of these banks make any money at all if they were honest? What do you mean by "honest"? If you mean telling the truth, then no. In fairness, sometimes it's just a little white lie. "Yeah, that deal would work really well for you" is the same as "sure, honey, I'd love it if your parents could join us tonight". I'm happy to do my part for the deficit. Well that confused me Eric. You mean you are offering to go to Kraven's house the next time his in laws come over. I plan on being there. Yeah, that will be fun. If one of you guys can pick up some chips and dip on the way that would be great. The kids can all watch Frozen. Nothing like the 125th time to really get things going. Link to comment Share on other sites More sharing options...
fareastwarriors Posted November 7, 2014 Share Posted November 7, 2014 BofA Said to make new Pitch for SEC for Relief http://www.bloomberg.com/news/2014-11-07/bank-of-america-said-to-make-new-pitch-to-sec-for-relief.html Link to comment Share on other sites More sharing options...
CorpRaider Posted November 7, 2014 Share Posted November 7, 2014 Man those JPM warrants are looking cheap, eh? Link to comment Share on other sites More sharing options...
Uccmal Posted November 8, 2014 Share Posted November 8, 2014 Man those JPM warrants are looking cheap, eh? So it seems. 60.50 - 42.40 = 18.10 Trading at $20 - market is charging $2.00 for 4 years of time value. Thanks for pointing this out. Link to comment Share on other sites More sharing options...
ERICOPOLY Posted November 8, 2014 Share Posted November 8, 2014 Man those JPM warrants are looking cheap, eh? So it seems. 60.50 - 42.40 = 18.10 Trading at $20 - market is charging $2.00 for 4 years of time value. Thanks for pointing this out. Silently, the market charges you an additional $1.54 per year of missed dividends. I think it winds up costing something like 5% a year for the leverage. Link to comment Share on other sites More sharing options...
CorpRaider Posted November 8, 2014 Share Posted November 8, 2014 Man those JPM warrants are looking cheap, eh? So it seems. 60.50 - 42.40 = 18.10 Trading at $20 - market is charging $2.00 for 4 years of time value. Thanks for pointing this out. Silently, the market charges you an additional $1.54 per year of missed dividends. I think it winds up costing something like 5% a year for the leverage. Even though it has triggered the dividend strike price adjustment? I was thinking I could just drop the consideration of the dividend in the cost of leverage once the protection clause was triggered, but I guess you have to add in the dividend up to the strike adjustment hurdle because you only get the adjustment for the portion of the dividends above the hurdle (via the adjustment mechanism, as you pointed out to me). So what, $1.52 (4 x .38, i.e. the adjustment hurdle...above that you get the divvy, as if it were reinvested via the two-part adjustment mechanism)? Link to comment Share on other sites More sharing options...
benchmark Posted November 8, 2014 Share Posted November 8, 2014 Silently, the market charges you an additional $1.54 per year of missed dividends. I think it winds up costing something like 5% a year for the leverage. Eric, how did you get to 5% cost? Link to comment Share on other sites More sharing options...
60North Investments Posted November 8, 2014 Share Posted November 8, 2014 Silently, the market charges you an additional $1.54 per year of missed dividends. I think it winds up costing something like 5% a year for the leverage. Eric, how did you get to 5% cost? I'm wondering as well, without dividend adjustments I got 0.5% as the cost of leverage. Calculated it as 4th sq.rt. (strike / (stock price - warrant cost)). I thought that should be the correct way if you then add the dividends (for example in call options can you simply add the dividend yield to the cost?), however much they'd be in this case. Am I missing something? Link to comment Share on other sites More sharing options...
ERICOPOLY Posted November 9, 2014 Share Posted November 9, 2014 Silently, the market charges you an additional $1.54 per year of missed dividends. I think it winds up costing something like 5% a year for the leverage. Eric, how did you get to 5% cost? Al said the strike is $42.40. So that's what you are implicitly borrowing. $1.54 is 3.6% of that. Then $1.90 warrant premium. $42.40-$1.90=$40.50. $40.50 grows to $42.40 in roughly 4 years at approximately 1.1% annually. So that's 4.7% total -- close enough to 5%. Link to comment Share on other sites More sharing options...
Uccmal Posted November 9, 2014 Share Posted November 9, 2014 My statement above about the time value being $2.00 is out to lunch. I think Eric refers to it better as a warrant premium. The warrants should ultimately resolve in 2018 this way: Warrant value Oct. 2018 = stock price (2018) - strike (as adjusted for excess dividends) - warrant cost (today). The warrant break even is roughly $80 in 2018 (with adjustments worked in). $90.00 at the time of expiry is the cross over point with the same amount of initial dollars invested. Anything above $90 and the warrants look sweet. This means the warrants are pricing an annual return of 11% on JPM stock. Based on that the warrants may appear cheap today. It just depends on JPM hitting greater than 11% cagr over the 4 years. If there is a recession sometime beyond two years from now that target wont be reached. I got my JPM warrants much cheaper after the Whale. Link to comment Share on other sites More sharing options...
vinod1 Posted November 9, 2014 Share Posted November 9, 2014 My statement above about the time value being $2.00 is out to lunch. I think Eric refers to it better as a warrant premium. The warrants should ultimately resolve in 2018 this way: Warrant value Oct. 2018 = stock price (2018) - strike (as adjusted for excess dividends) - warrant cost (today). The warrant break even is roughly $80 in 2018 (with adjustments worked in). $90.00 at the time of expiry is the cross over point with the same amount of initial dollars invested. Anything above $90 and the warrants look sweet. This means the warrants are pricing an annual return of 11% on JPM stock. Based on that the warrants may appear cheap today. It just depends on JPM hitting greater than 11% cagr over the 4 years. If there is a recession sometime beyond two years from now that target wont be reached. I got my JPM warrants much cheaper after the Whale. I did not quite understand your calculations. If the stock price is around $66 in October 2018, warrants would have about the same return as stock. So an annual return of about 2% is the hurdle rate the warrants have to overcome. Stock at $61 and warrants at $20 for this calculation. We can confirm this another way as well, using Eric's 4.7% cost of leverage and With a threshold dividend yield of about 2.5%, stock would have to appreciate at 2.2% so that warrant and stock have the same return. This would put break even at around $66 in 2018. So I would say the warrants are quite attractive relative to common. Vinod Link to comment Share on other sites More sharing options...
cemadh Posted November 9, 2014 Share Posted November 9, 2014 I get 7.4% as the borrowing cost. Here is how: Warrant price today is $20.05, strike price is $42.40, so total is $62.45 Stock price today is $61.47. Assume that the business is exactly valued and there is no growth. Each year the $1.54 in dividends would reduce the stock price by exactly $1.54 or $6.16 in four years. So in four years, JPM's stock price would be $57.47 (less by $6.16). You are paying $20.05 today. In four years, you borrow $42.40, buy one share of JPM and sell it in the market for $57.47. At that point you are left with $15.07. Market price is $57.47 and you repaid the $42.40 loan, incurring a 33% loss on your initial $20.05 investment. That works out to 7.4% a year for four years. Link to comment Share on other sites More sharing options...
mankap Posted November 9, 2014 Share Posted November 9, 2014 I do not get the dividend part. The price of warrant will not be reduced by the dividend amount. Let is us say in 4 years, share price is 61.47. What would be the warrant price? I think it will be 61.47-42.40=19.07 Why would the warrant price in 4 years be reduced by dividend amount Dividend is relevant when you compare stock return to warrant return But when you are calculating the borrowing cost for warrant only, we should not take dividend into account Link to comment Share on other sites More sharing options...
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