BAC-WT - Bank of America Warrants

[ERICOPOLY]

Getting Cosby'd here.

 

Thought I was perhaps safe as a man given his track record.  Perhaps it's those short skirts I've been wearing... I hear it's practically an invitation.

 

Let's blame the guy who was recently posting about what a great deal those $13 strike BAC puts were.  A post like that practically invites Mr. Market to have his way with you.

[Rasputin]

I am not sure any of the US trillionaires is ready for a break-up.

 

As far as 2017 and beyond stress test and capital return, JPM is in the worst possible spot and most prime for reduction in capital return.

 

Please look at Tarullo's November 2014 comment on future stress test incorporating GSIB surcharge. 

 

JPM has the largest GSIB surcharge (although they said they have reduced it to 3.5%) with the lowest capital buffer. 

 

For example:

 

min required CET1 ratio of 4.5% plus GSIB surcharge would be:

 

8% for JPM (assuming management is correct about their current surcharge of 3.5%, otherwise 9% as published by the fed) while 2015 CCAR showed that min JPM CET1 ratio was 5.3% during the stressed period.  That's 2.7% or 3.7% capital gap.

 

7.5% for BAC while 2015 CCAR showed that min BAC CET1 ratio was 6.6% during the stressed period.  That's 0.9% capital gap. 

 

8% for C while 2015 CCAR showed that min C CET1 ratio was 6.4%.  That's 1.6% capital gap.

 

6.5% for WFC while 2015 CCAR showed that min WFC CET1 ratio was 5.5%.  That's 1.0% capital gap. 

 

I dumped all my JPM shares and warrants when I read that Tarullo's surcharge comment back in November 2014.

 

Can you point me to the source of the stressed capital numbers (assuming severely adverse here?). I did not tie them out to this: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20150305a1.pdf

 

Maybe I am looking at the wrong page. Please lmk which page to look at.

 

Hi Jay,

 

That link is to DFAST 2015.  DFAST is published about 1 week prior to CCAR and did not take into account capital request.  The way it works is after the fed publishes DFAST, the banks got 1 week to reconsider their capital request. 

 

Here is the link to CCAR 2015

 

http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20150311a1.pdf

[FCharlie]

As a long term owner of BAC, I'll jump in and give three reasons for BAC to be sold.

 

1) The Fed likely won't raise rates anytime soon. If it's this difficult to get a quarter point increase, and if we're already hearing recession warnings, how will rates ever get up enough to help BAC's net interest margin?

 

2) So many other, much smaller companies in the S&P 500 have been "schlonged" as well, sometimes more so. Given that BAC is still a HUGE company, why not swap out into something that has the potential to be a multi-bagger? BAC, considering it's size, can't go up 5 X. Lots of other S&P 500 companies can be multi baggers considering how much smaller they are and how much they've fallen.

 

3) Frustration. I've owned BAC for almost a decade. I bought it at $4,$5, $6, $7, $8 up to $12 and everywhere in between thinking that we would have a stock that would race towards book value once litigation improves, once normalized earnings power returns, etc. Well, it hasn't happened. BAC would have to rise 70% from today's price to even get near book value. They can't even get close to book value even as they are repurchasing billions of dollars of stock every year.  I wonder if it will ever be at book value. This is the same frustration a value investor would have with Loews. It's an eternal value trap and no matter how high book value goes, no matter how many shares they repurchase, no one will ever care again.

 

Thoughts?

[jay21]

Yup - thanks for the link.

[meiroy]

 

I'm planning to buy some more LEAPS again, a look at the 5 year chart can easily show why. However, this is a speculative trade with weighting showing an understanding that it could go to 0.  It seems that there's a high chance for a U.S. recession to start late this year or next year. Can't see it now in the numbers but it will get there if everyone loads up on U.S. demand with currency depreciation.

 

Having said that, I expected BAC's results to be worse this quarter but then again it doesn't seem they reserved enough. What do I know.

 

As far as CCAR it would be a great surprise if "they" will not load it up with something new, some new requirements about the energy sector or who knows what.

 

There are plenty of reasons why BAC should still go down though. I guess this is a bet on oil short squeeze + BAC's TBV + blah blah.

 

[vinod1]

I have gone through all of the big banks 4Q, 2015 earnings reports and conference calls.

 

I think 2015 earnings are very close to normalized earnings levels for the current economic and monetary environment for all of the big banks. In which BAC ends up with $1.3 in EPS and 68% efficiency ratio. Other than $1.2 billion in further expense reductions for LAS, I do not see any other adjustments that are warranted relative to other banks.

 

BAC has been pointing to its wealth and investment management unit as the cause of the higher efficiency ratio.

 

22% of BAC revenues are from wealth and investment management and has ER of 76% = 16.7% of total efficiency ratio

If we assume the other 78% of BAC revenues match the other big banks and have an ER of 60% =46.8% of total efficiency ratio

Giving credit to $1.2 billion in additional cost saves from LAS = 1.5% of total efficiency ratio ($1.2/$82.5)

 

Total adjusted BAC efficiency ratio of 65%.

 

Peers have ER under 60% and are targeting even lower. Even if we go with 60% as comparable, thus even adjusting for this and LAS still leaves a gap of about 3% at a minimum with peers.

 

I think there are two factors that are hindering BAC that are causing it to under earn its peers:

 

1. Their business operations are still not streamlined/integrated enough to cross sell. This is likely hindering revenue. A company just cannot decide to cross sell, it needs IT systems that connect checking account to brokerage account to credit cards, etc. to have a single integrated view of the customer. Then the business processes have to be aligned to take advantage of this data. I have done a bit of scuttlebutt years back and at that time I came to the conclusion that they do not have the systems integrated. I have no idea now but think that it is still the case.

 

2. Moynihan keeps talking about "responsible growth" and "responsible lending". I think they are suffering from Cat on Hot Stove syndrome. They got burned badly in so many ways in the last cycle, they are being over conservative and this is likely hurting growth as they are likely turning off many customers who are likely good credit risks. Looking at their card growth, for example, or mortgages makes me think this is a reasonable conclusion.

 

The above factors I think are depressing revenues much more than peers and likely contributing to the elevated ER's and lower profitability.

 

Vinod

[gary17]

May be Americans need to elect Donald Or Ted to the office !  Go back to Banks gone wild... we'll be at $50 in no time LOL

[CorpRaider]

As a long term owner of BAC, I'll jump in and give three reasons for BAC to be sold.

 

1) The Fed likely won't raise rates anytime soon. If it's this difficult to get a quarter point increase, and if we're already hearing recession warnings, how will rates ever get up enough to help BAC's net interest margin?

 

2) So many other, much smaller companies in the S&P 500 have been "schlonged" as well, sometimes more so. Given that BAC is still a HUGE company, why not swap out into something that has the potential to be a multi-bagger? BAC, considering it's size, can't go up 5 X. Lots of other S&P 500 companies can be multi baggers considering how much smaller they are and how much they've fallen.

 

3) Frustration. I've owned BAC for almost a decade. I bought it at $4,$5, $6, $7, $8 up to $12 and everywhere in between thinking that we would have a stock that would race towards book value once litigation improves, once normalized earnings power returns, etc. Well, it hasn't happened. BAC would have to rise 70% from today's price to even get near book value. They can't even get close to book value even as they are repurchasing billions of dollars of stock every year.  I wonder if it will ever be at book value. This is the same frustration a value investor would have with Loews. It's an eternal value trap and no matter how high book value goes, no matter how many shares they repurchase, no one will ever care again.

 

Thoughts?

 

I have a thought.  F*&K Brian Moynihan.  He went to Brown and Ken Lewis was cool with him for pete's sake.  Quoth the WSJ, "Lewis viewed Moynihan as someone with high potential and a solid work ethic. Lewis did argue for Moynihan in the final board meeting on December 16, preferring him over an outside pick."  Finally, he is illiterate.

[Viking]

I think the core issue right now with US banks is sentiment. The overall market is lower and banks as a sub group are lower even more. The business of the big banks has not changed in the past 4 weeks, especially those with the majority of their business in the US. Fear is ruling the market plain and simple. As a result, everything could still go much lower for no good reason other than people continue to panic and sell indiscriminately.

 

The crazy thing is it could all reverse just as quickly. my guess is if the Fed takes the March rate hike off the table then we could get a 10% move to the upside (just like what happened in August/September of last year).

 

I follow the Calculated Risk blog and he is not expecting a recession in the US this year (he is not even on recession watch). Yes, the oil and gas states like Texas are in recession but when taken as a whole the US economy is on target to deliver 2.5% growth this year. I also expect the Fed to give the market what it wants.

 

I think the key risk right now is not being invested (and missing out on violent up days). All eyes will be on the Fed statement this week.

[meiroy]

 

Viking, if the Fed (which Gundlach just basically called idiots) reverse course and perhaps eventually go to negative interest, where does that leave banks?  Calculated risk is a fantastic blog, I follow it as well, and it is one of the best data based blogs and he is probably right about this year but he cant see far enough into next year. That 2.5% simply can't carry the whole world.

 

 

 

 

 

 

[Viking]

Meiroy, my read is the central issue right now is Fed tightening more quickly and aggressively than the 'markets' want. This has led to US$ appreciation. This has led to Chinese needing to devalue won, oil and commodity prices falling like a brick and emerging market getting stressed.

 

I think the Fed is the key in the short term. The 'markets' are throwing a tantrum. Since 2008 every time the 'markets' have thrown down a tantrum the Fed has backed off and given them what they want.

 

The US economy is chugging along; housing is very close to being completely healed which is amazing. Employment is growing. Chug, chug.

 

China is slowing as it moves from an export driven economy to more of a consumption driven economy; there will be growing pains but it will lumber along.

 

Europe is in better shape than it was a year ago (not much better).

 

When I weave it all together I do not see a world wide recession UNLESS there is a major policy error by the Fed (i.e. they tighten aggressively). Based on how they have acted since 2008 I expect the Fed to back off. This will cause a relief rally in stocks. The US$ will sell off. Oil will rise in price (as will all commodities).

 

Regarding bank valuations, they are already priced today assuming no further Fed tightening and starting to price in large credit losses (balance sheet impairment) caused by US/global recession. The reality is the banks are going to continue to earn lots of money and they will continue to change their business model to get an adequate return on capital. It will be very interesting to see what the Fed allows for capital return when CCAR happens in Q2.

 

I see a coiled spring... Lots of capital already. Decent to good earnings in 2016. Very low share price. Most importantly, I have no idea where bank stocks trade next week or next month. I think they will trade much higher in the next 12-24 months.

[ERICOPOLY]

 

Calculated risk is a fantastic blog, I follow it as well, and it is one of the best data based blogs and he is probably right about this year but he cant see far enough into next year.

 

Well, neither can Mr. Market but that doesn't stop him.

[Rasputin]

I have gone through all of the big banks 4Q, 2015 earnings reports and conference calls.

 

I think 2015 earnings are very close to normalized earnings levels for the current economic and monetary environment for all of the big banks. In which BAC ends up with $1.3 in EPS and 68% efficiency ratio. Other than $1.2 billion in further expense reductions for LAS, I do not see any other adjustments that are warranted relative to other banks.

 

BAC has been pointing to its wealth and investment management unit as the cause of the higher efficiency ratio.

 

22% of BAC revenues are from wealth and investment management and has ER of 76% = 16.7% of total efficiency ratio

If we assume the other 78% of BAC revenues match the other big banks and have an ER of 60% =46.8% of total efficiency ratio

Giving credit to $1.2 billion in additional cost saves from LAS = 1.5% of total efficiency ratio ($1.2/$82.5)

 

Total adjusted BAC efficiency ratio of 65%.

 

Peers have ER under 60% and are targeting even lower. Even if we go with 60% as comparable, thus even adjusting for this and LAS still leaves a gap of about 3% at a minimum with peers.

 

I think there are two factors that are hindering BAC that are causing it to under earn its peers:

 

1. Their business operations are still not streamlined/integrated enough to cross sell. This is likely hindering revenue. A company just cannot decide to cross sell, it needs IT systems that connect checking account to brokerage account to credit cards, etc. to have a single integrated view of the customer. Then the business processes have to be aligned to take advantage of this data. I have done a bit of scuttlebutt years back and at that time I came to the conclusion that they do not have the systems integrated. I have no idea now but think that it is still the case.

 

2. Moynihan keeps talking about "responsible growth" and "responsible lending". I think they are suffering from Cat on Hot Stove syndrome. They got burned badly in so many ways in the last cycle, they are being over conservative and this is likely hurting growth as they are likely turning off many customers who are likely good credit risks. Looking at their card growth, for example, or mortgages makes me think this is a reasonable conclusion.

 

The above factors I think are depressing revenues much more than peers and likely contributing to the elevated ER's and lower profitability.

 

Vinod

 

This is what I would adjust to get to normalized earnings going forward (with the same average earning asset level, the same interest rate environment as 2015, i.e. no fed increase) on pre-tax basis:

 

1. LAS - (assuming no improvement from $500 MM/q) - $1.57 B

2. UK payment protection charge (this will end by 2018 for sure) - $0.3 B

3. Trust redemption charge to NII in Q4 2015 - $0.6 B

4. Severance payment in Q4 2015 (this is the only severance they disclosed, they've been eating severance along the way undisclosed) - $0.13 B

5. End of compensation program put in place at the time of Merrill merger - $0.4 B

6. Lower dividend from the fed due to the highway transport bill - negative $0.2 B (this affect all the trillionaires)

 

Total pre-tax adjustment - $2.8 B or $1.96 B after tax or about $0.18 eps. 

 

There was also $300 million UK tax change charge in Q4 2015 (that's why tax rate was much higher in Q4 2015). 

 

Add it all up, I'd say $1.50 is more or less normalized eps level assuming same avg earning asset and interest rate environment as 2015. 

 

2015 is the first time they feel comfortable enough with their tier 1 leverage ratio to grow their adjusted quarterly average asset.  Since 2012, BAC adjusted quarterly avg asset (AQAA, the denominator in calculating tier 1 leverage ratio) declined from $2.096 T to $2.058 T by Q3 2014.  2015 CCAR showed they have over $20 B in excess capital (using tier 1 leverage ratio metrics).  Then they grew adjusted quarterly avg asset to $2.103 T by Q4 2015.  We will see the full benefit from this in 2016 along with the benefit of 1 - 25 bps rate hike (most AQAA expansion happened in Q3 and Q4 2015).  Also as they continue to whittle down legacy asset, that capital residing in LAS and All Other can be put to work for good loans. 

 

I see BAC as the trillionaire bank (vs WFC or JPM) with the highest likelihood of eps marching upward in 2016 and 2017. 

 

From the comments I read of late, I'm probably the only one here who is very ecstatic with the price decline.  The longer the stock price stays low, the better it is for the warrants (i'd love for the stock price to go under $10 at warrant adjustment date) and future stock price. 

 

I agree with your comment regarding their "we are not touching the stove" attitude.  However, it means their earnings are least susceptible to crisis, even as their asset is under producing at normal time.  It also means that if future management decide to do correspondent lending, they will regain the $1 B per quarter they lost by only originating mortgage to their customers.  Over the next 12 mo if oil stays this low or continues to go lower, we can see which trillionaire bank generates the least charge off from their energy book. 

[wescobrk]

Maybe I'm daft but I don't see why everyone is so bearish on BAC. I know manufacturing is slowing in the US but we have been growing at 2-2.5% since summer of 2009. Sure we have had some quarters since then that were slightly negative on a gdp print, but I just don't see the evidence we will have negative gdp for more than 2 quarters in 2016.

Let's say the fed only raises once this year sure BAC doesn't get the $4 billion in extra earnings but BAC is still trading high single digit p/e. when you compare that to 2% bond yields and very low inflation, I just don't get why everyone is bearish and not excited at buying more at these prices.

I just logged into to my computer so I haven't had a chance to read all the economic news that may have come out.

Is there some huge news today that would justify selling BAC at $13 instead of buying?

[meiroy]

 

Viking, the Chinese are not even really trying to devalue it's just a symptom which they hope but cannot control, and even if they were it wouldn't be because the Fed raised rates by what 0.25 or will raise more. Also, the appreciating USD is definitely not behind the commodities crash.

 

The low oil is causing various SWF to liquidate various assets and this such as funds forced selling and other things causing a feedback loop, i.e. panic of the day. But it can turn into a real issue because there are serious underlying issues. So, the panic might not be justified as a whole but there is some truth to the story. Anyhow, like I said I bought some BAC leaps when it dropped to 13 something and I will buy some more now that it dropped to 12 something, as speculation.

 

 

[Viking]

Meiroy, all of the economic / geopolitical talk is wild guessing on my part. I try and focus on businesses and fundamentals. And right now, given what we know today (not what we fear might happen tomorrow) there are a lot of companies trading at very cheap prices. The big banks look especially cheap.

 

The only thing that gives me pause is there is a small chance that this time could be different and we could be on the brink of a global financial panic. If this happened it would then spill over into the real economy and we would have serious economic issues (2008 book 2). Today, despite all the hand wringing, I think a global financial panic is highly unlikely. But I will continue to monitor.

 

If we get another leg down (5-10% down from current levels) I may copy your strategy of buying leaps. Always good to try new things!  :-)

[giofranchi]

The only thing that gives me pause is there is a small chance that this time could be different and we could be on the brink of a global financial panic. If this happened it would then spill over into the real economy and we would have serious economic issues (2008 book 2). Today, despite all the hand wringing, I think a global financial panic is highly unlikely. But I will continue to monitor.

 

So, BAC has declined 23% in the first month of 2016 apparently without any true reason, it is very cheap… But it could get even cheaper… This is basically what you are saying, isn’t it?

 

Cheers,

 

Gio

 

[vinod1]

I have gone through all of the big banks 4Q, 2015 earnings reports and conference calls.

 

I think 2015 earnings are very close to normalized earnings levels for the current economic and monetary environment for all of the big banks. In which BAC ends up with $1.3 in EPS and 68% efficiency ratio. Other than $1.2 billion in further expense reductions for LAS, I do not see any other adjustments that are warranted relative to other banks.

 

BAC has been pointing to its wealth and investment management unit as the cause of the higher efficiency ratio.

 

22% of BAC revenues are from wealth and investment management and has ER of 76% = 16.7% of total efficiency ratio

If we assume the other 78% of BAC revenues match the other big banks and have an ER of 60% =46.8% of total efficiency ratio

Giving credit to $1.2 billion in additional cost saves from LAS = 1.5% of total efficiency ratio ($1.2/$82.5)

 

Total adjusted BAC efficiency ratio of 65%.

 

Peers have ER under 60% and are targeting even lower. Even if we go with 60% as comparable, thus even adjusting for this and LAS still leaves a gap of about 3% at a minimum with peers.

 

I think there are two factors that are hindering BAC that are causing it to under earn its peers:

 

1. Their business operations are still not streamlined/integrated enough to cross sell. This is likely hindering revenue. A company just cannot decide to cross sell, it needs IT systems that connect checking account to brokerage account to credit cards, etc. to have a single integrated view of the customer. Then the business processes have to be aligned to take advantage of this data. I have done a bit of scuttlebutt years back and at that time I came to the conclusion that they do not have the systems integrated. I have no idea now but think that it is still the case.

 

2. Moynihan keeps talking about "responsible growth" and "responsible lending". I think they are suffering from Cat on Hot Stove syndrome. They got burned badly in so many ways in the last cycle, they are being over conservative and this is likely hurting growth as they are likely turning off many customers who are likely good credit risks. Looking at their card growth, for example, or mortgages makes me think this is a reasonable conclusion.

 

The above factors I think are depressing revenues much more than peers and likely contributing to the elevated ER's and lower profitability.

 

Vinod

 

This is what I would adjust to get to normalized earnings going forward (with the same average earning asset level, the same interest rate environment as 2015, i.e. no fed increase) on pre-tax basis:

 

1. LAS - (assuming no improvement from $500 MM/q) - $1.57 B

2. UK payment protection charge (this will end by 2018 for sure) - $0.3 B

3. Trust redemption charge to NII in Q4 2015 - $0.6 B

4. Severance payment in Q4 2015 (this is the only severance they disclosed, they've been eating severance along the way undisclosed) - $0.13 B

5. End of compensation program put in place at the time of Merrill merger - $0.4 B

6. Lower dividend from the fed due to the highway transport bill - negative $0.2 B (this affect all the trillionaires)

 

Total pre-tax adjustment - $2.8 B or $1.96 B after tax or about $0.18 eps. 

 

There was also $300 million UK tax change charge in Q4 2015 (that's why tax rate was much higher in Q4 2015). 

 

Add it all up, I'd say $1.50 is more or less normalized eps level assuming same avg earning asset and interest rate environment as 2015. 

 

2015 is the first time they feel comfortable enough with their tier 1 leverage ratio to grow their adjusted quarterly average asset.  Since 2012, BAC adjusted quarterly avg asset (AQAA, the denominator in calculating tier 1 leverage ratio) declined from $2.096 T to $2.058 T by Q3 2014.  2015 CCAR showed they have over $20 B in excess capital (using tier 1 leverage ratio metrics).  Then they grew adjusted quarterly avg asset to $2.103 T by Q4 2015.  We will see the full benefit from this in 2016 along with the benefit of 1 - 25 bps rate hike (most AQAA expansion happened in Q3 and Q4 2015).  Also as they continue to whittle down legacy asset, that capital residing in LAS and All Other can be put to work for good loans. 

 

I see BAC as the trillionaire bank (vs WFC or JPM) with the highest likelihood of eps marching upward in 2016 and 2017. 

 

From the comments I read of late, I'm probably the only one here who is very ecstatic with the price decline.  The longer the stock price stays low, the better it is for the warrants (i'd love for the stock price to go under $10 at warrant adjustment date) and future stock price. 

 

I agree with your comment regarding their "we are not touching the stove" attitude.  However, it means their earnings are least susceptible to crisis, even as their asset is under producing at normal time.  It also means that if future management decide to do correspondent lending, they will regain the $1 B per quarter they lost by only originating mortgage to their customers.  Over the next 12 mo if oil stays this low or continues to go lower, we can see which trillionaire bank generates the least charge off from their energy book.

 

I do not disagree at all. Looking out a couple of years, I am just noting that BAC is still only going to earn around 11% ROTCE which would be behind its peers. I am speculating as to why.

 

In looking out to 2017, BAC is the only big bank that I see growing earnings by more than 20%. I have recently bought back BAC and adding to it and other financials.

 

Vinod

[wescobrk]

On the latest call, Moynihan said they should be at 12% ROTCE by year end I believe. I know he said 12% ROTCE. Maybe I am wrong on the time frame. Everyone knows this but he also said they should be able to save another $300 million a quarter in legacy costs by late this year.

Absent a US recession, this thing will trade at 1.1 tbv and very quickly, in my humble opinion.

We will see over the next 90 days.

[Liberty]

Eric, I'm curious to know, were you still fully hedged on your BAC going into the latest correction?

[KCLarkin]

ROTCE:

 

As we said we ran about 9%, it has just been travelling about 9.5% for the year and return to annual common equity. We believe we have a path to get that to 12. Rates get us part of it and hard work and expenses and core revenue growth has been driving to get this in LAS expense drop and we're chipping away that, if you look from '14 to '15 we made some substantial steps and we will continue to drive away. We haven’t put a specific timeframe on it. It’s just a goal to keep driving and we will drive beyond that.

[ERICOPOLY]

Eric, I'm curious to know, were you still fully hedged on your BAC going into the latest correction?

 

At $15 strike.

[Viking]

The only thing that gives me pause is there is a small chance that this time could be different and we could be on the brink of a global financial panic. If this happened it would then spill over into the real economy and we would have serious economic issues (2008 book 2). Today, despite all the hand wringing, I think a global financial panic is highly unlikely. But I will continue to monitor.

 

So, BAC has declined 23% in the first month of 2016 apparently without any true reason, it is very cheap… But it could get even cheaper… This is basically what you are saying, isn’t it?

 

Cheers,

 

Gio

 

Gio, my read is BAC has declined because:

1.) general stock market decline - primary reason; pretty much everything has sold off

2.) concern Fed will not raise rates in 2016 - affecting all banks NIM but BAC a little more given their US footprint and large deposit base

3.) concern about size of oil and gas loans and losses - affecting all banks

4.) flight away from low quality - sell off has hit the lower quality banks harder than the higher quality banks

 

The head scratcher for me is why BAC has sold off about as much as Citi the last few weeks; Citi has much more US$/emerging markets exposure and I don't think they were as transparent about energy/mining exposure. In the current environment BAC's business looks much more stable/predictable than Citi.

 

 

[ERICOPOLY]

The bank is in runoff:

 

http://realmoney.thestreet.com/articles/01/26/2016/bank-america-life-support?puc=yahoo&cm_ven=YAHOO

 

 

[CleverLongboat]

Runoff. Sounds like a good time to change horses no?