BAC-WT - Bank of America Warrants

[ERICOPOLY]

 

There are even some courageous estimates for already this year that make Eric's estimate look pretty conservative  ::).

 

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Bank of America Rally Continues Into 2013

2013-01-02 WSJ.com

 

http://blogs.wsj.com/deals/2013/01/02/bank-of-america-rally-continues-into-new-year/

 

Analyst Andrew Marquardt thinks the capital concerns are “behind” BofA, so investors will start to focus on its earnings power, which the analyst has high hopes for. He sees 2013 EPS at $1.69 a share, 76% above consensus estimates, as measured by Thomson Reuters

 

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I wonder if he really thinks that or if his boss just wanted the company name to get into the headlines?

[berkshiremystery]

 

There are even some courageous estimates for already this year that make Eric's estimate look pretty conservative  ::).

 

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Bank of America Rally Continues Into 2013

2013-01-02 WSJ.com

 

http://blogs.wsj.com/deals/2013/01/02/bank-of-america-rally-continues-into-new-year/

 

Analyst Andrew Marquardt thinks the capital concerns are “behind” BofA, so investors will start to focus on its earnings power, which the analyst has high hopes for. He sees 2013 EPS at $1.69 a share, 76% above consensus estimates, as measured by Thomson Reuters

 

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I wonder if he really thinks that or if his boss just wanted the company name to get into the headlines?

 

With those guesstimates for near term (next 12 months), I personally feel much more secure at the lower band range, thinking that it's better to be roughly right than precisely wrong. There are still so many variables like MBIA or Countrywide that still could make them look a little cloudy near term.

[ERICOPOLY]

 

There are even some courageous estimates for already this year that make Eric's estimate look pretty conservative  ::).

 

-----

 

Bank of America Rally Continues Into 2013

2013-01-02 WSJ.com

 

http://blogs.wsj.com/deals/2013/01/02/bank-of-america-rally-continues-into-new-year/

 

Analyst Andrew Marquardt thinks the capital concerns are “behind” BofA, so investors will start to focus on its earnings power, which the analyst has high hopes for. He sees 2013 EPS at $1.69 a share, 76% above consensus estimates, as measured by Thomson Reuters

 

-----

 

I wonder if he really thinks that or if his boss just wanted the company name to get into the headlines?

 

With those guesstimates for near term (next 12 months), I personally feel much more secure at the lower band range, thinking that it's better to be roughly right than precisely wrong. There are still so many variables like MBIA or Countrywide that still could make them look a little cloudy near term.

 

I'm happy the consensus is for merely a dollar this year and 1.35 or so for next year.  Once you apply the NOLs it's giving us a lot of cash for the price paid.

 

However an end to this pessimism would enable me to free up some cash for things I need to get accomplished -- buying a house and diversifying.  TBV should be $14 by the time the Q1 results are reported -- that would be a good starting point.

 

[vinod1]

BAC to sell $300B in mortgage servicing rights.  Cheers!

 

http://www.reuters.com/article/2013/01/04/bofa-msrs-sale-idUSL1E9C488L20130104?feedType=RSS&feedName=marketsNews&rpc=43

 

mmm… this I don't like much. One of the effects of Basel III.

 

Why dont you like it? I would think these are not their core customers so given their intent to move towards a more relationship based focus, it seems aligned with that direction.

 

Thanks

 

Vinod

[LC]

 

I'm happy the consensus is for merely a dollar this year and 1.35 or so for next year.  Once you apply the NOLs it's giving us a lot of cash for the price paid.

 

However an end to this pessimism would enable me to free up some cash for things I need to get accomplished -- buying a house and diversifying.  TBV should be $14 by the time the Q1 results are reported -- that would be a good starting point.

 

I am thinking along the same lines: exiting a majority of my BAC-WSA position around tangible book and retaining my stake in the commons. Is this your thinking as well or do you think the warrants are still a good investment past TBV?

[PlanMaestro]

Why dont you like it? I would think these are not their core customers so given their intent to move towards a more relationship based focus, it seems aligned with that direction.

 

Thanks

 

Vinod

 

 

Because it's easy money going forward and they are selling those rights at a ridiculous price because of the capital required by Basel III. One company that I used to follow (Newcastle NCT) and one that I'm following (PHH) are making a fantastic business out of buying these rights out of the forced selling of the banks.

 

For more info on this: http://reminiscencesofastockblogger.com/2012/03/23/pounding-the-table-on-mortgage-servicing-rights/

[berkshiremystery]

 

I'm happy the consensus is for merely a dollar this year and 1.35 or so for next year.  Once you apply the NOLs it's giving us a lot of cash for the price paid.

 

However an end to this pessimism would enable me to free up some cash for things I need to get accomplished -- buying a house and diversifying.  TBV should be $14 by the time the Q1 results are reported -- that would be a good starting point.

 

I am thinking along the same lines: exiting a majority of my BAC-WSA position around tangible book and retaining my stake in the commons. Is this your thinking as well or do you think the warrants are still a good investment past TBV?

 

For me personally I will probably keep them at least through most of this decade until all legacy issues are behind and they would run on full steam power again (that would mean at least above $2.00 of  EPS, with 1/3 as DPS paid out and the remaining other 1/3 repurchased). Before that I wouldn't even thinking about reducing them. In between I might rebalance my common, a-warrants and/or LEAPS (roll some LEAPS over to the next cycle). My biggest BAC-LEAPS position is currently the out-of-the- money Jan.2015 @ the $15 strike level. Also currently still keep my-in-the-money Jan.2014 @ the $10 strike level,... on which I gained over 150% in the last year. I plan to roll them over to the 2015's after BAC reaches TBV, and some months before they mature. I will definitely keep my A-warrants for some years, at least almost 1 year before they mature.

[ERICOPOLY]

 

I'm happy the consensus is for merely a dollar this year and 1.35 or so for next year.  Once you apply the NOLs it's giving us a lot of cash for the price paid.

 

However an end to this pessimism would enable me to free up some cash for things I need to get accomplished -- buying a house and diversifying.  TBV should be $14 by the time the Q1 results are reported -- that would be a good starting point.

 

I am thinking along the same lines: exiting a majority of my BAC-WSA position around tangible book and retaining my stake in the commons. Is this your thinking as well or do you think the warrants are still a good investment past TBV?

 

I don't want to get rid of the warrants.  Rather, I was thinking of ditching some LEAPS in my RothIRA.

 

I hold so much BAC it isn't even funny.  At $14 a share I'd still be about 2x notional long in BAC after all on a total net worth basis.  The biggest positions are the warrants and the $7 strike 2015 calls.  The calls turned out to be a dumb idea so far because they've performed in line with the warrants yet carry more maturity risk.

 

 

[Parsad]

 

I'm happy the consensus is for merely a dollar this year and 1.35 or so for next year.  Once you apply the NOLs it's giving us a lot of cash for the price paid.

 

However an end to this pessimism would enable me to free up some cash for things I need to get accomplished -- buying a house and diversifying.  TBV should be $14 by the time the Q1 results are reported -- that would be a good starting point.

 

I am thinking along the same lines: exiting a majority of my BAC-WSA position around tangible book and retaining my stake in the commons. Is this your thinking as well or do you think the warrants are still a good investment past TBV?

 

Once the stock is at tangible book, the warrants will move nearly like equity until the time arbitrage gets to about two years left. 

 

 

I'm happy the consensus is for merely a dollar this year and 1.35 or so for next year.  Once you apply the NOLs it's giving us a lot of cash for the price paid.

 

However an end to this pessimism would enable me to free up some cash for things I need to get accomplished -- buying a house and diversifying.  TBV should be $14 by the time the Q1 results are reported -- that would be a good starting point.

 

I am thinking along the same lines: exiting a majority of my BAC-WSA position around tangible book and retaining my stake in the commons. Is this your thinking as well or do you think the warrants are still a good investment past TBV?

 

I don't want to get rid of the warrants.  Rather, I was thinking of ditching some LEAPS in my RothIRA.

 

I hold so much BAC it isn't even funny.  At $14 a share I'd still be about 2x notional long in BAC after all on a total net worth basis.  The biggest positions are the warrants and the $7 strike 2015 calls.  The calls turned out to be a dumb idea so far because they've performed in line with the warrants yet carry more maturity risk.

 

 

 

Hi Eric,

 

I would do that as the stock goes up.  There's always risk that the stock trades flat for a couple of years if you get some sort of systemic event.  As you stated, the time arbitrage of the LEAPs may make the option premium worthless if some sort of crisis occurred, whereas you would still have another 3-4 years left on the warrants. 

 

Our plan is to keep all of the equity, and thin out the warrants over time as the stock rises.  In a couple of years, the dividend based on our cost will be something like 10-15% annually on the equity if they eventually pay $0.50-$0.75.  Cheers! 

[Uccmal]

BMystery, Parsad, Eric,

 

I am thinking along the same lines as you gents.  I bought 150 2015 x 15 Leaps on or around the end of 2012.  By the 3rd and 4th I was selling a few 2014 Leaps, a 1000 or so warrants, and a few hundred common.  BAC now makes up 1/3 of my total portfolio, well ahead of FFH.  My long  term plan is to turn my 2014s that are left, mostly 10 and 7s into equity next January.  The warrants I will hold onto, and the 2015s for now.  When I sell The Leaps I sell from highest strike to lowest to push taxes as far away as possible. 

 

My total BAc position grew from around 70000 notional to about 90000 through November and December, so I have no issues thinning 10% - 15% out.  In assessing risk management, there is as much chance it will trend sideways, as up, or even down in the short term.  And like Eric, I have other places to store my profits, like in my house (equity.... not gold :-) ).

 

On the flip side I dont see where else I would want to put that large a sum right now, in the markets.

 

Al.

 

 

[Parsad]

That's a good plan Al.  I agree, there aren't many good places to put capital right now.  Cheers!

[vinod1]

 

Because it's easy money going forward and they are selling those rights at a ridiculous price because of the capital required by Basel III. One company that I used to follow (Newcastle NCT) and one that I'm following (PHH) are making a fantastic business out of buying these rights out of the forced selling of the banks.

 

For more info on this: http://reminiscencesofastockblogger.com/2012/03/23/pounding-the-table-on-mortgage-servicing-rights/

 

Thanks!

[berkshiremystery]

Manhattan Home Listings Plunge in Sign Prices to Climb

2013-01-03 Bloomberg.com

 

Manhattan’s inventory of homes for sale plunged to the lowest in at least 12 years, a sign that prices may rise in 2013 if buyer demand intensifies.

 

http://www.bloomberg.com/news/2013-01-03/manhattan-apartment-listings-plunge-in-sign-sale-prices-to-climb.html?cmpid=yhoo

 

 

 

 

[berkshiremystery]

Fed holding up final $10B mortgage deal with largest banks, OCC, WSJ says

Theflyonthewall.com – 9 hours ago

 

The Office of the Comptroller of the Currency, OCC and the largest U.S. banks have reached a $10B settlement that would put an end to a lengthy review of thousands of foreclosure cases, but a final deal is being held up by the Federal Reserve, says the Wall Street Journal. citing people familiar with the matter.

 

http://finance.yahoo.com/news/fed-holding-final-10b-mortgage-214732684.html

 

 

[fareastwarriors]

 

Because it's easy money going forward and they are selling those rights at a ridiculous price because of the capital required by Basel III. One company that I used to follow (Newcastle NCT) and one that I'm following (PHH) are making a fantastic business out of buying these rights out of the forced selling of the banks.

 

For more info on this: http://reminiscencesofastockblogger.com/2012/03/23/pounding-the-table-on-mortgage-servicing-rights/

 

Thanks!

 

PlanMaestro,

 

Are you looking at PHH or NCT? Are you invested in either? What are your thoughts on them?

[ERICOPOLY]

Once the stock is at tangible book, the warrants will move nearly like equity until the time arbitrage gets to about two years left. 

 

Somebody a while back posted that a reasonable set of dividend payments would bring the strike down to about $10 on the warrants and the share conversion to about 1.2x.

 

Given those assumptions, the warrants as priced today are effectively a 2019 call option with $10 strike priced at $4.75.

 

Now, compare that to a 2015 strike call (4 years earlier maturity) priced at $3.60.

 

There is the added price of $1.15 per share premium in the warrants versus the $10 2015 call.  That's about 29 cents per year.

 

A good value (however keeping in mind that the volatility premium is high in the 2015 calls and that can change rapidly as BAC's implied volatility settles down).

[jay21]

That's a good plan Al.  I agree, there aren't many good places to put capital right now.  Cheers!

 

How has this affected your portfolio?  Have you raised more cash as former bargains have become fairly priced and now you can't find reinvestment opportunities?  Are you hedging?  Or are you still nearly fully invested but you don't see as many potential investments as you did before?

 

Would love to hear anyone's thoughts.

[Liberty]

http://www.bbc.co.uk/news/business-20928354

 

Internationals financial regulators have eased rules on minimum quantities of cash and liquid assets all banks must hold, set to take effect in 2015.

 

The agreement, by the body that oversees the Basel Committee on Banking Supervision, is an attempt to make banks less vulnerable to runs.

 

The new "liquidity coverage ratio" will be phased in from 2015 and take full effect four years later.

[MYDemaray]

Settlement to be announced tomorrow, supposedly: http://www.cnbc.com/id/100357141

[Uccmal]

That's a good plan Al.  I agree, there aren't many good places to put capital right now.  Cheers!

 

How has this affected your portfolio?  Have you raised more cash as former bargains have become fairly priced and now you can't find reinvestment opportunities?  Are you hedging?  Or are you still nearly fully invested but you don't see as many potential investments as you did before?

 

Would love to hear anyone's thoughts.

 

So far, not at all.  As existing bargains come to fruition, I will first reduce margin debt, then personal debt (as I said above).  Then I will balance out the asset mix, making me less dependent on US financials.  I plan on leaving enough in dividend payers to cover annual living costs. 

 

Hopefully at some point something else will become a bargain.  If not, I will store it as cash, rather than riding down the quality curve as I have done in the past.  Eventually something else will come along.  In the meantime, I have other interests. 

 

FFH itself is not a bad place to store money, as long as it stays around BV. 

[berkshiremystery]

I remember Mohnish Pabrai or somebody used the term "place holder" to put excess cash into BRK around BV,... just as a substitute for cash that would yield almost nothing in the money market currently. Well,... if everything is equal, BRK or FFH relative to BV,... I still would prefer myself FFH as a "place holder" for excess cash, simply because it's much smaller in size compared with some dinosaur BRK equity base. And I would even disregard the put feature on BRK, because if there would be some major market pull down FFH is also pretty much hedged,... and Prem is some years younger than Buffett.

 

Otherwise I'm pretty much invested in BAC & AIG,... and still keep my old FFH as this other counterweight, with also some minor positions in LUK & BRK. But seriously, I wouldn't rebalance anything now into a place holder. BAC & AIG are still relative cheap compared with what I expect to receive in future look through earning streams with them. At almost/around half BV something,... ~1% of future ROA stream, yields ~10%ROE, thus almost 20% on something at half BV. I even went into margin a little to juice up my equity in the last year.

 

Ha,... I could almost refer to the same words as UCCMAL,... I wait for the existing bargains come to fruitation,... then reduce some margin debt myself and also look for some stable dividend income in the sunset.

[compoundinglife]

I remember Mohnish Pabrai or somebody used the term "place holder" to put excess cash into BRK around BV,... just as a substitute for cash that would yield almost nothing in the money market currently. Well,... if everything is equal, BRK or FFH relative to BV,... I still would prefer myself FFH as a "place holder" for excess cash, simply because it's much smaller in size compared with some dinosaur BRK equity base. And I would even disregard the put feature on BRK, because if there would be some major market pull down FFH is also pretty much hedged,... and Prem is some years younger than Buffett.

 

Otherwise I'm pretty much invested in BAC & AIG,... and still keep my old FFH as this other counterweight, with also some minor positions in LUK & BRK. But seriously, I wouldn't rebalance anything now into a place holder. BAC & AIG are still relative cheap compared with what I expect to receive in future look through earning streams with them. At almost/around half BV something,... ~1% of future ROA stream, yields ~10%ROE, thus almost 20% on something at half BV. I even went into margin a little to juice up my equity in the last year.

 

I would probably prefer to keep my idle cash in BRK.B if only because its more liquid and I feel that I will likely be able to sell it at a smaller discount if the market tanks which is inevitably a time you might want to unload to buy cheaper stuff. No data to back that up but its just a gut feeling thing.

[Guest Dazel]

 

Just for information purposes....

 

Balance sheet assets portion which is goodwill

 

BAC-$70b

C-$25b

WFC-$25b

 

Dazel.

[PlanMaestro]

Banks win more flexible Basel rules

http://www.ft.com/intl/cms/s/0/e4effd30-5820-11e2-b997-00144feab49a.html?ftcamp=published_links%2Frss%2Fworld%2Ffeed%2F%2Fproduct#axzz2HFhEIUPU

 

 

US banks call for easing of Basel III

 

jeez that didn't take long.  ???

[Parsad]

Foreclosure deal imminent.  May be announced Monday.  Cheers!

 

http://www.nytimes.com/2013/01/07/business/lenders-said-to-be-near-deal-of-foreclosure-claims.html?partner=yahoofinance&_r=0