BAC-WT - Bank of America Warrants

[gary17]

my $0.02 -- it's not about what make sense.. it's about what the majority wants...  remember, this is a voting machine.... =)

 

Damn you Moynihan!

 

I don't give a rat's arse about signalling to stupid Wall Street - create value for shareholders - i.e. buy back your undervalued stock you muppet!

 

C.

 

+1

 

Ah, the eternal argument......

 

I am happy the dividend is approved.... Finally.  The faster the stock goes up the more I make.  I dont give a rat's ass about buybacks.  And, do you think the average endowment or pension fund cares about buybacks?  They want the dividend and they are the ones that ultimately buy my undervalued stock. 

 

One more puzzle piece to finally free the stock to trade on its earnings.

 

This line of thinking is exactly why I started this thread. It just doesn't make any sense.

[ni-co]

my $0.02 -- it's not about what make sense.. it's about what the majority wants...  remember, this is a voting machine.... =)

 

You can't imagine how often I have to say this to myself, too.  :D

[finetrader]

At least this is the 1st positive news in the last 4-5 months

[Sunrider]

So Uccmal - after what we saw a few years ago do you think they mental model of your buyers (the ones you cite) is as you describe it? Do people really still believe that a dividend is a stable commitment? Arguably these people aren't smart but they're not totally dumb either - buying a stock below book value is a very quantifiable investment, if you believe book value. The dividend is (a) taxed and (b) variable (whereas the buy back once it's done is done and cannot be reversed ... i.e. management can't do something silly with that money any more). Next year or so Moynihan is going to buy back stock and join a long line of executives who buy their stock when it's expensive (and NOT when it's cheap). It's his job to make the case for the shareholders to the regulator as well as publicly ... and that case is clear: It is preferable to buy back undervalued stock, rather than paying a dividend.

 

It makes sense to me.  They over-estimated their capital levels by $4Bn, so, they reduced their share buyback from $4Bn to $0. 

 

The good news is, 2013-2014, they've dedicate maybe $2.6Bn to dividends, $5-$6Bn to buying back shares and $5.5Bn to buying preferreds.  And the 5c dividend gives them plenty of room to increase dividends slightly while bumping buybacks substantially ... if they can actually make some real profits. 

 

 

 

 

I don't think Moynihan/BAC management has much say in the capital return. Most analysts expected a reduced buyback, maybe $2-3 billion, but apparently BAC didn't even ask for one. I bet the Fed told them not to "ask" for one. Just like how their previous buyback could not all be executed immediately when the stock price was substantially below tangible book and could only be executed at the end of the year.

 

I imagine that to be the case.  This whole  game playing is designed to give the illusion that the banks are being regulated.

[Sunrider]

I doubt this is what the majority wants (shareholders or market) - sadly we will never know what the stock price appreciation would've been if instead of a dividend they'd come out with a tender for a few billion of their own stock.

 

my $0.02 -- it's not about what make sense.. it's about what the majority wants...  remember, this is a voting machine.... =)

 

You can't imagine how often I have to say this to myself, too.  :D

[fareastwarriors]

I'll take it.

[Uccmal]

So Uccmal - after what we saw a few years ago do you think they mental model of your buyers (the ones you cite) is as you describe it? Do people really still believe that a dividend is a stable commitment? Arguably these people aren't smart but they're not totally dumb either - buying a stock below book value is a very quantifiable investment, if you believe book value. The dividend is (a) taxed and (b) variable (whereas the buy back once it's done is done and cannot be reversed ... i.e. management can't do something silly with that money any more). Next year or so Moynihan is going to buy back stock and join a long line of executives who buy their stock when it's expensive (and NOT when it's cheap). It's his job to make the case for the shareholders to the regulator as well as publicly ... and that case is clear: It is preferable to buy back undervalued stock, rather than paying a dividend.

 

It makes sense to me.  They over-estimated their capital levels by $4Bn, so, they reduced their share buyback from $4Bn to $0. 

 

The good news is, 2013-2014, they've dedicate maybe $2.6Bn to dividends, $5-$6Bn to buying back shares and $5.5Bn to buying preferreds.  And the 5c dividend gives them plenty of room to increase dividends slightly while bumping buybacks substantially ... if they can actually make some real profits. 

 

 

 

 

I don't think Moynihan/BAC management has much say in the capital return. Most analysts expected a reduced buyback, maybe $2-3 billion, but apparently BAC didn't even ask for one. I bet the Fed told them not to "ask" for one. Just like how their previous buyback could not all be executed immediately when the stock price was substantially below tangible book and could only be executed at the end of the year.

 

I imagine that to be the case.  This whole  game playing is designed to give the illusion that the banks are being regulated.

 

The requirements for many pension funds, and endowments is that a common stock pay a dividend.  Look it up.  They want income and stability.  2009/2009 was an anomaly.  Its not me who cares.  I dont even hold BAC common - only Leaps.

 

I doubt this is what the majority wants (shareholders or market) - sadly we will never know what the stock price appreciation would've been if instead of a dividend they'd come out with a tender for a few billion of their own stock.

 

my $0.02 -- it's not about what make sense.. it's about what the majority wants...  remember, this is a voting machine.... =)

 

You can't imagine how often I have to say this to myself, too.  :D

 

Dont fool yourself.  The majority of the shareholders want a dividend that is stable and growing.  Truthfully, they are not that intelligent  as a group.  They have been schooled their whole lives that a rising dividend is best.  Again, it is not me who cares.  I only hold Leaps but I play the psychology game very well and that is what value investing is about. 

 

[CorpRaider]

Aren't the warrants beneficiaries either way?  ;D

[Sunrider]

So if you hold LEAPS only you should be really peeved - you bought them when the old dividend was priced in and you get no benefit from the new dividend beyond the increase in share price from the signalling benefit you impute (which may or may not be as much by the time of expiration as you would've gotten from a buyback). If you're a warrant holder of course it'd be different and that is the one consolation for me today. Warrant strike price should now adjust by 0.04/price at dividend date every quarter. Not trying to pick a fight with you personally - and totally agree that this is how people have been conditioned - however (a) the stock was paying a dividend of 0.01 so that argument re pension funds etc. doesn't hold water (b) I think most of those investors (despite generally being dumb/herd driven by job imperatives) aren't THAT dumb .... they're smart enough to understand that buying something for less than it's worth without paying tax is better than being given that same amount of cash but having to pay tax on it (and leaving a good chunk with management to mess around with until the time they pay the dividend).

 

my (now) $0.05

 

C.

 

 

So Uccmal - after what we saw a few years ago do you think they mental model of your buyers (the ones you cite) is as you describe it? Do people really still believe that a dividend is a stable commitment? Arguably these people aren't smart but they're not totally dumb either - buying a stock below book value is a very quantifiable investment, if you believe book value. The dividend is (a) taxed and (b) variable (whereas the buy back once it's done is done and cannot be reversed ... i.e. management can't do something silly with that money any more). Next year or so Moynihan is going to buy back stock and join a long line of executives who buy their stock when it's expensive (and NOT when it's cheap). It's his job to make the case for the shareholders to the regulator as well as publicly ... and that case is clear: It is preferable to buy back undervalued stock, rather than paying a dividend.

 

It makes sense to me.  They over-estimated their capital levels by $4Bn, so, they reduced their share buyback from $4Bn to $0. 

 

The good news is, 2013-2014, they've dedicate maybe $2.6Bn to dividends, $5-$6Bn to buying back shares and $5.5Bn to buying preferreds.  And the 5c dividend gives them plenty of room to increase dividends slightly while bumping buybacks substantially ... if they can actually make some real profits. 

 

 

 

 

I don't think Moynihan/BAC management has much say in the capital return. Most analysts expected a reduced buyback, maybe $2-3 billion, but apparently BAC didn't even ask for one. I bet the Fed told them not to "ask" for one. Just like how their previous buyback could not all be executed immediately when the stock price was substantially below tangible book and could only be executed at the end of the year.

 

I imagine that to be the case.  This whole  game playing is designed to give the illusion that the banks are being regulated.

 

The requirements for many pension funds, and endowments is that a common stock pay a dividend.  Look it up.  They want income and stability.  2009/2009 was an anomaly.  Its not me who cares.  I dont even hold BAC common - only Leaps.

 

I doubt this is what the majority wants (shareholders or market) - sadly we will never know what the stock price appreciation would've been if instead of a dividend they'd come out with a tender for a few billion of their own stock.

 

my $0.02 -- it's not about what make sense.. it's about what the majority wants...  remember, this is a voting machine.... =)

 

You can't imagine how often I have to say this to myself, too.  :D

 

Dont fool yourself.  The majority of the shareholders want a dividend that is stable and growing.  Truthfully, they are not that intelligent  as a group.  They have been schooled their whole lives that a rising dividend is best.  Again, it is not me who cares.  I only hold Leaps but I play the psychology game very well and that is what value investing is about.

[Grenville]

the institutional imperative is very strong…it's hard for them to bend and why value investors have opportunities.

 

I prefer the dividend.

[xazp]

WSJ says BAC is close to a settlement of $16-$17Bn dollars. 

http://online.wsj.com/articles/bank-of-america-near-16-billion-to-17-billion-settlement-1407355290?mod=mktw&cb=logged0.014240134736340448

 

BAC management just rolls over every time. 

[Yours Truly]

So if this DOJ case closes, that should be it for any outstanding blockbuster (> 1+ billion) legal cases?

[MYDemaray]

shares basically unched on the news...guess most saw this coming? We'll see tomorrow.

[alertmeipp]

So they just pay the asking price. Kind of expected but still a big number.

By the time all these lawsuits stop, we might be in another recession.

 

Too bad they are not buying back, i don't really need 5 cents dividend for my shares.

 

[xazp]

The most expensive part will be the cash component, which was rumored around $9Bn.  I think they've probably reserved $6Bn already, and maybe there's $3-$4Bn coming with this settlement.  These expensive settlements are messing up 2015's capital return, unfortunately. 

 

 

So they just pay the asking price. Kind of expected but still a big number.

By the time all these lawsuits stop, we might be in another recession.

 

Too bad they are not buying back, i don't really need 5 cents dividend for my shares.

[Guest wellmont]

WSJ says BAC is close to a settlement of $16-$17Bn dollars. 

http://online.wsj.com/articles/bank-of-america-near-16-billion-to-17-billion-settlement-1407355290?mod=mktw&cb=logged0.014240134736340448

 

BAC management just rolls over every time.

you have to when your regulator is extorting you. now we know why they didn't ask for a buyback...

[Mephistopheles]

So doj wanted $17, they offered $13. So they negotiated it to $16-17.

 

Nice.

[xazp]

DOJ is not BAC's regulator.  That's why they have to sue (or threaten to sue) BAC in order to get any recourse.

 

WSJ says BAC is close to a settlement of $16-$17Bn dollars. 

http://online.wsj.com/articles/bank-of-america-near-16-billion-to-17-billion-settlement-1407355290?mod=mktw&cb=logged0.014240134736340448

 

BAC management just rolls over every time.

you have to when your regulator is extorting you. it will be much better for the stock if you get this behind you. it's not worth the fight to save a few billion. buy the stock when they print the loss next quarter. now we know why they didn't ask for a buyback...

[buylowersellhigh]

Behind BofA Deal: A Phone Call and a Possible Suit -- Market Talk

DOW JONES & COMPANY, INC. 3:32 PM ET 8/6/2014

 

16:32 EDT - One push to the tentative $16B-$17B settlement between Bank of America(BAC) and the US government over mortgage-related claims was a phone call between BAC CEO Brian Moynihan and US AG Eric Holder, people familiar with the matter said. For weeks, the bank refused to offer more than $13B, including cash and consumer relief, while Justice Department was seeking $17B. On the call, Mr. Holder told Mr. Moynihan that if the bank didn't bring its offer closer to the government's demand, Justice Department lawyers could file a lawsuit the next day that had been prepared by NJ U.S. Attorney Paul Fishman, these people said. (geoffrey.rogow@wsj.com)

 

(END) Dow Jones Newswires 08-06-141632ET Copyright © 2014 Dow Jones & Company, Inc.

[ERICOPOLY]

So if this DOJ case closes, that should be it for any outstanding blockbuster (> 1+ billion) legal cases?

 

These is still something more related to foreclosures that they can be sued for.  It was mentioned in the filings under legal risks or somethings like that.

 

 

[ERICOPOLY]

I'm relieved.  I want this thing settled.  I'm happy to wait for 6 weeks to earn the difference (500m per week in pre-tax earnings).

 

Just give them $17b if it will make them go away.

 

I want the stock to climb without an endless drumbeat of FIRREA in the news.

[rkbabang]

DOJ is not BAC's regulator.  That's why they have to sue (or threaten to sue) BAC in order to get any recourse.

 

Just another part of the same crime family.

[Uccmal]

So if you hold LEAPS only you should be really peeved - you bought them when the old dividend was priced in and you get no benefit from the new dividend beyond the increase in share price from the signalling benefit you impute (which may or may not be as much by the time of expiration as you would've gotten from a buyback). If you're a warrant holder of course it'd be different and that is the one consolation for me today. Warrant strike price should now adjust by 0.04/price at dividend date every quarter. Not trying to pick a fight with you personally - and totally agree that this is how people have been conditioned - however (a) the stock was paying a dividend of 0.01 so that argument re pension funds etc. doesn't hold water (b) I think most of those investors (despite generally being dumb/herd driven by job imperatives) aren't THAT dumb .... they're smart enough to understand that buying something for less than it's worth without paying tax is better than being given that same amount of cash but having to pay tax on it (and leaving a good chunk with management to mess around with until the time they pay the dividend).

 

my (now) $0.05

 

C.

 

 

Well, I can always convert my Leaps, even at a loss to catch the dividend, if the .20 c is cut from the price of the stock. 

 

The institutional shareholders of concern have written mandates to hold a certain amount of income producing stocks.  Often, they cant buy something that pays a dividend below a certain threshold.  They are excluded by mandate from what we are doing which is buy low/ sell higher.  They operate by checklists the same as you or I do.  Except theirs are different and to some extent regulated, especially the public ones. 

 

I.e.) Must pay a dividend of 1% of stock price (just an example)

Can only buy companies with an increasing dividend.

 

I would be really surprised if very many of the huge teacher's pension plans can buy stocks based on criteria associated with a company buying back its own stock.  But I can assure you that there are dividend threshold, and dividend growth requirements in there. 

 

Finally, I am not convinced that management in most companies or institutions are very smart at all.  I know it sounds Mungerish, but never underestimate the stupidity of your fellow man. 

 

FWIW, I dont think BM is stupid... I think he had little choice in the matter.  I am sure he would be quite thrilled to buy back 20'B stock this year, but he knows his role. 

 

[ERICOPOLY]

To take revenge on Eric Holder, I propose BofA runs a "Thank you Eric Holder!" commercial campaign.  In that commercial, highlight all the abuses Countrywide did and how all the executives at BofA offer their warm thanks for being able to settle it all with other-people's-money and to not be in prison.

 

It will completely ruin his political career.

[gary17]

If we all pitch in $20 I wonder if there's enough to run a half page "thank you note" in the Washington post lol..

Oh well. Life moves on.