BAC-WT - Bank of America Warrants

[ERICOPOLY]

Last summer it was hard to purchase the A warrants without moving the price.  Lately, if I put in a large order it fills easily.  There is much more eagerness to fill my orders.

 

Back in March the A warrants reached $5.50 on a $10.10 stock price.  So that's like 5% higher stock price than yesterday, yet a 48% higher warrant price.

 

Same here, my A warrant purchase was filled easily, and I don't understand the price action -- I just get as much as I can :)

 

Friday I tried swapping some of my calls for A warrants and it was hard to get them in volume without moving the price.

 

Today the volume is really low in the warrants and the price is holding.

 

Maybe the big seller is gone now???

[mhdousa]

My work retirement account (through Vanguard) has added a brokerage option (meaning I can theoretically buy any stock or mutual fund Vanguard offers).  However, when I tried to put in an order for BAC and the warrants (and for AIG and the AIG warrants), I'm getting:

"your retirement plan rules do not allow participants to purchase this security".

 

Can anyone think of a workaround for this, other than buying one of Berkowitz's funds which have a large amount in BAC and AIG?

 

 

[txlaw]

http://www.thestreet.com/story/11756844/1/bank-of-america-sees-40b-normalized-profits.html?puc=yahoo&cm_ven=YAHOO

 

BAC management sees 40$B of normalized earnings power...

 

I think that's about where most on this board that hold BAC figured they would be.  But keep it even at $25B, which most analysts think they can achieve within two years once the cost-cutting is done and more legacy issues are settled, and what do you get?  About $2.30 per share...ten times multiple...$23 stock! 

 

I personally think they can do better than that...conservatively...much closer to the $40B as Eric states.  But analysts won't get it till they've done it, just like the rest of the industry is wondering how the heck did they get to 9% Tier 1 Common Capital in a year and have to hold less capital than JPM.  The culture is changing under Moynihan, and BAC is going back to it's pure banking roots.  Cheers!

 

What, you're kidding me?  I thought the consensus on the board is that it is too late to buy BAC and that there is no longer a MOS under $10.

[hyten1]

folks

 

i am worry about when bac will achieve normailze earning, you can get the bet right but the timing will kill you

 

especially with the A warrants and call options, what is everyones thought on this?

 

Its been 4 years since this entire thing started, how many people thought we would of been done (in terms reaching normalize earnings) by now?

 

how long do you guys think it'll take from now?

 

this is what worries me about the call options as well as warrants

 

hy

[vinod1]

My work retirement account (through Vanguard) has added a brokerage option (meaning I can theoretically buy any stock or mutual fund Vanguard offers).  However, when I tried to put in an order for BAC and the warrants (and for AIG and the AIG warrants), I'm getting:

"your retirement plan rules do not allow participants to purchase this security".

 

Can anyone think of a workaround for this, other than buying one of Berkowitz's funds which have a large amount in BAC and AIG?

 

One of our retirement accounts has a similar restriction. Upon talking with the plan provider I found that it only allows for purchasing mutual funds. I ended up buying Berkowitz funds in that account. I do not think there is any workaround for this.

 

In another retirement account, I can invest upto 20% of my initial investment in the brokerage account and it allows my to buy stocks and warrants also but not options. Apparently all these restrictions are designed to limit liability to employer in case of losses.

 

Vinod

[mhdousa]

My work retirement account (through Vanguard) has added a brokerage option (meaning I can theoretically buy any stock or mutual fund Vanguard offers).  However, when I tried to put in an order for BAC and the warrants (and for AIG and the AIG warrants), I'm getting:

"your retirement plan rules do not allow participants to purchase this security".

 

Can anyone think of a workaround for this, other than buying one of Berkowitz's funds which have a large amount in BAC and AIG?

 

One of our retirement accounts has a similar restriction. Upon talking with the plan provider I found that it only allows for purchasing mutual funds. I ended up buying Berkowitz funds in that account. I do not think there is any workaround for this.

 

In another retirement account, I can invest upto 20% of my initial investment in the brokerage account and it allows my to buy stocks and warrants also but not options. Apparently all these restrictions are designed to limit liability to employer in case of losses.

 

Vinod

 

Thanks, Vinod.  Which of his funds did you go with?

[PlanMaestro]

http://www.thestreet.com/story/11756844/1/bank-of-america-sees-40b-normalized-profits.html?puc=yahoo&cm_ven=YAHOO

 

BAC management sees 40$B of normalized earnings power...

 

That normalized number is pre-tax pre-provision and seems conservative.

 

Bank of America is a 1.3-1.4% ROA bank, equivalent to a growing $30 billion after-tax, $50 billion PTPP, or around $3 EPS. That would support a growing $1 dividend in a normal environment. We may also enjoy some above normalized quarters thanks to reserves releases and tax benefits.

 

 

[ERICOPOLY]

folks

 

i am worry about when bac will achieve normailze earning, you can get the bet right but the timing will kill you

 

especially with the A warrants and call options, what is everyones thought on this?

 

Its been 4 years since this entire thing started, how many people thought we would of been done (in terms reaching normalize earnings) by now?

 

how long do you guys think it'll take from now?

 

this is what worries me about the call options as well as warrants

 

hy

 

They'll get at least 2/3 of the way from here to normalized by mid-2015.  I say "at least" because while the expense reduction (2/3) is under their control, the yield curve is not (the other 1/3).

 

The warrants take you well beyond that, and if the stock doesn't move then the buybacks will lead to astounding per-share earnings by 2019.  So the stock will be higher, and the strike on the warrants will be low.

[Parsad]

folks

 

i am worry about when bac will achieve normailze earning, you can get the bet right but the timing will kill you

 

especially with the A warrants and call options, what is everyones thought on this?

 

Its been 4 years since this entire thing started, how many people thought we would of been done (in terms reaching normalize earnings) by now?

 

how long do you guys think it'll take from now?

 

this is what worries me about the call options as well as warrants

 

hy

 

Hy, how long have you been buying BAC?!  I didn't buy any warrants until June 2011, and I didn't buy the bulk of my BAC equity and warrants until Fall of 2011 and Spring of 2012, respectively.  This thread didn't start until Spring of 2011.  So really, it's only been a year and a half, while Moynihan has only been in charge for two years. 

 

Call options are a bit more risky because of the time arbitrage, but I think the bulk of the work at BAC is done, with the earnings showing up through mid-2013 and into 2014.  Legacy issues should all be settled by around the same time.  You should see clean earnings from the end of 2014 on.  The A warrants do not have much risk.  The B warrants have substantial time arbitrage risk relative to the exercise price.  Cheers!

[PlanMaestro]

Chris "hundreds of billions of dollars" Whalen is starting to panic.

 

http://www.housingwire.com/news/bacs-unresolved-reps-and-warrants-exposure-doubles-9-months?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+housingwire%2FuOVI+%28HousingWire%29

 

Christopher Whalen with Tangent Capital Partners has been following the putback risks and RMBS litigation plaguing BofA for a while. Whalen believes BofA's reserves should potentially be double what they are today.

 

"These guys have been pretending this problem doesn't exist for a long time," he said. "I am not suggesting it will cost $350 billion." But, he added, "the totality of the claims they are facing justify a $50 to $75 billion reserve."

 

Whalen, who has called for BofA's restructuring, cites the uncertainty around the cost of resolving putback claims and RMBS litigation as just one of the factors prompting his calls for major changes within BofA.

 

 

[Uccmal]

folks

 

i am worry about when bac will achieve normailze earning, you can get the bet right but the timing will kill you

 

especially with the A warrants and call options, what is everyones thought on this?

 

Its been 4 years since this entire thing started, how many people thought we would of been done (in terms reaching normalize earnings) by now?

 

how long do you guys think it'll take from now?

 

this is what worries me about the call options as well as warrants

 

hy

 

Nobody knows right.  But, my guess is that we reach any normal state long before the warrants expire.  It will happen very fast once the Legacy issues drop away.  Suddenly, Joe Mutual Fund will need to own BAC. 

 

40 B strikes me as optimistic right now, 20 definitely not.

 

I was buying at $5/ share up to 9.20 or so, common, options, and warrants.  My return to date, unrealized is roughly 20%, most of which has happened this fall.  Like most things in life we cant pinpoint timelines.  I did buy some warrants early on when BAC was higher than today. 

 

All we know is that BAC earning 20 B, which seems easily doable, will likely occur, and the COMMON, will at least double based on that.  The leverage on the warrants and options is just gravy. 

[ERICOPOLY]

Chris "hundreds of billions of dollars" Whalen is starting to panic.

 

http://www.housingwire.com/news/bacs-unresolved-reps-and-warrants-exposure-doubles-9-months?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+housingwire%2FuOVI+%28HousingWire%29

 

Christopher Whalen with Tangent Capital Partners has been following the putback risks and RMBS litigation plaguing BofA for a while. Whalen believes BofA's reserves should potentially be double what they are today.

 

"These guys have been pretending this problem doesn't exist for a long time," he said. "I am not suggesting it will cost $350 billion." But, he added, "the totality of the claims they are facing justify a $50 to $75 billion reserve."

 

Whalen, who has called for BofA's restructuring, cites the uncertainty around the cost of resolving putback claims and RMBS litigation as just one of the factors prompting his calls for major changes within BofA.

 

That's pretty funny considering most of the increase this year was GSE-related, and after talking with the GSEs (with whom they've held settlement talks) they come away with a worst case $1b additional liability.

 

 

[Parsad]

Chris "hundreds of billions of dollars" Whalen is starting to panic.

 

http://www.housingwire.com/news/bacs-unresolved-reps-and-warrants-exposure-doubles-9-months?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+housingwire%2FuOVI+%28HousingWire%29

 

Christopher Whalen with Tangent Capital Partners has been following the putback risks and RMBS litigation plaguing BofA for a while. Whalen believes BofA's reserves should potentially be double what they are today.

 

"These guys have been pretending this problem doesn't exist for a long time," he said. "I am not suggesting it will cost $350 billion." But, he added, "the totality of the claims they are facing justify a $50 to $75 billion reserve."

 

Whalen, who has called for BofA's restructuring, cites the uncertainty around the cost of resolving putback claims and RMBS litigation as just one of the factors prompting his calls for major changes within BofA.

 

Pardon my french, but this guy is a retard!  Google Christopher Whalen and Bank of America and you get tons of articles from 2010 and 2011 where he says they are bankrupt and doomed.  Check this one out:

 

http://dailybail.com/home/chris-whalen-bank-bailouts-20-is-coming-all-major-us-banks-w.html

 

He's one of these analysts who got one big call right (think Chanos) and then sits on his ass and loves to listen to his own voice and name recognized.  Cheers!

[Parsad]

Another great interview by Whalen.  California will default in 2012 and most house sales will be foreclosures!

 

http://www.moneynews.com/StreetTalk/christopher-Whalen-Foreclosure-Peak/2010/12/06/id/379123

 

Dead on the money...er sorry, dead money!  ;D  Cheers!

 

[Parsad]

Even Roubini took him to task on CNBC.

 

http://www.youtube.com/watch?v=znTHTUvzN8k

 

By the way, it's worth watching this interview from 2010, because then you realize exactly how little all of these guys know.  I think members on this board provide better insight on investments and economics.  It's just these guys are well-known (for whatever reason) and get the press, but they don't know any more than anyone else.  Cheers!

[PlanMaestro]

Pardon my french, but this guy is a retard!

 

He is one for the value records, like those guys that Berkowitz mentioned in OID 1992.

[hyten1]

parsad, i only started buying around late last year (it hasn't been long since i started buying but that is not what i am concern about)

 

i guess for me i worry about the timing that is all, the call 2015 option is more risky (2 years time) vs A warrants (7 years time).

for me i am looking at the jan 2015 $7 call as well as A warrants, both cost around $3.6 or so per share (approx) but the difference in time and strike price.

 

hy

 

 

folks

 

i am worry about when bac will achieve normailze earning, you can get the bet right but the timing will kill you

 

especially with the A warrants and call options, what is everyones thought on this?

 

Its been 4 years since this entire thing started, how many people thought we would of been done (in terms reaching normalize earnings) by now?

 

how long do you guys think it'll take from now?

 

this is what worries me about the call options as well as warrants

 

hy

 

Hy, how long have you been buying BAC?!  I didn't buy any warrants until June 2011, and I didn't buy the bulk of my BAC equity and warrants until Fall of 2011 and Spring of 2012, respectively.  This thread didn't start until Spring of 2011.  So really, it's only been a year and a half, while Moynihan has only been in charge for two years. 

 

Call options are a bit more risky because of the time arbitrage, but I think the bulk of the work at BAC is done, with the earnings showing up through mid-2013 and into 2014.  Legacy issues should all be settled by around the same time.  You should see clean earnings from the end of 2014 on.  The A warrants do not have much risk.  The B warrants have substantial time arbitrage risk relative to the exercise price.  Cheers!

[Parsad]

Pardon my french, but this guy is a retard!

 

He is one for the value records, like those guys that Berkowitz mentioned in OID 1992.

 

http://www.ft.com/cms/s/0/6719fa80-c291-11e0-9ede-00144feabdc0.html#axzz2BNoYN0pe

 

Christopher Whalen, analyst at Institutional Risk Analytics, said no matter what Mr Moynihan was able to offer in terms of reassurance, the bank was destined for a government-ordered restructuring. “I think the markets will force it,” he said. “I think there’s so much risk clustered around BofA and, to a much lesser extent, Wells [Fargo] that both of them have severe problems.”

 

The only two banks I've ever owned in my life or in the funds, were bought around the time of the above comment and afterwards...WFC and BAC!  Buffett bought the preferreds shortly after.  Which two banks have surprised investors the most in a positive manner since his comments...WFC and BAC.  ;D 

 

Sorry, a little correction in the above comment.  We owned Washington Mutual briefly in 2008...what a mistake that was!  Cheers!

[txlaw]

Pardon my french, but this guy is a retard!

 

He is one for the value records, like those guys that Berkowitz mentioned in OID 1992.

 

I guess we should never underestimate how great of a business it is to be a prognosticator or pundit, regardless of how sound one's analysis is.

[Uccmal]

Pardon my french, but this guy is a retard!

 

He is one for the value records, like those guys that Berkowitz mentioned in OID 1992.

 

I guess we should never underestimate how great of a business it is to be a prognosticator or pundit, regardless of how sound one's analysis is.

 

Wrong or right... you gotta stay in the press.  That idiot Kevin O'Leary makes more bad calls but has two of his own TV shows.  He started a group of mutual funds and got half a billion initially, and the peformance is dismal.  I recall the day in 2009 when he said that GE had dropped below 10 per share and was toast as a result.  I bought calls the same day. 

[Uccmal]

The A's are rising in price a little bit every day.  With your guys reports on them being scarce  this is interesting.

[vinod1]

My work retirement account (through Vanguard) has added a brokerage option (meaning I can theoretically buy any stock or mutual fund Vanguard offers).  However, when I tried to put in an order for BAC and the warrants (and for AIG and the AIG warrants), I'm getting:

"your retirement plan rules do not allow participants to purchase this security".

 

Can anyone think of a workaround for this, other than buying one of Berkowitz's funds which have a large amount in BAC and AIG?

 

I split it between FAIRX and FAAFX. I like FAAFX in that it has a smaller asset base and he can take big positions in his best ideas even if they are small cap but I like the fact that 50% of FAIRX is in AIG/BAC.

 

Vinod

One of our retirement accounts has a similar restriction. Upon talking with the plan provider I found that it only allows for purchasing mutual funds. I ended up buying Berkowitz funds in that account. I do not think there is any workaround for this.

 

In another retirement account, I can invest upto 20% of my initial investment in the brokerage account and it allows my to buy stocks and warrants also but not options. Apparently all these restrictions are designed to limit liability to employer in case of losses.

 

Vinod

 

Thanks, Vinod.  Which of his funds did you go with?

[ERICOPOLY]

The A's are rising in price a little bit every day.  With your guys reports on them being scarce  this is interesting.

 

There was a day last week when the volume was 2,000,000.  Today, barely more than 10% of that with a rising price on a day when the stock was down quite a bit.

 

Nearly two weeks ago when I was getting filled at 3.65 I was buying as much as 100,000 warrants at a time without moving the price, getting filled in 10 seconds!

[Parsad]

The A's are rising in price a little bit every day.  With your guys reports on them being scarce  this is interesting.

 

There was a day last week when the volume was 2,000,000.  Today, barely more than 10% of that with a rising price on a day when the stock was down quite a bit.

 

Nearly two weeks ago when I was getting filled at 3.65 I was buying as much as 100,000 warrants at a time without moving the price, getting filled in 10 seconds!

 

It may have been Paulsen selling them to you because of redemptions!  ;D  You may be catching up to him after all.  Cheers!

[Rabbitisrich]

 

Wrong or right... you gotta stay in the press.  That idiot Kevin O'Leary makes more bad calls but has two of his own TV shows.  He started a group of mutual funds and got half a billion initially, and the peformance is dismal.  I recall the day in 2009 when he said that GE had dropped below 10 per share and was toast as a result.  I bought calls the same day.

 

Not long ago, some jerk went on CNBC and said to avoid Berkshire Hathaway because Charlie Munger was the only successor (this is NOT an oversimplication of his argument). Not surprisingly, his 10 year record hugged the S & P. Unfortunately, it was a 10 year record. I think that he even managed a little over $2 B with a large cap equity focus. The business of investing is not the same as investing.