given2invest Posted November 23, 2011 Share Posted November 23, 2011 BAC is below the level of March 12, 2009 when it closed at $5.80. I find that interesting. More interesting is the TRUPS are $20+ when back on that date they were $5-$8. Link to comment Share on other sites More sharing options...
Baoxiaodao Posted November 23, 2011 Share Posted November 23, 2011 Regarding Munger and BAC, I only have the frame of reference from listening to him before Buffett made his "sweetheart deal," and what he said was unkind period. It should be duly noted that they're a competitor to their favorite bank holding, Wells Fargo, therefore the reason behind what is factually at stake in the world of finance, should be measured very carefully by those jumping on "naked equity." Buffett does not own "naked equity," and has arranged for sweeteners along the way. Since when are Buffett and Munger, Capitalists at their core, not looking to KILL their competitors as opposed to offering them LIFELINES? You figure that out! Munger would sue a business owner in heartbeat for wearing his "COLORS" and trying to compete next door to him! This is pure speculation, not unlike AIG, with respect to "too big to fail," and belief systems that the Fraudulent Reserve would bail them out come hell or high water. Indeed, that's why Buffett front ran the preffered deal for the minds of the investment public to absorb rather than hearing it was their "PRINTING MACHINE" with "INTEREST" doing it for SCOUNDRELS again! I have no idea if your comments relating to Munger a second time, was before or after Buffett's investment, with an original assumption that they came after. Carl, You are completely wrong on this. Buffett bailed out Munich Re, as well as Lloyds. Prem just bailed out Bank of Ireland. They have no problem bailing out their competitors, if it makes money for them and they restore the business. Buffett is a capitalist no doubt, but his intent is to make money, not lose money. He invested in Bank of America because he likes Moynihan...otherwise, don't you think he would have put money with Vikram Pandit if he was just interested in making a buck! He likes Moynihan's nose to the grindstone attitude. You also made another comment in another post regarding past experience with mortgage insurers. We bought mortgage insurers as you know, but we bought them through options and a basket of them in MPIC Fund I, LP. We do not trade options in MPIC Canadian LP and we unfortunately bought a basket of equity. We expected huge losses in shareholder equity when we bought them, but the magnitude that occurred was our worst case scenario. I do not have that same feeling or theories about BAC, and the margin of safety is actually significantly larger than when we bought the mortgage insurers back in 2008...double actually! Capitalization is significantly better, they are squeezing the size of their book, and they are running off poor business and writing new business that is far better...not unlike what Fairfax had to do. The earning power and reach of the business is terrific, and they've got a CEO who eats his own cooking and is a tireless worker. In this case, I'm extremely comfortable buying equity and buying one single company. I think the market reaction is incredibly wrong in BAC's case. Like with the mortgage insurers, we are buying to a level we are comfortable with, where our other holdings will offset any possible loss if they were to occur in the worst of circumstances. You calculate your odds of success versus your odds of failure, and you mitigate as much of that risk as possible. That's all you can do. Cheers! Parsad, I admit I have no knowledge about BAC. But calling a person completely wrong is kind of overreacting. No one can be 100% right about things. Link to comment Share on other sites More sharing options...
given2invest Posted November 23, 2011 Share Posted November 23, 2011 Any business with leverage and that requires trust to survive has a chance of becoming insolvent and the equity going to 0, regardless of it's book value. Coke will never have this problem unless people start dying en masse drinking a Diet Coke. Link to comment Share on other sites More sharing options...
Parsad Posted November 23, 2011 Share Posted November 23, 2011 Parsad, I admit I have no knowledge about BAC. But calling a person completely wrong is kind of overreacting. No one can be 100% right about things. The comment was made in reference to a statement that Buffett would not dare help his competition and is only interested in "sweetheart" deals. I think he's 100% wrong on this as history showed. Cheers! Link to comment Share on other sites More sharing options...
ragnarisapirate Posted November 23, 2011 Share Posted November 23, 2011 Is anybody here bothered that ~85% of respondents on here think that BAC is cheap? I have long been worried about a group becoming a crowd. especially if that group generally thinks like I do... Link to comment Share on other sites More sharing options...
Parsad Posted November 23, 2011 Share Posted November 23, 2011 Is anybody here bothered that ~85% of respondents on here think that BAC is cheap? I have long been worried about a group becoming a crowd. especially if that group generally thinks like I do... I would say that you would have roughly the same proportion saying that FFH and BRK are cheap too. Is that group think or is it because something simply becomes broadly recognized as cheap? Market prices eventually reflect intrinsic value, only once the broad consensus of investors deem it to be cheap and move from higher priced assets to the lower priced assets. A few months ago, you would have been hard-pressed to get ten people to think that BAC was cheap at the same price. Cheers! Link to comment Share on other sites More sharing options...
txlaw Posted November 23, 2011 Share Posted November 23, 2011 Is anybody here bothered that ~85% of respondents on here think that BAC is cheap? I have long been worried about a group becoming a crowd. especially if that group generally thinks like I do... The key is that 85% of the respondents think BAC is cheap. Talk about selection bias. It seems to me that some of the board members who post quite often are going a bit stir crazy as a result of this highly volatile, range-bound market. Lots of bile being spewed out there at other members as well -- it seems like almost everyone is a target these days. We should probably all chill out (including me). Otherwise, this board just might jump the shark. Link to comment Share on other sites More sharing options...
benchmark Posted November 23, 2011 Share Posted November 23, 2011 BAC is below the level of March 12, 2009 when it closed at $5.80. I find that interesting. More interesting is the TRUPS are $20+ when back on that date they were $5-$8. Where do you find more information about these preferred? Link to comment Share on other sites More sharing options...
Guest ValueCarl Posted November 23, 2011 Share Posted November 23, 2011 Actually, I left it up to the board to figure it out, and you seem content with your explanation about why he did so. My Munger reference to "colors" and mimic like behavior relates to Sees suing Russell's much earlier, when Russell's was arriving in their neighborhoods waving similar store colors. It's not impossible that BAC's more global reach versus Wells' more domestic, contributed to their decision making processes. And I say, "their," because Munger received a phone call! In this regard, we now have Buffett believing in "Global Capitalism" beyond just believing in "America" as he states for the crowd receiving U.S. sound bites. Certainly, his foray into Europe as of late, confirms such suspicions not to mention his global bets including Asian car battery companies, and Israeli technology companies servicing the auto space. I believe the globe needs to become a more friendly place, so I am not opposed to such thinking, but he does not seem courageous enough or bold enough to say so to American audiences. More than likely, however, he is intent on saving a housing market in desperate need of resuscitation for many of his own businesses revolve around the space. Giving a life line to BAC, serves such a purpose at least for the time being. Having him do it, versus the Federal Reserve, a private banking cartel in the United States of America, was WINDOW DRESSING, otherwise. Killing a competitor for these type of capitalists, guys who have fun meditating upon the guilt factors of men during Valentine's Day or other holidays, and raising candy prices while some men acquiesce to their emotions, is perfectly acceptable and logical to them. <Since when are Buffett and Munger, Capitalists at their core, not looking to KILL their competitors as opposed to offering them LIFELINES? You figure that out! Munger would sue his next door neighbor in heartbeat for wearing his same "COLORS" on his home during the holidays, and trying to mimic him!> Link to comment Share on other sites More sharing options...
SharperDingaan Posted November 23, 2011 Share Posted November 23, 2011 The case for the defence: BAC is 1 of 4 unique oligarchs in the US. If someone else wanted to be BAC they would effectively have to buy the company (established relationships, market share, etc). And even if BAC had to massively dilute to weather the coming storm, the buyer has nowhere else to go. The only question is how material an interim direct stake the fed might take – as if it is good enough for AIG, GM, etc. it is certainly good enough for BAC. There is nothing wrong with threatened &/or state intervention. WEB used it with GS. HW has used it with the Bank of Ireland. Today - both GS & the Bank of Ireland are doing very well. Most would argue that for the price paid - both investors have either done very well, or may reasonably expect to. Venture Capitalists have long practiced J curve investing, & currently a long-term investment in BAC is really no different. However - unlike a start-up, BAC has long established relationships, market share, etc. One hell of a moat, that actually strengthens when they start a buyback at some distant future point. It is highly likely that over the long-term, BAC is a solid investment. But until Europe resolves ... there is probably no rush - which is what the absence of insider buying is saying. SD Link to comment Share on other sites More sharing options...
biaggio Posted November 23, 2011 Share Posted November 23, 2011 Have really enjoyed thread. Thanks to all. I think BAC is a blackbox but so are a lot of other companies we invest in like FFH where we trust management to reserve conservatively. I can t believe how low price has gotten. Do not own any shares but I am getting tempted by the price. I am concerned that the CEO has not doubled down at these prices. He only owns ~ 434000 shares (according to gurufocus.com). Surely he has a couple million hanging around. If I was him I would seriously do a Steve Job and forego my salary + take all my pay in shares. Berkowitz's theory (and all posters here) that they will grow out of these problem loans/bad assets makes sense. Seeing that we need a banking system I think the government powers will do all they can to make sure that these huge banks will survive somehow, someway. They have survived the last couple years-it has to be getting better from here. "Don t fight the Fed" i.e. I don t think the U.S. government wants to go thru more bailouts . Link to comment Share on other sites More sharing options...
TorontoRaptorsFan Posted November 23, 2011 Share Posted November 23, 2011 Really good article in the latest edition of Fortune magazine about Robert Kelly almost becoming CEO of BAC before the job was given to Moynihan. http://money.cnn.com/2011/11/18/news/companies/robert_kelly_bank_new_york.fortune/index.htm I think Moynihan has done a commendable job since he's become the CEO. He just needs time to right the Battleship. Link to comment Share on other sites More sharing options...
Rabbitisrich Posted November 24, 2011 Share Posted November 24, 2011 BAC is below the level of March 12, 2009 when it closed at $5.80. I find that interesting. More interesting is the TRUPS are $20+ when back on that date they were $5-$8. That probably reflects the incentive for banks to issue Tier 1 common qualifying liabilities to repurchase the TRUPS by 2013, which are phased out in Basel III capital weightings, rather than confidence in BAC's long-term future. Any business with leverage and that requires trust to survive has a chance of becoming insolvent and the equity going to 0, regardless of it's book value. Coke will never have this problem unless people start dying en masse drinking a Diet Coke. Definitely true, but this is where the big banks benefit from some of the oligarchic dynamics described by SharperDingaan. Fair or not, surely not, depositors have priced in a government backstop and sent their deposits to the very banks they disrespect. Is anybody here bothered that ~85% of respondents on here think that BAC is cheap? I have long been worried about a group becoming a crowd. especially if that group generally thinks like I do... I would say that you would have roughly the same proportion saying that FFH and BRK are cheap too. Is that group think or is it because something simply becomes broadly recognized as cheap? Market prices eventually reflect intrinsic value, only once the broad consensus of investors deem it to be cheap and move from higher priced assets to the lower priced assets. A few months ago, you would have been hard-pressed to get ten people to think that BAC was cheap at the same price. Cheers! It would be interesting to see if the board is weighting BAC as heavily as it weighted popular securities in the past. I have a fair amount of exposure to BAC, but not as much as I had put into FRFHF, SNS, SD, WFC, or some of the other ideas that gained traction here. Link to comment Share on other sites More sharing options...
Uccmal Posted November 24, 2011 Share Posted November 24, 2011 Is anybody here bothered that ~85% of respondents on here think that BAC is cheap? I have long been worried about a group becoming a crowd. especially if that group generally thinks like I do... Ragnar, I don't think that is what is happening here. If you got a full response from all board members the numbers would be quite different. Those not interested in BAC probably aren't responding. Also, the market is against us and they make up the vast majority. I don't think I personally am overly affected by the boards opinion. I have never held Lvlt, SD, and could never understand the appeal of either. Some of my best ideas come fro here, some come from elsewhere. Some come as a result of grilling members here on why they might hold something so trashy: I.e. I have been converted. I also recognize that members will generally sell prior to announcing their selling much like FFH dumping SD, without telling other shareholders. I think the board recognizes in BAC a rare opportunity where a company has mostly turned and the stock is not reflecting it yet. Link to comment Share on other sites More sharing options...
Guest Hester Posted November 24, 2011 Share Posted November 24, 2011 I think the ultimate success of stocks like BAC is less effected by market sentiment and more effected by how well the business performs over the next few years. So i wouldn't worry about "who or how many think BAC is a buy" or not. Stocks like KO or JNJ are more effected by market sentiment, the businesses are steady and don't change much. They are the ones to agonize over market sentiment. This is less a reversion to the mean play and more a "is there a future mean?" That is the question. With that being said BAC does seem to have a very favorable risk/reward which is why I have a small long position. Link to comment Share on other sites More sharing options...
Guest misterstockwell Posted November 24, 2011 Share Posted November 24, 2011 Nobody worries about anti big bank sentiment? The common man hates them. The government hates them. The rest of world hates them. I feel far more comfortable in a small bank stock. Small community banks are the benefactors of the sentiment against big banks. I am invested in a small bank hedge fund. I also own a ton of FFBCW. FFBC has so much excess capital that they are paying out 100% of earnings as dividends, which triggers the TARP warrant provision that drops the strike price. No worries about lawsuits. No worries about derivative exposure to some far away land. Simple. Link to comment Share on other sites More sharing options...
alertmeipp Posted November 24, 2011 Share Posted November 24, 2011 I really depends on what's priced in... there are political risk, big bank sentiment, housing risk, debt risk, lawsuit risk, ML execution risk? compare to other, big bank sentiment isn't top in the list. Their deposit is still growing... Link to comment Share on other sites More sharing options...
ERICOPOLY Posted November 24, 2011 Share Posted November 24, 2011 BAC is below the level of March 12, 2009 when it closed at $5.80. I find that interesting. More interesting is the TRUPS are $20+ when back on that date they were $5-$8. Where do you find more information about these preferred? Yeah, sometimes when bonds get cheap people say that the bond market knows something that the stock market doesn't. Are we now going to hear someone claim that the stock market knows something that the bond market doesn't? Link to comment Share on other sites More sharing options...
Uccmal Posted November 24, 2011 Share Posted November 24, 2011 The fixed income market is pricing in a minor risk premium with BAC. Tells a very different store then the equity markets. Link to comment Share on other sites More sharing options...
kmukul Posted November 24, 2011 Share Posted November 24, 2011 Why not look at other banks like citi which is also really cheap Link to comment Share on other sites More sharing options...
given2invest Posted November 24, 2011 Share Posted November 24, 2011 The fixed income market is pricing in a minor risk premium with BAC. Tells a very different store then the equity markets. Yes, and I think this is saying after Lehman and 2009 TARP preferred/equity infusions, no bondholder in JPM, C, BAC, WFC is ever going to have to take a haircut. Equity on the other hand... Link to comment Share on other sites More sharing options...
ERICOPOLY Posted November 24, 2011 Share Posted November 24, 2011 The fixed income market is pricing in a minor risk premium with BAC. Tells a very different store then the equity markets. Yes, and I think this is saying after Lehman and 2009 TARP preferred/equity infusions, no bondholder in JPM, C, BAC, WFC is ever going to have to take a haircut. Equity on the other hand... TARP was 2008. Your argument should have been applicable in March 2009. The fixed income market however didn't remember TARP at that point? Link to comment Share on other sites More sharing options...
Uccmal Posted November 25, 2011 Share Posted November 25, 2011 The fixed income market is pricing in a minor risk premium with BAC. Tells a very different store then the equity markets. Yes, and I think this is saying after Lehman and 2009 TARP preferred/equity infusions, no bondholder in JPM, C, BAC, WFC is ever going to have to take a haircut. Equity on the other hand... Well, fwiw, I think the equity markets are wrong about wfc, jpm, and BAC now. Someone mentioned lawsuits earlier. I think you will find that nearly all large public companies continuously have lawsuits against them. To a point it is part of business and modern complexity. I mean Apple and Samsung are suing one another constantly, and Samsung is a major supplier to Apple. Now, if that isn't sick, I don't know what is. The size of lawsuits against BAC may seem greater but they have the ability to drag them out and mitigate them in various ways. Also, many of them were filed this fall, just at the end of the statute of limitations for the mortgage claims. Link to comment Share on other sites More sharing options...
ubuy2wron Posted November 25, 2011 Share Posted November 25, 2011 The fixed income market is pricing in a minor risk premium with BAC. Tells a very different store then the equity markets. Yes, and I think this is saying after Lehman and 2009 TARP preferred/equity infusions, no bondholder in JPM, C, BAC, WFC is ever going to have to take a haircut. Equity on the other hand... Well, fwiw, I think the equity markets are wrong about wfc, jpm, and BAC now. Someone mentioned lawsuits earlier. I think you will find that nearly all large public companies continuously have lawsuits against them. To a point it is part of business and modern complexity. I mean Apple and Samsung are suing one another constantly, and Samsung is a major supplier to Apple. Now, if that isn't sick, I don't know what is. The size of lawsuits against BAC may seem greater but they have the ability to drag them out and mitigate them in various ways. Also, many of them were filed this fall, just at the end of the statute of limitations for the mortgage claims. I think the unknowns for BAC are the lawsuits and Euro counter party risk. It appears that the other major players in the CDS mkt in North America have at least as much exposure to counter party risk but perhaps have had a better track record on handling the risk. The litigation risk is not IMO definable with any certainty I have invested because I assume that putting Country wide into bk was always a hole card for BAC if the litigation risks ever get out of control. The operations of the bank are getting stronger and they are the only major bank which has been raising capital which I think is a good thing if we do enter a period of high capital mkts instability. If BAC weakens materially next week I will be adding. I was lucky enough to purchase some BAC in 2009 under 4.00 the firesales this time will be in Europe in October the entire mkt cap of the Euro banking industry was below the mkt cap of the Cdn banking industry Euro banks have to raise 300- 500 billion the rights offerings which is how they raise capital are particularly brutal to exisiting shareholders. Link to comment Share on other sites More sharing options...
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