Parsad

Francis Chou's 2011 Semi-Annual Report is out. Always a few interesting comments and ideas. Cheers! http://www.choufunds.com/pdf/SemiAR11.pdf

Don't go by the year-end numbers as they had significant losses due to settlements in Q2. Although with the capital they've raised in Q3, they should be close or above 9% Tier 1 Capital, which is more than adequate relative to other large U.S. banks. Cheers!

I wasn't even paying attention to what happened at TRE until I read Libor's post right now. Damn Cwericb, I hope you took some profits off the table like I mentioned. I still don't like Block though. ;D Cheers!

I've had to remove the old message board theme which wasn't working as well with Simple Machines 2.0 and some of the modules that have been added on. Unfortunately, the new look is the one that is now the default theme. Sorry! Cheers!

I was being facetious Rranjan. Trying to get a rise out of them. Cheers!

By the way, I think the first one was probably intiated by some of the hedge funds that are going to trial against Fairfax later this year. They need some negative publicity to present to the judge/jury, as much of the negative press for the last two years has been against the hedgies...in particular the ones being sued by Fairfax! Cheers!

It's just another class-action that jumped in with the other class-actions. I can't remember who the first one was a few months ago, and then after that they all jumped in. This last one apparently was a little slower than the others, and decided to show up to the party fashionably late. They are scumbucket, parasitic lawyers that want in at the trough...if there is one! Cheers!

Manually into Quickbooks using information from monthly brokerage account statements, and then inputed into Excel. Cheers!

We still had snow on the local ski mountains until the second week of July! Normally there are water restrictions in effect this year...none so far, and not likely at all, as the reservoir is 2/3rds full. Cheers!

The problem with being a property-casualty insurance investor is that horrible events generally translate into a hard market in insurance premiums. While I hope that everyone that is affected by Hurricane Irene get through it quickly and as painlessly as possible, the reality is that this is a pretty big storm whose landfall path is going to be quite wide. Take a look at the satellite image below. This is going to be a hell of a storm in those coastal states! Four of which have already called state of emergencies and mass evacuations. Cheers! http://www.weatheroffice.gc.ca/data/satellite/goes_eusa_visible_100.jpg

That feature is there for those that want to use it. Personally, I would not use it (even not as admin), simply because I get a kick out of rolling in the mud with Munger and Harry, as they periodically decide to participate when events are briefly in their favor. Call me a masochist, but I enjoy it and love to hear them bat around my ideas or ideologies. It gives my beliefs and analysis more credence...especially when I'm regularly proven right against them! ;D Cheers!

By the way, if there weren't so many other bargains around, I'd be buying LVLT. Did anyone see that Amazon AWS has selected Level 3 for its Direct Connect service? (Boom-- I just LVLT'd this thread!) Nice! Our resident LVLT expert, ValueCarl, is away right now helping his daughter settle into her new dorm. But he'll be back soon enough to torment the RSS Feed folk. Cheers!

Here is Becky Quick's comments on her call with Buffett this morning. ...I ASKED HIM WHY NOW AND HE SAID HE THINKS IT'S BETTER THAN ANYTHING ELSE THAT I CAN THINK OF AT THE TIME. HE ALSO SAID THAT IT'S VERY LIKELY THAT OVER TEN YEARS, THAT THEY DO EXERCISE AND OWN ALL OF THOSE WARRANTS, THAT THEY TURN THEM INTO SHARES. AT THAT POINT, IF SHARES OUTSTANDING EXISTS AS THEY DO TODAY, THEY'D OWN SIX AND A FRACTION OF PERCENT OF THE COMPANY. SO IT'S A MASSIVE INVESTMENT THAT HE'S THINKING OVER THE NEXT DECADE HE'D BE MAKING IN BANK OF AMERICA. I HEARD YOU ALL EARLIER POINT OUT THAT THIS IS SOMETHING HE'S DOING WHILE INVESTING IN WELLS FARGO. HE POINTED OUT HE THINKS WELLS AND BANK OF AMERICA HAVE TWO BEST DEPOSIT FRANCHISES IN THE UNITED STATES. HE DOES SAY THAT BANK OF AMERICA HAS SIGNIFICANT PROBLEMS IN THEIR PAST, BUT THEY'RE WORKING THEIR WAY THROUGH THEM. HE ADMITS THIS IS NOT SOMETHING THAT'S GOING TO BE RESOLVED IN A WEEK, MONTH, VERY LIKELY EVEN IN A YEAR, BUT THIS IS REMINISCENT OF SOME THINGS HE'S DONE IN THE PAST. YOU LOOK WHEN HE'S MADE MAJOR, MAJOR INVESTMENTS, IT WAS WHEN AMERICAN EXPRESS BACK IN THE 1960s. IT WAS WHEN AMERICAN EXPRESS HAD BIG PROBLEMS, TOO. IT WAS THE SALAD OIL SCANDAL... ...BUT I ASKED HIM WHY NOW AND HE SAID IT'S BECAUSE THE STOCK HAS COME DOWN SO MUCH RECENTLY, BANK OF AMERICA HAS GONE DOWN A LOT RECENTLY. AND HE SAYS HE THINKS BANK OF AMERICA IS CERTAIN TO BE AROUND OVER THE LONG-TERM. HE ALSO SAYS BY THE WAY, THAT THIS IS A VOTE OF CONFIDENCE. NOT ONLY IN BANK OF AMERICA, BUT ALSO IN THE COUNTRY. AND LISTEN TO THIS, HE SAYS ALL THOSE PEOPLE WHO THINK THE WORLD IS GOING TO END. I THINK THEY'RE WRONG... ...HE SAYS THIS IS LIKE GOING BACK TO HIS YOUTH WHERE NOT ONLY AMERICAN EXPRESS, WHERE HE GOT IN BACK IN THE 1960s, BUT THEN WITH GEICO BACK IN 1970. GEICO WAS IN TROUBLE, TOO. I BELIEVE BECAUSE OF SOME ACCOUNTING ISSUES. HE BOUGHT INTO THAT COMPANY, TOO AND BOUGHT A MAJOR STAKE AT THAT POINT, BUT IT'S THE IDEA OF BUYING INTO THE COMPANIES THAT LOOK LIKE THEY ARE IN TROUBLE, TAKING SOME MAJOR BETS AND BUYING BIG INTO THEM. THIS IS REMINISCENT OF SOME OF THE DEALS HE'S DONE IN THE PAST... http://www.cnbc.com/id/44207362 Cheers!

Sanjeev - can you explain what you mean here? How would the warrants be less risky than common in the case of large liability/loan losses? Do you just mean that in terms of risk/reward, the warrants passed your criteria while common did not when you started buying? I just meant that the outlay of capital was significantly lower buying the warrants rather than common equity. The bank warrants also have the benefit of being adjusted if any dividends are paid out, unlike most other warrants. We just felt more comfortable buying through the warrants at the time. We were much more comfortable with WFC and bought the common equity. Cheers!

I actually like my patience. If I chose, I could now invest in BAC at a minimum 30-40% lower price than you or your hero Berkowitz, with full knowledge that I now have Buffett at my back. Let's just say, I like my position. So much for those platitudes! Well that would be the kicker Munger. We're waiting for you to invest, so that we know we made the right decision. I hope you buy common! It's funny that you assume our price in BAC is that much higher. Apparently, none of us average down when we have an idea we like. Good luck to you!

Nothing about today gave you any greater insight into these risks. Correct Munger. Our platitudes were enough. Cheers!

I agree that you said all those things Sanjeev. I mostly believe them myself which is why I'm long BAC. I just don't see how this morning's news confirms any of those points to the degree of warranting an "I told you so". I chalk that up to waking up at 6:15am and then posting on here after hearing the news on Bloomberg. My apologies for the outburst. The news confirmed our sentiment on the direction of the business and the degree of irrationality around the company. How can any reasonable person not believe that Buffett investing in BAC, be it through preferreds, common, notes, warrants, or even bridge loans, not be a positive thing for the company? He mitigated his own risk, but that does not change his sentiment around the business. Cheers!

Really, what did you tell him? That BAC was going to raise capital? That a 20% pop in the stock price means it's a good investment? Or is it just because Warren buys that it must be a good deal? We told him that there was value in the business. That management seemed to be doing the correct things. That there was significant over-reaction by the market and nonsensical innuendo. That the business had enough cash flow to cover it's legal liabilities going forward and enough non-core assets available for sale to bolster Tier 1 Capital. That many of the analyst reports were making far-fetched guesses without actually examining the company's loan portfolio. I guess you are correct. We didn't tell him anything. Cheers!

And I repeat another simple, common sense fact... If you are running a fully capitalized bank with nothing but massive free cash flow on the horizon, the CEO of BAC tells Warren Buffett "thanks for your interest, we share your opinion but you can capitalize on the upside by buying common stock just like everyone else." -- ESPECIALLY SINCE YOU TOLD THE WORLD YOU DIDN"T NEED CAPITAL JUST TWO WEEKS AGO. You don't give WEB a sweetheart deal (FREE equity exposure and 400 bps over the 10 year) because he is a nice guy with a good reputation. Are you kidding me? Sure you do. And just like people are going to be doing the same thing with Prem in the future. You aren't getting an injection of capital from just anyone...it's Warren Buffett! How many people on this board were buying BYD stock because Buffett and Munger invested? That business has no competitive advantage, but people invested tons of money because they did. How many people heard of LiLu before Munger talked about him? What happened to Goldman and GE when Buffett invested, compared to everyone else at the time? It's a shot of confidence that no amount of presentations by the CEO could muster. It means that you have one of the world's greatest investors and businessmen telling the world that I like the management of this company. It's huge, because it now gives them time to execute their gameplan. Just like Jeff Amelt needed. Is GE in better shape today than when the capital injection was made? You bet! Why? Because they got breathing room. BAC just took a deep breath, as Munger exhaled with a sigh! ;D Cheers!

What the stock does in the short-term is meaningless. Cheers!

Very true and I'm not saying BAC is not a good investment here. The only thing I've been debating is whether BAC should have done this and whether WEB doing this really says a whole lot about BAC common. I agree. We never bought BAC common, because of the risk from legal liability and loan losses. We invested through the warrants. But I'm also at the point, and this was before Buffett injected the capital, that the risk to common equity is significantly less than people are assuming. It's alot higher than WFC or JPM, but not any higher than C. Buffett bought preferreds in BAC, but not C. That does indicate something...that he has more faith in Moynihan than the market does. Cheers!

Preferred DOES NOT EQUAL common. In 2008/2009, if you owned BAC or C preferreds, and held, you didn't lose a penny. If you owned the common, you'd be down HUGE due to the massive dilution that came. Did Buffett invest in the preferreds of BAC or C in 2008/2009? No, correct. What preferreds did he invest in back then? GE & GS, correct. What was the loss to equity holders in both of those? Cheers!

I agree with all of this. Time will tell whether it worked or not, but I agree. I disagree that they should have done this deal but I agree with your reasoning as to why they did it though I think it's fairly obvious. The best way to view this through Buffett's previous similar deals in 2008/2009. GE Capital was overly leveraged and had large loan losses. Goldman was being thrown in with Lehman and Bear Stearns. Both cases there was a lack of confidence by investors and institutions. Innuendo was abound regarding how both were in trouble. Buffett's investment was one where he was protected on the downside, and had significant upside. It was a lose little, win big proposition. But that gave both of those companies time to work through their problems and separate themselves from the herd. That's all this deal does...it gives BAC breathing room to continue to move forward on the things they have planned. Anybody could have injected that capital, but because it was from Buffett, it has a different connotation altogether. It means we believe that management is doing the right things and we think we can make money here. Cheers!

I don't care about the stock price. My whole argument, and I think many of the other investors who bought, was simply that there was value there and things were changing for the better. That's all. What the stock price does in the short-term we have no clue. But we felt that the long-term fundamentals of the business were changing and eventually the stock price would recognize that...be it 3, 5 or 10 years from now. Cheers!

And he also helps to improve a tiny bit the capital ratios. Anyone really thinks that $5B ($10B w/warrants) was a rescue? Not me. Confidence is a huge thing to financial institutions. If your depositers, shareholders and employees don't feel confident in the company and management, you could have very painful events occurring that have nothing to do with the actual finances of the business. This occurs simply because they are leveraged institutions and any dollar that leaves the vault has a ten fold effect on the company. Having Buffett inject capital means hardly anything in terms of their balance sheet and cash flows. What it tells the markets and the general public is that Bank of America is ok. You can ignore the flood of recent negative articles and analyst reports; you don't have to panic and pull your money; and you will be perfectly fine doing business with or working for them. That is enormously signficant! Now it allows the company to continue to improve their circumstances and focus on restoring the business. It changes nothing on the timeline it will take to make improvements and increase shareholder value, but it gives them the time to actually now implement the entire gameplan. Cheers!