Parsad

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!

God damn it Ericopoly...forget about retirement, start a fund! ;D Cheers!

Unbelievable! I can't friggin' believe this. I didn't think Buffett would invest in it because of the huge investment in Wells, but he did. How crazy! I knew somebody had to step in and invest, it was just too cheap, but I didn't think it would be him and at this point. The exact same thing happened last time when I was talking about WFC and GE in 2008/2009. The Oracle himself stepped in then too. And now again, all those guys who were doubting Berkowitz are going to sing a different tune in a couple of years. Ok folks, what is the next big idea? Goldman? ;D Cheers!

Ha Munger! We told you. Cheers!

Hope Jobs is ok and just taking it a bit easier, but Tim Cook has been appointed CEO and Jobs was elected Chairman. Cheers! http://finance.yahoo.com/news/Apple-says-Steve-Jobs-apf-3667841820.html?x=0&sec=topStories&pos=1&asset=&ccode=

Actually we owe Munger a debt of gratitude, because he helps us dissect our ideas further. I'm actually more convinced that my argument is correct on BAC than before I started debating with him. I think that's a good thing. Time will tell who was right. Cheers!

Yeah, Simple Machines 2 has some additional features and I figured that some people would want to use it. Although, I don't think you can ignore the admin! ;D Cheers!

Now, can someone please tell me who out there feels like something similar is going on? Am I living under a rock? I'm really genuinely asking to understand where the fear that BAC is in a 2008 type of situation is coming from? Europe Debt? Stupid Congressmen willing to risk our credit standing for political points? Seriously what gives? Actually it is happening, but in places where they never took care of the problem in the first place - Europe. But it is not happening here in the U.S. And that's the problem. People think that the system here will get take down, but we are nowhere near what was happening in 2008. Money market funds were having liquidity issues! There was a run on a bank or some other institution every few days! There was a ton of counterparty risk that had not been even looked at. There were massive portfolios of bad debts on the books. Banks had little liquidity unlike now. Leverage was significantly higher. Credit was contracting at a rapid pace and fear wasn't just rampant in the stock market but through every facet of the securities industry. Right now, are we even remotely near the spreads we saw in corporate bonds in 2008/2009? No, not even close! It was a different animal altogether, and truth be told if it wasn't for a few people who suddenly had to make some quick decisions, it would be God-awful right now. But that's not what happened, and that's not what is happening. There is plenty of work to do, but we are a world away from 2008! Cheers!

How is my number any different than the same one Moynihan gives in that very article? Why do you edit out the parts you do not want people to see and only put in what you want them to see? In March, at a presentation to investors in the baroque ballroom of New York's Plaza Hotel, Moynihan unveiled his audacious goal of earning as much as $40 billion before taxes by the middle of the decade. That translates into $25 billion in net income, far more than any non-oil company in America made in 2010. Cheers!

The comparison to Lehman is ridiculous. Lehman was leveraged 30-1, was in the midst of a credit crisis and did not have enough cash to provide liquidity. BAC is leveraged 9.5-1, is not in the midst of a credit crisis and not only has enough cash to provide liquidity, but earns $40-50B in free cash a year to continue to meet its liabilities, financing needs and lending/deposit operations. After the sale of the Canadian credit card business, half the stake in CCB and smaller asset sales they will be close to 9% Tier 1 Capital, which is exactly where they were after the government injected $20B during the credit crisis. Their future legal liabilites can be administered through just the next two years of cash flows. This is all rubbish...they aren't going down anytime soon unless you see a massive collapse in European banks and a domino effect ensues. Cheers!

To give you some idea of how crazy things are, the ALS Chemex Lab in North Vancouver has a massive backlog of drilling assays they have to evaluate. That has never happened before. They have upped their staffing by 90% according to one of the companies we do work for, and still the backlog is huge! People are waiting months for results. Cheers!

Three very well known and respected value managers, Francis Chou, Vito Maida and Irwin Michael, have been buying. In fact, Maida's North America ETF fund is now fully invested. Cheers! http://www.theglobeandmail.com/globe-investor/investment-ideas/value-investors-snap-up-stocks-in-pummelled-market/article2139332/

Didn't we think this was all over after 2008/09? What's to say this is the end of the crisis? I just don't understand how after they raised lots of capital in 09 they now might need to raise lots more. They've had 2 years of earnings to "grow" out of the losses. Why should we believe this is the end? (I ask honestly, I don't know a lot about financials.) Two years is nothing. It took Prem five years and a homerun on the credit default swaps to get FFH turned around. A question for the bulls - how confident are you that BAC is similar to FFH (i.e. a stock that was punished but had management of impecable integrity that you could really trust)? This stock sounds tempting but my historical weak spot has been leveraged financials and I would only invest in something like this if the management team was similar to FFH in actions. Do you have examples of management putting shareholders in front of thier own interests? TIA. Note: historically, these bank turnarounds typically take quite a long time to happen (BAC from 1988 to early 1990s and C 1989 to early 1990s). Hi Packer, there are no guarantees, but alot of the little things Moynihan is doing seems to be the correct path to choose. Prem had a long history we could reflect back on as a CEO, so I think people had a better idea of his ethics and leadership skills. Bank turnarounds vary, but this one could take a bit of time. As mentioned above, it took Prem five years to turn around Fairfax, and I think it would take no less for Bank of America. But the market notices things much earlier and usually reflects it in the price before the turnaround is complete. In regards to Moynihan, he's not making moves for the sake of change, but liquidating portions of the business that aren't core...simplifying! The executive compensation seems strongly tied to improvement in shareholder value and the longer term prospects for the company. He knows the business inside out, and understands what are the strengthes of his competition. Also has a good grasp of the company's brand, reach and exactly where they can maintain or grow market share. Finally, he's got an impressive grasp of the banking business in general, as well as an excellent understanding of financials and seems to be a decisive leader. It certainly has risk, but it's priced with that risk in mind. Cheers!

+1! Cheers!

Again -- I am not assuming anything...simply pointing out that bullish opinions have been based on platitudes not any insightful analysis. And your assumptions about my viewpoint and investment approach are ludicrous. Didn't say anything about your investment approach...just your views. They tend to rest on the shoulders of catastrophic consequences. For example...If a cup of coffee spills while reading the newspaper! Your reality: The coffee will stain the table, which will have to be resurfaced, lacquered and then restained to match...if you can even save the table at all! Reality: you simply wipe it up with a cloth, refill the cup and read the newspaper again. And yes, you can send a rebuttal and say that my views are rose-colored and simplistic. I just find that if you can simplify a problem by rationalizing it, then you find that the eventual outcome is closer to what actually occurs. Remember, our actual fund presentations from 2006 were very pessimistic about what was occuring. We were nearly 40% cash earlier this year as well. But we jumped in at the end of 2008 and beginning of 2009, and we jumped in again now. So my glasses aren't always so rose-tinted! ;D Cheers!

Take it easy on Munger. He relies on viewing the world with the same blackness that David Rosenberg does. Let's take a look at this Zerohedge presentation from a couple of years ago. Then view what they say with what transpired. Some things they got right, some things they got wrong. But things never became as bleak as they expected. And that's all I'm saying. Folks like Blodget, or Smith, or Munger will have you consider that the worst case scenario is the likely scenario without actually attributing odds to that event occurring. Every investor should make their bets accordingly. Cheers! http://www.zerohedge.com/sites/default/files/The%20End%20Of%20The%20End%20Of%20The%20Recession.pdf

$15-$20 billion in increased mortgage-litigation reserves. Zero Hedge thinks BoA is understating the liability for mortgage litigation costs by this amount. See explanation here. Why set up a reserve until you've actually discovered what your reasonable estimation of litigation costs are. If Zerohedge can come up with that number without actually seeing BAC's loan portfolio, then they've got a skill-set that no other person in the industry does. Some percentage of $80 billion of "second mortgages." Yves Smith thinks these should probably be written down by 60%, or $48 billion. You can pick your own number. Some percentage of $182 billion in commercial real estate loans. The "extend and pretend" game in commercial real-estate is even more pronounced than in residential real estate. So as Yves Smith observes, there's almost no chance those loans are actually worth $182 billion. A healthy percentage of $78 billion of "goodwill." Bank of America built itself by acquisition. "Goodwill" is what's left over when management overpays for something. As Yves Smith observes, Bank of America's former CEO Ken Lewis loved overpaying for things. He overpaid for Countrywide, for example, which has since been written off to zero, and Merrill Lynch, which he could have had for free by waiting a couple more days. Untold amounts of exposure to collapsing European banks and sovereign debt. Yves Smith says Bank of America says its sovereign exposure is $17 billion. Really? Has the firm not written any credit default swaps protecting customers in the event that European banks or countries go belly up? Might the firm have to post some cash "collateral" to satisfy these contracts? That's what Lehman had to do, after all. And that's what made Lehman go from "having plenty of capital" to being broke overnight. You speak of platitudes, but these numbers are pulled out of thin air. How does Smith know exactly what loans are on the books. She's basing the decision on acquired portfolios of loans, and past underwriting standards. How many of these loans have already been rung out? How much new business has been brought in of significantly better quality? Any future losses from these portfolios should be incurred as they take the hit, quarter after quarter, and they will be offset by business from newer loans. BAC today said that the analysis of their foreign soverign exposure was off by a magnitude of 10! So who knows their books better...the analyst who has no access to them, or the CEO & CFO? Moynihan hasn't done anything to date that would indicate he's playing games. In fact, he took the higher road on the settlement side so that the company could move forward. He could have dragged these cases through the courts for years, but he didn't. So, taking some back of the envelope numbers, it looks as though we could easily come up with, say, $100-$200 billion in write-offs and exposures to "clean up" Bank of America's balance sheet. Yup, it looks pretty easy. Just like St. Joe should have taken huge write-offs. Just like Fairfax should have taken huge write-offs. I've seen plenty of people throw around numbers who have no clue what the actual liabilities for a business are. Remember John Gwynn's $4B number at the time? He then cut it in half a couple of weeks later. And this was an insurance analyst who dug as deep as he could into Fairfax and had all sorts of hedge funds and journalists on his side. I remember being told not to buy WFC at $9 and GE at $7, because things could get worse. Easy to come up with worst case scenarios, but hard to come with probable scenarios. It's why some people missed the rebound in 2009 and 2010. Same reason they'll miss it again in the next year or so. Cheers!

It is crazy! This bank is trading at 0.32 times book now. It has so much capital. Their loan business is great. Merrill alone would make up half the current market cap and MBNA the other half! So is their banking business alone worth zero based on future cash flows and liabilities? I don't think so. Their banking business now may be by far their largest asset, as the loan portfolio is cleaner and getting better every day. Their deposit and lending business is a cash cow. I think their management under Moynihan is terrific! And we haven't even talked about their other subsidiaries or their $20B stake in China Construction Bank. This thing is so irrationally priced that somebody has to walk in and take a huge stake. It won't be Buffett because of his stake in Wells, but there has to be some large institutions that would just say to themselves, let's strike a $20B preferred deal like Buffett did with Goldman and kill the shorts. Somebody is going to buy into this thing at this price...just crazy! Cheers!

The fretting around Bank of America has reached absurd proportions. Almost crazy how the frenzy is so detached from reality. Henry Blodget, the numbskull, said today that BAC may need $100-200B! Nuts! Cheers! http://finance.yahoo.com/news/BofA-shares-drop-debt-rb-1373949543.html;_ylt=AsO2RYspWeXraBxiih2FMQ27YWsA;_ylu=X3oDMTE1b2NpMXI1BHBvcwM2BHNlYwN0b3BTdG9yaWVzBHNsawNib2ZhbmVhcjA5bG8-?x=0&sec=topStories&pos=3&asset=&ccode=

That was quite funny. The only thing funnier would have been if they had some distraught women standing next to the chair being comforted. Regardless, I think the earthquake was caused by the Tea Party, as they promised to "shake up Washington!" Cheers!