ERICOPOLY

The devious side of me wonders if this is somebody trying to buy up what they can under $10. Anyway, I drastically reduced my exposure today. I'm hoping volatility premiums on LEAPs come down (which they probably won't). They also may be testing the durability of the rally. First they will dump out tons of negative media spin (we're in that phase now), and if the stock holds up then they buy it and put out some rosy forecast articles.

Al, It cracked $10 18 minutes into trading. You were soooo close.

Yes, it's a shame that the earnings of KO, JNJ, KFT, GE, MSFT, AAPL, IBM, PFE, PG, and ... cannot grow faster than US GDP.

Is he sticking with his "Sell BAC immediately at the open" directive? EDIT: Oops, that was Gundlach

I disagree with this statement, you are making a ton of assumptions about what will or won't happen between now and expiration. Anything can happen and will there for IMO anytime you at the mercy of time you are introducing risk. I don't disagree with the overall BAC thesis, I own warrants, common, and 2014 $10 calls. But I would never say that the warrants aren't all that risky. I think you are correct on that. Mohnish says that the warrants have a 7-8 year life...whereas equity has a 100-year life. Anything is possible in that 7-8 years period...good or bad. Cheers! Guys... come on. I said "aren't all that risky" Do this mean: a) less risky than the common b) same risk as the common c) more risky than the common If your answer isn't "c", I'm throwing a shoe.

There are probably at least a few traders out there playing this valuation gap closing strategy. Maybe they are shorting the JPM and WFC banks and going long BAC. This way if a big macro event happens they have some protection. As long as recapitalization is off the table, it's a trade that seems hard to lose on.

I'm just using the charts to set mimimum expectations based on how buyers behaved before the big scare last year. The banks at that time were all trading below their intrinsic value and all had further room to go. So because I can't guess when Wall Street will value them on intrinsic value, I'm instead looking at how they value them relative to each other. Once that relative valuation gap has been closed, I might then find good reason to diversify a bit into maybe WFC and JPM.

I can't really predict how banks as a sector will be viewed due to macro forecasting being all the rage these days. My forecast though was really for $12 by July, to give room for a couple more BAC earnings reports. I'm happy to pile on with Al's forecast of TBV by April 10th (my birthday) -- it does make perfect sense to me. In my mind all of the discount was due to the uncertainty of whether regulators would push BAC into a capital raise. Now nobody believes that anymore. Even if we get the ECRI's recession, there still won't be a capital raise. BAC made the most improvement in the past 12 months. But look at the results: BAC vs Citi: http://finance.yahoo.com/q/bc?t=1y&s=BAC&l=on&z=l&q=l&c=C BAC vs JPM: http://finance.yahoo.com/q/bc?t=1y&s=BAC&l=on&z=l&q=l&c=JPM BAC vs WFC: http://finance.yahoo.com/q/bc?t=1y&s=BAC&l=on&z=l&q=l&c=WFC The gap is smallest in the BAC vs Citi comparison, probably due to Citi getting hurt the most from expectations of slower global economic growth.

Al, I think you called it. $9.88 after hours -- I think we can round that up to $10. Where is it headed by next weekend?

I was also thinking about the "special" FDIC assessments that the TBTF banks had to pay. Ironically, they aren't the ones putting stress on the FDIC! The TBTF banks are covering their own bad loans, and the tiny community banks are the ones failing by the hundreds. This creates a moral hazard. The small banks that carry the risk pay a smaller share of the FDIC burden. TBTF banks will also, by definition, never draw on the FDIC reserves. They instead are forced to lug around their big rainy day bailout fund (the SIFI buffer) -- you can think of this like a privatized extension of FDIC fund. Sort of like being forced to tow your own depositor rescue vessel behind you, yet at the same time being required to cover the costs of the deposit bailout fund (FDIC) that by definition you're not expected to ever make use of.

I don't get why people are against TBTF banks, wanting to break them up. BofA will have a SIFI buffer of 2%. If you broke it up into 100 pieces, you'd have 100 banks with exactly the same loans but without a SIFI buffer. The system would be more leveraged. How many small banks failed last year? How many TBTF banks? For a bank like BofA, you have regions of the country where they are very profitable, and those profits cover the losses for the regions of the country where losses are enormous. Split it up into 100 parts, and you'll have the FDIC covering the losses of the banks concentrated in the struggling regions, and the banks concentrated in thriving regions will keep all of their profits to themselves with no losses to subsidize. So the FDIC suffers if you break up BofA, whereas BofA absorbs all of the losses if you keep it whole. If the entire system were just one large enormous bank, then last year the FDIC would have lost nothing at all. Not one dollar of losses! It's the small banks that create risk for the FDIC. The banking system in the aggregate had a very profitable year last year.

Those are extremely good returns. I have been sick with volatility. Hopefully I may not find myself in such a deep hole again. Based on your posts, the impression I have that you take big concentrated positions more frequently. Volatility is bit difficult to avoid if thats the case. Yes, I have trouble controlling my excitement when the Miss Hawaiin Tropic bus breaks down. I clear my schedule and I focus all of my energy on the one I like the most. It's risky I suppose because eventually there may be a lapse of judgement or the Euro collapse actually happens and financial system actually does crumble.. I was thinking a lot about the opportunity cost of just having a small slice of the portfolio double, and I didn't want to give up the opportunity to have the whole thing double..

Right after Q1 earnings MisterStockWell informed us that Doug Kass "took out a short rental at $7.20". How is that guy doing with that short by the way? A couple of weeks ago I saw him pass a comment that he was expecting a pullback of 6%-10% and named BAC as one of the stocks to buy on the weakness (so he was recommending people to buy it for more than where he shorted it at).

Those are extremely good returns. I have been sick with volatility. Hopefully I may not find myself in such a deep hole again.

For me it's not time until we get to spreads like we saw this time last year for BAC relative to WFC and JPM. The discount has been 100% about fears of raising dilutive equity.

There is a point coming (hopefully soon) when I'll decide to switch some money back to the AIG warrants. They look very attractive still, but as I was saying earlier (a couple of weeks ago) it makes absolutely no sense for BAC to be at this large a discount to JPM, and I figure there will be convergence in valuation (not complete convergence for quite some time, but this has been too wide a gap).

I first hit 100% notional in-the-money upside in the low $5 range, and I've been adding to it on the way up. A few more pennies and my $10 strikes come into the money, then my $12.50s. >>I first hit 100% notional in-the-money upside in the low $5 range, What's that mean? It means instead of putting 100% of my net worth in BAC common, I bought an equivalent amount of $5 strike calls. Then as the stock went up I stopped being such a pussy and bought more. My net worth is up 39% since Tuesday morning.

I first hit 100% notional in-the-money upside in the low $5 range, and I've been adding to it on the way up. A few more pennies and my $10 strikes come into the money, then my $12.50s.

Your phone rings today. A tenant has burned down one of your houses. How much of this hassle does the property manager do for you? Does he file the insurance claims, get permits to rebuild, deal with the contractors to have the new home built? Or are you finding yourself in Las Vegas on a "business trip"? Scenario #2: The roof needs replacing on one of your properties. Do you have to make any phone calls to anyone other than the property manager? Or does the property manager take care of everything? I basically mean to say, "how much managing does the manager do"?

Ah come on Mom, not a Saturday tomorrow. I wish it were Monday again.

Had to laugh at this one: Bank of America's share price has plunged into the single digits Its credit rating, already downgraded to a few rungs above junk status, could plummet with the next bad analyst report, causing a frenzied rush to the exits by creditors, investors and stockholders – an institutional run on the bank.

It hasn't been this promising since 2009. Before that, 2006. Every three years? I'm going to be watching out for 2015.

Well this is really fun!

One such distortion is the damage done to net interest margin for banking. Killing ROE for all kinds of companies, like AIG for example. At the same time it's boosting companies who are borrowing at low rates. I'm looking forward to BAC's net interest margin improving over time.

Getting the underwater Fannie Freddie loans refinanced would give a solid boost to household cash flow. Can they get it done? What happened to that VISIT-USA Act? Things are painfully slow.