ERICOPOLY

I'm surprised he can't just buy it in the open market for less than $6.

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?

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?

You are undignified.

A FOOL and now a liar too? You are a loudmouth, no sense in talking over your noise.

Those fools with Schwab accounts are doing even better today at LVLT. So what's your point about the fools at Schwab?

BAC was notified over the summer of their capital shortfall under the rigorous new stress test. WEB got wind of this and called Moynihan. This is why the capital raise of preferred makes no sense under Basel III. It's got nothing to do about Basel III. It had to do with passing this new stress test under current rules. No new dilution surprise from this stress test.

It's looking like a real stress test this time: http://www.bloomberg.com/news/2011-11-23/citigroup-bofa-may-see-dividend-ambitions-cut-as-fed-stiffens-stress-test.html?cmpid=yhoo The Fed’s stressed scenario calls for unemployment to hit 12 percent by next year and 13 percent in 2013. It also tests banks’ performance in an economic decline that begins this quarter and bottoms in the first quarter of next year, with real gross domestic product falling 8 percent and home prices dropping 20 percent during the next two years.

It will be interesting when I'm faced with 45% tax on dividends. The after-tax dividend would need invested very capably in order to be a better idea than just reinvested in a fairly priced stock buyback. I mean, I only have 55 cents left on the dollar for goodness sake! Berkshire only pays a 5% tax on some dividends from equities, but they pay a 35% tax on capital gains. So it seems like no surprise to me that Buffett pretty much prefers the cash dividend at all times. Now, if you instead make his cash dividend 45% tax rate and lower his capital gains tax to 22.5%, then I'll bet he changes his tune.

I'm considering swapping some common for warrants in my taxable account -- but only for tax reasons... to bring down the dividend income. The tax rate on BAC dividends would be 45% in Australia where I'm planning to move to next year. So the dividend tax is something for me to think about when I'm comparing the price of the warrants to the price of the common. I haven't made my mind up yet.

BAC is below the level of March 12, 2009 when it closed at $5.80. I find that interesting.

I am happy to be alone in thinking that buybacks instead of dividends are just fine -- at any price. I guess that's because I see a lot of value in the dividend->capital_gain laundering pass-through. And I'm happy if a corporate chieftain wants to pay me too much for my shares ;D

It's relatively harder (compared to C or JPM) to figure out BAC's progress on getting to 7% under Basel III because BAC doesn't like to discuss it in their presentations. This suggests an inferiority complex and they want desperately to get to that level soon for the headline effect. Or maybe it doesn't -- perhaps they just like to make us work harder.

And JPM got the green light for that behavior when they were at about 7% under Basel III. So we'll see what happens when BAC hits that level in 2012. The two banks are roughly the same in size. If BAC got just 1/2 of that approval level it would be a 10% yield on current share price.

At current prices, JPM is already yielding over 10% if you count buybacks. They've on track to return more than $10b to shareholders this year. The company increased its quarterly dividend to $0.25 from $0.05 per share and set plans to buy back $8 billion in stock this year as part of a $15 billion stock buyback program. http://www.mysmartrend.com/news-briefs/news-watch/jpmorgan-chase-topped-q1-estimates-plans-15b-buyback-program-jpm

This time I expect that BAC gets the approval. They've been hitting the gym the past few months trying to get in shape for this. There were probably given a cheat sheet to study. After all, it's in everyone's interests to help them pass with flying colors. It would be a positive sign of confidence in the banking system -- help weaken some rumors.

It's just the expected earnings yield relative to the price paid for the stock -- that's all he is saying the 20% is from. He is not saying it's the expected shareholder returns The shareholder returns would be slightly under 14% if it takes 20 years for the gap to close to a 10% earnings yield. Anyhow, the 20% number in his example has nothing to do with BAC. He just threw it out there. He could have used these numbers instead of using 20%: 51% earnings yield if you assume $3 earnings power 35% earnings yield if you assume $2 earnings power 25% earnings yield if you assume $1.45 earnings power

Breast augmentation is sometimes better than acting lessons?

You can't get a tax loss from going back and forth between stock and options. It falls under the wash sale rules. Where did you hear that you can do it between stock and warrants?

I feel like UPS and FedEx just aren't going to ever deliver a postcard to my mailbox. The FBI probably isn't posting a profit either. Hey, let's get rid of them too!

The reason why I'm not excited for a recession is that companies generally do better when demand is not falling. So I think I would make less money because of the recession. I'm not holding cash to buy things cheaper. I do have some portion hedged though with IWM $120 strike put.

Reasons for not putting Countrywide into BK: http://blogs.wsj.com/deals/2011/11/08/why-bofa-decided-against-a-countrywide-bankruptcy-for-now/?mod=yahoo_hs

I've been wondering about that. My gut says they are trying to get approved for a dividend raise so they don't get left being the only one without a meaningful dividend after Citigroup gets theirs in 2012. Otherwise, what's the explanation? I don't buy the official argument that it's about retiring securities at a discount when in order to do so they have to issue shares at a huge discount -- 3x 1% ROA.

This is what BAC reported in Q3 (from CC transcript): If we move from the businesses to credit and the trends that we've seen in credit; as we look at consumer credit trends on Slide 21, we continue to be very pleased with the progress that we're making. If you look at consumer credit trends quarter-over-quarter, you can see continued declines in net charge-offs, 30-plus performing delinquencies as well as our nonperforming loans and foreclosed properties.

Their current forecast is inaccurate. UCLA-Ceridian pulse of commerce index is down 10% annualized -- symptomatic of a recession if you ask their chief economist: http://ceridianindex.com/multimedia/video/September-PCI-Falls/ Appears quite coincident to me...... http://ceridianindex.com/ Buffett's set of businesses is a better indicator of the whole picture. That's my view. I put that link to the ECRI in there because it's interesting. I have more faith in Buffett-vision though -- he's got reports from boots on the ground. Thus he can see what the ECRI guy is missing -- the actual results and sentiment of the businesses. Eric, I went back and looked at what WEB was saying back in late 2007/early 2008 when ECRI came out with their recession call, and WEB was saying that there was a high probability of recession. I will admit it will be extremely interesting to see who wins on the economic assessment over the next year or two - WEB v. ECRI. I would argue that Buffett has the best businesses in the country that would most likely, as a group, tend to lag the economy going into a recession (save for his housing-related businesses, which he has said continue to remain depressed). Perhaps WEB is right. It also may be a matter of time horizon - Prem and Friedberg are very worried about the environment over the near term, whereas WEB is looking out over the next 100 years. I'd be curious to pit Prem/Friedberg against WEB regarding the depression-era environment we're in. I think WEB would say the capitalist nature of our economy is healing our economy slowly over time and that there is a very small chance of a depression-type environment going forward - I think Prem/Friedberg would argue differently. As I've said before, that's the wonderful thing about this business, we can all be right at the same exact time just depending on the time horizon! Perhaps CEO Burke will be right over the next five years with his UNP purchase, but at the same time I'll avoid UNP and like investments over the near term due to the economic risk out there and end up being right over the shorter term by picking UNP and other investments up at 50 cents on the dollar at a later date 8) This is a bit like discussing sports or horse racing. I am very relieved that home construction and autos are already in the toilet. The recession of 2008/2009 was especially scary because those industries fell off a cliff and they are enormous parts of the economy. But they didn't climb back up the cliff -- there is only so far it can fall. You can't have home building fall by another 1.7 million units annually when your base is now only 500k-700k units.