As BAC stock continues to fall, interesting perspective

[txlaw]

I just hate that his handle is "Munger."

 

Funny because I was thinking if it's possible to stop people using handle such as Buffet or Munger ot Graham if they are poles apart in thinking. Handle might create an association bias and people might take time to respond which they would have ignored in general. But I guess it's an online forum and people can chose any handle they want.

 

Are you 12?

 

This is standard cognitive science. Names mean something, and our brains can't help but make associations.

 

Or maybe I should just change my handle to 'Warren Buffett'..

 

That was a wry joke. 

 

Clearly, folks did not get it.

[AZ_Value]

 

Ah . . . see, this is one of the reasons, among others, why you're getting such negative feedback from the board.  This statement right here is antithetical to the value investor's mentality.  You're assuming that the market is correct about GE and GS, and that the investment was terrible because the prices of GE and GS have gone down. 

 

The real Munger would never say such a thing.

 

TxLaw - BAC might or might not turn out to be a good investment but I have seen many people pretending to be a value investor but you can generally catch them quickly due to passing some silly statements( like judging the investment merit on short term price movements). It's another thing to not have an opinion or different opinion but if anyone talks about the merit of an investment based on stock price being temporarily being up or down in many threads then you do get a decent idea about how a person thinks.

 

I'd like to add to this. I think it's Myth who mentioned earlier in the thread that it also gets excessively annoying when people simply spend their time harassing others when they've already stated their investment  thesis. You all went into great detail about why you thought it was a buy, I'm not the smartest guy in the room by far, but I read it, understood it and moved on. If I was comfortable with Banks I would have actually considered buying myself but fortunately for me it wasn't even an issue as my dry powder was spent going "balls to the wall" in names like SD that I know and own and Mr Mkt sold them to me at lower prices.

But, continually bringing up the same thing over and over adds nothing IMHO, as it looked like anything short of an audit ready binder with all the mortgages issued by BAC dating back to the 1950's wasn't going to be enough and make the case that someone could actually look at BAC's disclosures and get a decent idea of what's going on. I know Sanjeev said that the questioning allowed the Longs to fine tune their thesis but I sincerely believe that after the 3rd round of questioning that advantage was gone, but that's just my opinion.

 

As a side note: You guys are better persons that I am for real, as I still cannot understand how you engage in an argument with a person who firmly stated that banks counted their market cap as part of their Tier I capital... I still can't get over it sorry lol  :o

[Myth465]

 

As a side note: You guys are better persons that I am for real, as I still cannot understand how you engage in an argument with a person who firmly stated that banks counted their market cap as part of their Tier I capital... I still can't get over it sorry lol  :o

 

I too am out of capital, but have been raising it over the last few days. Hopefully ATPG continues to run and I can harvest some capital from there, SD is looking more and more like a fat pitch to me, though one may want to go out to the 2014s......

 

LOL. Its just another nod to the quality of the board. You guys have extreme patience and will likely or already are probably excellent parents. This is one skill I truly lack. That and spelling lol.

 

Patience is the state of endurance under difficult circumstances, which can mean persevering in the face of delay or provocation without acting on annoyance/anger in a negative way; or exhibiting forbearance when under strain, especially when faced with longer-term difficulties

[Valuebo]

http://investor.bankofamerica.com/phoenix.zhtml?c=71595&p=irol-newsArticle&ID=1618158&highlight=

 

 

Not dead yet. Earnings boosted by adjustments of course.

[Parsad]

http://investor.bankofamerica.com/phoenix.zhtml?c=71595&p=irol-newsArticle&ID=1618158&highlight=

 

 

Not dead yet. Earnings boosted by adjustments of course.

 

Yes, there are adjustments, but much of it is from being conservative on losses in previous quarters...not accounting tricks.  The engine is pretty damn powerful, and as the loan quality continues to improve, it will compensate for a flattening yield curve which is reducing interest income for all banks.  I think they will also make more money from the $5 monthly debit fee, than they will lose by customers moving.  Finally, the capital ratios are all higher than they were after the government recapitalized them during the credit crisis.  Everyone is going to look at the negatives, and they ignore the positives.  Over time, they'll eventually get it right.  Cheers!

[Valuebo]

I completely agree Parsad. My average is $6.30 and I am very confident about the future for BAC.

 

-5% pre-market. We just might get more chances to buy.  ;)

[biaggio]

Not very knowledgeable re investing in BAC but am watching +learning.

 

Different perspective re recent earnings from zerohedge

 

http://www.zerohedge.com/news/bank-america-posts-adjusted-loss-excluding-benefits-spread-blow

 

"the reported net income number was $6.2 billion, which includes, "among other things, $4.5 billion (pretax) in positive fair value adjustments on structured liabilities, a pretax gain of $3.6 billion from the sale of shares of China Construction Bank (CCB), $1.7 billion pretax gain in trading Debit Valuation Adjustments (DVA), and a pretax loss of $2.2 billion related to private equity and strategic investments, excluding CCB. The fair value adjustment on structured liabilities reflects the widening of the company’s credit spreads and does not impact regulatory capital ratios." So netting out the CCB gain and the strategic investment loss leaves us looking at the two items entirely affected by the blow up in the company itself manifested by its soaring spreads: the $4.5 billion in structured liabilities adjustment and the DVA which add to $6.2 billion, which is.... what the company reported as its EPS! In other words, Bank of America had $0.00 EPS excluding for the accounting BS that is provisioning for buying "CDS on yourself." And since both of these adjustments flow through the P&L, the reported revenue of $28.45 billion (much better than the expected $25.92 billion) had to be adjusted $6.2 billion lower, and confirms that absent this most blatant accounting gimmick, the revenue was a huge miss. Yet despite a plunge in the company's NIM, a $1.7 billion reserve release, and a substantial plunge in BAC's provisioning for Rep & Warranties from $14 billion in Q2 to $0.3 billion in Q3, something which will again haunt BAC, Bank of America increased its staffing from 40.4 thousand to $42.1 thousand sequentially"

[Uccmal]

Thanks biaggio, That earnings release didn't provide any operating earnings with the one time 'gains' taken out.  It was clear as mud. 

 

I did buy some jan 2014s yesterday when they became available.  Slowly rolling over my derivative positions from 2013 to 2014s. 

[BargainValueHunter]

It's getting harder and harder to imagine a scenario where you lose money buying the BAC TARP warrants (The AIG and C warrants as well).

[Olmsted]

Not very knowledgeable re investing in BAC but am watching +learning.

 

Different perspective re recent earnings from zerohedge

 

http://www.zerohedge.com/news/bank-america-posts-adjusted-loss-excluding-benefits-spread-blow

 

"the reported net income number was $6.2 billion, which includes, "among other things, $4.5 billion (pretax) in positive fair value adjustments on structured liabilities, a pretax gain of $3.6 billion from the sale of shares of China Construction Bank (CCB), $1.7 billion pretax gain in trading Debit Valuation Adjustments (DVA), and a pretax loss of $2.2 billion related to private equity and strategic investments, excluding CCB. The fair value adjustment on structured liabilities reflects the widening of the company’s credit spreads and does not impact regulatory capital ratios." So netting out the CCB gain and the strategic investment loss leaves us looking at the two items entirely affected by the blow up in the company itself manifested by its soaring spreads: the $4.5 billion in structured liabilities adjustment and the DVA which add to $6.2 billion, which is.... what the company reported as its EPS! In other words, Bank of America had $0.00 EPS excluding for the accounting BS that is provisioning for buying "CDS on yourself." And since both of these adjustments flow through the P&L, the reported revenue of $28.45 billion (much better than the expected $25.92 billion) had to be adjusted $6.2 billion lower, and confirms that absent this most blatant accounting gimmick, the revenue was a huge miss. Yet despite a plunge in the company's NIM, a $1.7 billion reserve release, and a substantial plunge in BAC's provisioning for Rep & Warranties from $14 billion in Q2 to $0.3 billion in Q3, something which will again haunt BAC, Bank of America increased its staffing from 40.4 thousand to $42.1 thousand sequentially"

 

There were $3.3 billion in other one-time charges not mentioned in this zerohedge piece (besides the $2.2 billion loss on private equity investments they do acknowledge).  Intelligent individuals can have a debate on the true "one-timeness" of these charges, but it seems that if they discount all the one-time gains, they should at least mention all the one-time losses.

 

http://blogs.wsj.com/deals/2011/10/18/bank-of-america-earnings-very-messy/?mod=yahoo_hs

[rranjan]

Not very knowledgeable re investing in BAC but am watching +learning.

 

Different perspective re recent earnings from zerohedge

 

http://www.zerohedge.com/news/bank-america-posts-adjusted-loss-excluding-benefits-spread-blow

 

"the reported net income number was $6.2 billion, which includes, "among other things, $4.5 billion (pretax) in positive fair value adjustments on structured liabilities, a pretax gain of $3.6 billion from the sale of shares of China Construction Bank (CCB), $1.7 billion pretax gain in trading Debit Valuation Adjustments (DVA), and a pretax loss of $2.2 billion related to private equity and strategic investments, excluding CCB. The fair value adjustment on structured liabilities reflects the widening of the company’s credit spreads and does not impact regulatory capital ratios." So netting out the CCB gain and the strategic investment loss leaves us looking at the two items entirely affected by the blow up in the company itself manifested by its soaring spreads: the $4.5 billion in structured liabilities adjustment and the DVA which add to $6.2 billion, which is.... what the company reported as its EPS! In other words, Bank of America had $0.00 EPS excluding for the accounting BS that is provisioning for buying "CDS on yourself." And since both of these adjustments flow through the P&L, the reported revenue of $28.45 billion (much better than the expected $25.92 billion) had to be adjusted $6.2 billion lower, and confirms that absent this most blatant accounting gimmick, the revenue was a huge miss. Yet despite a plunge in the company's NIM, a $1.7 billion reserve release, and a substantial plunge in BAC's provisioning for Rep & Warranties from $14 billion in Q2 to $0.3 billion in Q3, something which will again haunt BAC, Bank of America increased its staffing from 40.4 thousand to $42.1 thousand sequentially"

 

There were $3.3 billion in other one-time charges not mentioned in this zerohedge piece (besides the $2.2 billion loss on private equity investments they do acknowledge).  Intelligent individuals can have a debate on the true "one-timeness" of these charges, but it seems that if they discount all the one-time gains, they should at least mention all the one-time losses.

 

http://blogs.wsj.com/deals/2011/10/18/bank-of-america-earnings-very-messy/?mod=yahoo_hs

 

I really don't follow zerohedge but as a rule if I spot someone projecting only one side of story consistently then I don't take them seriously due to clearly having their own agenda. You can still read to get one side of the story though.

[Parsad]

There were $3.3 billion in other one-time charges not mentioned in this zerohedge piece (besides the $2.2 billion loss on private equity investments they do acknowledge).  Intelligent individuals can have a debate on the true "one-timeness" of these charges, but it seems that if they discount all the one-time gains, they should at least mention all the one-time losses.

 

Won't happen.  I remember all the positive things happening at Fairfax or Steak'n Shake, and there was always somebody pointing to how crappy the results were or how this thing is not going to survive.  They don't see it until they look at everything in hindsight, and then they say how could anyone have known for sure!  It will be at tangible book by some time next year, and at multiple of current tangible book by 2015-2016.  Cheers!

 

[Parsad]

I wouldn't be surprised to see zh hedge fold up shop next year. or at least dissapear into insignificance. the doom and gloomers will be looking for work after it is examined just how wrongly they advised investors in 2011.

 

Not going to happen.  He gets 17M page views a month...that's about $30K a month in ad revenue if he wants it.  They'll just find other topics to cover.  There's always something to write about.  Cheers!

[merkhet]

I wouldn't be surprised to see zh hedge fold up shop next year. or at least dissapear into insignificance. the doom and gloomers will be looking for work after it is examined just how wrongly they advised investors in 2011.

 

Not going to happen.  He gets 17M page views a month...that's about $30K a month in ad revenue if he wants it.  They'll just find other topics to cover.  There's always something to write about.  Cheers!

 

ZH gets some interesting news every now and then, but they definitely have a bias towards doom and gloom. I can't remember where I saw this, but there was a joke going around a few months ago with a fake headline from ZH -- "ZeroHedge once again disappointed that meteorite fails to annihilate Earth." or something like that.

[given2invest]

There were $3.3 billion in other one-time charges not mentioned in this zerohedge piece (besides the $2.2 billion loss on private equity investments they do acknowledge).  Intelligent individuals can have a debate on the true "one-timeness" of these charges, but it seems that if they discount all the one-time gains, they should at least mention all the one-time losses.

 

Won't happen.  I remember all the positive things happening at Fairfax or Steak'n Shake, and there was always somebody pointing to how crappy the results were or how this thing is not going to survive.  They don't see it until they look at everything in hindsight, and then they say how could anyone have known for sure!  It will be at tangible book by some time next year, and at multiple of current tangible book by 2015-2016.  Cheers!

 

I wouldn't be surprised to see zh hedge fold up shop next year. or at least dissapear into insignificance. the doom and gloomers will be looking for work after it is examined just how wrongly they advised investors in 2011.

 

Haha, zerohedge is so popular, it's not going anywhere.  You're way off here.

[biaggio]

For whatever reason (I think it was from someone on this message board) I usually scan ZH---I tend to be optimistic type , the doom + gloom there helps to balance things.

 

I have found it helpful to read conflicting view points.

 

A quote that I have written down as a reminder from one of the posters here:

 

"The first principle is that you must not fool yourself - and you are the easiest person to fool." -- Richard Feynman

 

And I have been fooled more than my share,

 

p.s 17m views per day that is amazing

 

[beerbaron]

p.s 17m views per day that is amazing

 

17M per month Parsad said.

[biaggio]

Getting back to BAC

 

What metrics do you guys favor looking at an enterprise like BAC.

 

I found a good site regarding analyzing banks-

 

http://www.valuablebehavior.com/banking/bank-valuation-made-simple/

 

According to this fellow he favors the following numbers ( I have gone thru the recent BAC quarterly numbers to provide the following ratios)

 

 

pre tax pre provision earnings:$10.84b up from $8.884b

non performing assets:$29 billion down from $34.5 billion

total assets:$2339 billion down from $2379 billion in 2010

Tangible common equity: $127.7 billion up from $126 billion

Tangible common equity/share:$13.22 up from $12.91

Tangible assets:$2.142 trillion down a bit from $2.256 trillion 2010

Real estate owned:$3.48b (http://www.depositaccounts.com/banks/bank-of-america.html)

texas ratio :19.9%

 

Shares outstanding:10.46 b up a bit from 9.96 in 201

1. Pre-provision, pre-tax earnings to average assets,(ideally should be 1%-3%) =1.5%(based on whole year estimate ~ $36b)

 

2. Non-performing assets and past due loans to total assets,(ideally should be 4%-1%) =1.2%

 

3. Tangible common equity to tangible assets,(should be 8%+)=5.9%

 

4. Texas ratio, (20% – 70%)=19.9%

 

5. Non-core deposit dependency ratio and loan to asset ratio, (theshold of 25% and 70% respectively.)-could not find these figures.

 

These numbers appear to support a buy at these levels

 

At the end of the day you have to trust management + there is the issue of what is in the loan portfolio, etc(blackbox).

 

This has to be very different then investing in FFH back in the day because I don t think you have the same kind of leadership at BAC.

 

 

[biaggio]

p.s 17m views per day that is amazing

 

17M per month Parsad said.

 

Sorry, stand corrected...still good + that's good monthly income too

[prunes]

Forget ad revenue. I'd be shocked if there weren't hedge funds backing ZH.

[biaggio]

http://www.reuters.com/article/2011/10/19/idUS200361147020111019

 

Is Bank of America preparing for a Chapter 11?

[A_Hamilton]

http://www.reuters.com/article/2011/10/19/idUS200361147020111019

 

Is Bank of America preparing for a Chapter 11?

It's too bad the supreme court has rejected prior restraint. Chris Whalen is the prime example of why we should gag some people's speech. Total nonsense.

[prunes]

VIC write-up http://www.scribd.com/fullscreen/69599523

[PlanMaestro]

VIC write-up http://www.scribd.com/fullscreen/69599523

 

That is the quality of VIC contributors? Maybe it was not so bad to be rejected if that is your average contributor.

 

First point: Sustainable competitive disadvantages and Potential Run.

 

Potential Run?what is he talking about, has he not seen the liquidity that BAC has? Has he not seen the last Qs deposit trends? It actually has TOO MUCH deposits and its problems is what to do with them. Some banks have actually started to charge for deposits ... they do not WANT them. And no competitive advantages? Has he not seen BAC's cost of deposits?

 

Well I could not pass beyond this point especially where a skim of the rest did not show much in terms of facts. The way that he used a hand wave to dismiss the use of Countrywide's Ch11 as a negotiation tool and using as a matter of fact the litigant's claims ...

 

Well, another wasted 5 minutes in terms of looking for a credible bear case.

[Kraven]

VIC write-up http://www.scribd.com/fullscreen/69599523

 

That is the quality of VIC contributors? Maybe it was not so bad to be rejected if that is your average contributor.

 

First point: Sustainable competitive disadvantages and Potential Run.

 

Potential Run?what is he talking about, has he not seen the liquidity that BAC has? Has he not seen the last Qs deposit trends? It actually has TOO MUCH deposits and its problems is what to do with them. Some banks have actually started to charge for deposits ... they do not WANT them. And no competitive advantages? Has he not seen BAC's cost of deposits?

 

Well I could not pass beyond this point especially where a skim of the rest did not show much in terms of facts. The way that he used a hand wave to dismiss the use of Countrywide's Ch11 as a negotiation tool and using as a matter of fact the litigant's claims ...

 

Well, another wasted 5 minutes in terms of looking for a credible bear case.

 

I couldn't agree more.  I didn't waste 5 min thank god, but did waste about 2 1/2 min skimming it quickly.  This was more like a bad Seeking Alpha article than anything else.  There are so many problems with it I don't know where to start.