BAC Investor Poll

[ERICOPOLY]

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

 

I find that interesting.

[turar]

So what are you guys buying -- the common, warrants, or leaps?

[ERICOPOLY]

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.

[alertmeipp]

To those who think BAC is cheap, what % are you putting in?

I can see this play out very well over the long term... I want to swap some of my craps into BAC...

[JSArbitrage]

I think the tax shield of the warrants is a very valuable part of the thesis. Assuming BAC normalizes by 2014, what you are really saying is that BAC will be spitting out $1/share in dividends per annum. Over the next 4 years, that's 60c per warrant you get to keep (that's close to a quarter of the warrant cost at these levels.)

 

Then, you get a free option on the possibility of Congress increasing the cap gains rate.) At a 30% cap gains rate, you get an extra $1.20 per warrant. That's like getting the warrants half off!

[JSArbitrage]

Divi rate not cap gains, excuse me.

[ERICOPOLY]

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.

[moore_capital54]

BAC is 8% of our portfolio...

[Parsad]

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.

 

That's good!  As a shareholder or bank depositer, I want to know that the banks can handle such events.  I welcome the tests and any improvements banks have to make to survive such circumstances...even if that means no buybacks, dividends or even dilution of my shares.  Because at the end of the day, such banks should trade at no less than tangible book and close to book once they pass.  Cheers!

[prevalou]

That is good but to pass the test, us banks Will probably cut further their european exposure which will continue the run on european banks and the risk of global recession

[Parsad]

That is good but to pass the test, us banks Will probably cut further their european exposure which will continue the run on european banks and the risk of global recession

 

Unfortunately, this is something that Europe has to figure out and fix.  All the rest of the world can do is support their efforts, but the bulk of the reform has to come from within.  Europe did not do this back in in 2008/2009 and the problem has come home to roost.  They need a massive TARP program that has to go into effect, and broad regulation across Euro nations similar to what the Treasury, FDIC and SEC have done here. 

 

Only when the financial institutions are well capitalized, have proper regulation and restrictions, will confidence start to slowly come back.  You cannot have a successful Euro region without a strong backbone of financial institutions.  The U.S. will do far better because they took those steps to clean out and strengthen their financial system.  Cheers!

[prevalou]

Well said. Hopefully the contagion Will not spread to us banking system via unintended consequences.

[Uccmal]

Well said. Hopefully the contagion Will not spread to us banking system via unintended consequences.

 

I think it already has.  Bac at all time lows.  Nowhere to go but up, in theory at least.

[SharperDingaan]

 

Keep in mind that a stress test is after the really bad stuff has been repo’d off the books – in today’s market it will the best possible outcome after the MAXIMUM POSSIBLE manipulation.

 

All (Asia as well?) central banks (& agents), insurance companies (with different quarter-ends), & Hedge Funds (non regulated orbit) swapping dung for T-Bills over the cut-off date – to give the banks the maximum possible regulatory capital. Subtract actual from desired capital to find the capital shortfall – for the financial system as a whole – then force the banks to raise it, allocated by market share.

 

Yet all seem to be 100% certain that BAC will not have to dilute (again), when we know that regulators have (publicly, via the leak) warned of insufficient capital ? To most folks a public warning implies that the target is currently BELOW its minimum capital requirement, & that existing anticipated capital raises have already been anticipated (which will bring them back on side).

 

There are lots of ways that big friends can help with the capital, but is it really likely that there will be no further dilution?

 

SD

 

[SmallCap]

Ok, Just for the pure fun of it, who thinks that it will break below $5.00?

 

I think it will but if you asked me why, I would shrug my shoulders and say, "I don't know"

 

But I am also wondering about the significance of the $5.00 barrier and if it will actually make any difference because of the mutual fund rules and the margin requirements. Is there any history of data about the significance of this barrier, does anyone have more experience with it?

 

I wonder if there if there is a potential trading strategy around stocks at the 5.00 barrier?

[ERICOPOLY]

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.

[Guest ValueCarl]

Good God! Has this board thought about "The Madness of Crowds" theory, or "counter intuitive psychology," or are the trading gods who reside here EXEMPT from these principles? Is this a LEMMING brigade of the smartest tools in the shed heading straight over the cliff? 

 

I suppose that some could have been making similar claims about the "mortgage insurance" companies earlier on!

 

When thinking about the dirty pool loans contained inside of its asset portfolio inherited from a prior charlatan, a bad man, a very bad man indeed, over at Countrywide, I shudder to think what one does not know according to the stealth accounting tricks which gave these entities earlier reprieve. 

 

Then again, there is one piece of anecdotal evidence that points favorably tied to a shoe shine boy story. I keep hearing about average Joe's without near the financial acumen nor savvy as those on this board, having shorted it in the middle six range.

 

This being said, these fools on main street with their Schwab accounts continue to be RIGHT, while you boys are heading for the CLIFFS!  :o

 

 

 

 

[Munger]

Firmly believe that BAC is complete black hole, which is why I have never shorted the stock.

 

I continue to see BAC as nothing more than a speculation...one that could prove quite profitable if they get lucky.

 

The bulls will argue the fall in BAC common stock just reflects Mr. Market being irrational once again.  In my opinion, the fall reflects the fact that no one can confidently determine the downside.

 

Continue to be amazed that not one insider has used a single $ of their own money to buy the stock at what some argue is an insanely cheap valuation, which was supposedly the case at $12 and then $8 and now $5.

 

 

 

 

[libor.plus1]

Thank you!

 

I thought I was the only one who thought dealing in BAC was more of a gamble than an investment. There are so many variables in play here, and most of them look to be on the downside. Anyone who can confidently say BAC is a good buy is kidding themselves.

 

That said, Sanjeev is right. I've been following this board for about 5 years, and never recall a stock or investment that the board agreed on this much that didn't do very well for its investors... FFH, SNS, ORH, NB, etc etc.

 

At the same time, I simply can't see the value here given all the uncertainty coming out of europe and china, not to mention on its own home turf. I can see this going to a 3 handle in about 6 months.

 

 

[berkshiremystery]

Just for a matter of fact, I sleep very well, being a long in BAC. I also had a couple of days ago purchased the January 2014 LEAPS. If BAC dives Fairfax-like-something (like that $57 day), you would see me on the buying side adding more, with both the common and the LEAPS.  :) Cheers!

[ERICOPOLY]

This being said, these fools on main street with their Schwab accounts continue to be RIGHT, while you boys are heading for the CLIFFS!  :o

 

 

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

[bmichaud]

This being said, these fools on main street with their Schwab accounts continue to be RIGHT, while you boys are heading for the CLIFFS!  :o

 

 

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

 

Oh snap. How dear you bash LVLT - it's a ten-bagger, remember?  8)

[Guest]

 

This being said, these fools on main street with their Schwab accounts continue to be RIGHT, while you boys are heading for the CLIFFS!  :o

 

 

 

"In adversity, remember to keep an even mind."

 

;)

[txlaw]

Thank you!

 

I thought I was the only one who thought dealing in BAC was more of a gamble than an investment. There are so many variables in play here, and most of them look to be on the downside. Anyone who can confidently say BAC is a good buy is kidding themselves.

 

That said, Sanjeev is right. I've been following this board for about 5 years, and never recall a stock or investment that the board agreed on this much that didn't do very well for its investors... FFH, SNS, ORH, NB, etc etc.

 

At the same time, I simply can't see the value here given all the uncertainty coming out of europe and china, not to mention on its own home turf. I can see this going to a 3 handle in about 6 months.

 

libor.plus1, when you say you think that anyone who thinks BAC is a good buy is kidding themselves, is there something about BAC in particular that you have in mind? 

 

Or do you pretty much have the view that all the financials are black boxes and shouldn't be invested in, as per the bottom answer on the survey?

[Kraven]

This being said, these fools on main street with their Schwab accounts continue to be RIGHT, while you boys are heading for the CLIFFS!  :o

 

 

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

 

Oh snap. How dear you bash LVLT - it's a ten-bagger, remember?  8)

 

I am pretty sure you MEANT to say that LVLT is a TEN BAGGER.  You also didn't add that Buffett believes in 20 punches, a margin of safety and America.  ;D ;D ;D