BAC Capital Plan Approved...JPM & Goldman Flagged

[fareastwarriors]

I too am very disappointed.  I wanted to see a reasonable dividend increase.  Share buybacks are too easy to cancel in a moment of trouble.  I dont think they have done enough and its going to weigh on the share price for another year.  This is going to keep big pension funds out because the dividend doesn't meet thresholds.  Not happy at all.  3 billion towards a dividend would have been approved.  Moynihan has not done what he stated he would do which was to split the money between buybacks and dividend, or else the fed told them not to ask. 

 

Now, we just have the cash piling on the balance sheet.  Not a good thing.

 

If they're going to do buybacks, I'd rather it be at low prices than high prices. They can always do a bigger dividend later, but for now, buybacks seem like a better use of capital IMO, and if the absence of a higher dividend allows them to buy cheaper, I think it's a good thing.

 

And if in the meantime they keep piling up capital on the balance sheet, it just means a bigger dividend and buyback next year, and a more solid balance sheet in the meantime, so it's not lost.

 

 

 

I really hope BAC can do some substantial buybacks before something blows up again ala a JPM/Whale or something else...

I would definitely like to see a lower share count.

[ericd1]

I agree - Buybacks below book value - Pay dividends later

[Parsad]

I win the bet Kraven...$10.5B!  Where's my dollar...it's worth $1.02 Canadian...I can get alot for that extra 2 cents.  ;D  Cheers!

 

Not so fast my good sir. The bet was $7 bil returned to the COMMON. I was very clear about it and asked that you confirm. I can't find it right now but go back to where we bet. I am still winning here. I will happily pay when it's $7 bil to the common. There is still 9.5 months to go.

 

I went back and checked...you sneaky bugger!  Yes, you stipulated in brackets "(common only), no other security".  I'm going to have to get Txlaw to read any agreement between you and me on a bet going forward!  ;D 

 

Remind me to give you your "100 Grand Bar" in Toronto.  Now I've got to cross the border to get one.  Can any of you Americans coming to Toronto, pick one up!  Cheers!

[Parsad]

Without that dividend increase the stock price has no support if there is a general market downturn.

 

The buybacks are going to be far more effective than the dividends as far as increasing shareholder value.  They actually did the right thing here...buy back shares under book, even tangible book maybe...and retire high interest preferreds.  If they just wanted to keep the stock afloat, dividends may have been better.  But if they want to permanently increase the value of the shares, then this was the way to go. 

 

Also, dividends tie you down to the large institutional shareholders...doesn't matter if loan losses are up, capital levels down...you pay the damn dividend and it's double taxation.  You buy back shares and it's permanent...done...more tax efficient and accretive to book and earnings when done right.  The Fed cannot cancel your share buyback after it's complete, but they can stop you from paying a dividend.  Cheers!

[dcollon]

Does anyone think Moynihan asked Mr. Buffett his thoughts prior to submitting their plan?  I hope so.

 

As it relates to pension funds, we don't have one investment policy statement from a client that says a stock has to pay a dividend.  We certainly have a lot of other goofy restrictions, but whether or not B of A's dividend is at some arbitrary level shouldn't matter.

 

I agree with Sanjeev that share repurchases sub TBV are more attractive.

[Uccmal]

What I think they have said with this (both BAC and the fed)  is we dont want to be committed to paying a dividend because we are unsure of our capital position.  Aftermarket is dropping back as this is realized. 

 

Not good.  Buying back 5% of shares is meaningless in the greater scheme of things.  If it was 20-30 Billion it would be meaningful, but 5 - really?

 

As to the preferred shares, this was going to happen anyway.  The prefs dont count toward Basel 3, and my bet is they issue lower cost debt in exchange.

 

Put me down as feeling that this is all smoke and mirrors.

 

[ERICOPOLY]

I also don't think buybacks support the stock in a pullback.  It just means an extra 5 billion of shares will be dumped by mutual funds who are trying to sell whatever is liquid.  So it might help support the overall market, but not the stock.  It just makes it a bigger target for the sellers looking for liquidity.

 

[ERICOPOLY]

I win the bet Kraven...$10.5B!  Where's my dollar...it's worth $1.02 Canadian...I can get alot for that extra 2 cents.  ;D  Cheers!

 

Not so fast my good sir. The bet was $7 bil returned to the COMMON. I was very clear about it and asked that you confirm. I can't find it right now but go back to where we bet. I am still winning here. I will happily pay when it's $7 bil to the common. There is still 9.5 months to go.

 

I went back and checked...you sneaky bugger!  Yes, you stipulated in brackets "(common only), no other security".  I'm going to have to get Txlaw to read any agreement between you and me on a bet going forward!  ;D 

 

Remind me to give you your "100 Grand Bar" in Toronto.  Now I've got to cross the border to get one.  Can any of you Americans coming to Toronto, pick one up!  Cheers!

 

Perhaps you can have Kraven buy it for you on credit and he can hold the collateral until you pay up.

[Uccmal]

Without that dividend increase the stock price has no support if there is a general market downturn.

 

The buybacks are going to be far more effective than the dividends as far as increasing shareholder value.  They actually did the right thing here...buy back shares under book, even tangible book maybe...and retire high interest preferreds.  If they just wanted to keep the stock afloat, dividends may have been better.  But if they want to permanently increase the value of the shares, then this was the way to go. 

 

Also, dividends tie you down to the large institutional shareholders...doesn't matter if loan losses are up, capital levels down...you pay the damn dividend and it's double taxation.  You buy back shares and it's permanent...done...more tax efficient and accretive to book and earnings when done right.  The Fed cannot cancel your share buyback after it's complete, but they can stop you from paying a dividend.  Cheers!

 

Yes,  "when done right" is the key here.  The only buyback I have seen done right in the last number of years is Seaspan.  The list of badly done buy backs far outweighs those done well.  SHLD, JPM, Potash corp, are three that immediately come to mind. 

 

And Moynihan said there would be more money toward dividends.

[moore_capital54]

Happy with the news. Congrats to boardmembers. Div would have been preferred (pun intended :) but I am very satisfied with a buyback. Some perspective in order: 14 months ago the majority of this board,investing public, and tv pundits thought BAC was doomed.

[Parsad]

I win the bet Kraven...$10.5B!  Where's my dollar...it's worth $1.02 Canadian...I can get alot for that extra 2 cents.  ;D  Cheers!

 

Not so fast my good sir. The bet was $7 bil returned to the COMMON. I was very clear about it and asked that you confirm. I can't find it right now but go back to where we bet. I am still winning here. I will happily pay when it's $7 bil to the common. There is still 9.5 months to go.

 

I went back and checked...you sneaky bugger!  Yes, you stipulated in brackets "(common only), no other security".  I'm going to have to get Txlaw to read any agreement between you and me on a bet going forward!  ;D 

 

Remind me to give you your "100 Grand Bar" in Toronto.  Now I've got to cross the border to get one.  Can any of you Americans coming to Toronto, pick one up!  Cheers!

 

Perhaps you can have Kraven buy it for you on credit and he can hold the collateral until you pay up.

 

Good idea! 

 

Kraven, do you mind just buying a "100 Grand Bar", and I'll give you the dollar (CDN) in Toronto.  Although it will be a loonie coin and your bank won't accept it in the U.S.  Cheers!

[Parsad]

Without that dividend increase the stock price has no support if there is a general market downturn.

 

The buybacks are going to be far more effective than the dividends as far as increasing shareholder value.  They actually did the right thing here...buy back shares under book, even tangible book maybe...and retire high interest preferreds.  If they just wanted to keep the stock afloat, dividends may have been better.  But if they want to permanently increase the value of the shares, then this was the way to go. 

 

Also, dividends tie you down to the large institutional shareholders...doesn't matter if loan losses are up, capital levels down...you pay the damn dividend and it's double taxation.  You buy back shares and it's permanent...done...more tax efficient and accretive to book and earnings when done right.  The Fed cannot cancel your share buyback after it's complete, but they can stop you from paying a dividend.  Cheers!

 

Yes,  "when done right" is the key here.  The only buyback I have seen done right in the last number of years is Seaspan.  The list of badly done buy backs far outweighs those done well.  SHLD, JPM, Potash corp, are three that immediately come to mind. 

 

And Moynihan said there would be more money toward dividends.

 

In one of the interviews, he said that capital would be returned to shareholders...of earnings above required capital...1/3rd to dividends, 1/3rd to buybacks...but he said that would be dependent on the share price and if it made more sense to do buybacks.  At this price, I think he believes that buybacks make more sense, as well as retiring the preferreds.  Cheers! 

[Kraven]

I win the bet Kraven...$10.5B!  Where's my dollar...it's worth $1.02 Canadian...I can get alot for that extra 2 cents.  ;D  Cheers!

 

Not so fast my good sir. The bet was $7 bil returned to the COMMON. I was very clear about it and asked that you confirm. I can't find it right now but go back to where we bet. I am still winning here. I will happily pay when it's $7 bil to the common. There is still 9.5 months to go.

 

I went back and checked...you sneaky bugger!  Yes, you stipulated in brackets "(common only), no other security".  I'm going to have to get Txlaw to read any agreement between you and me on a bet going forward!  ;D 

 

Remind me to give you your "100 Grand Bar" in Toronto.  Now I've got to cross the border to get one.  Can any of you Americans coming to Toronto, pick one up!  Cheers!

 

Perhaps you can have Kraven buy it for you on credit and he can hold the collateral until you pay up.

 

Good idea! 

 

Kraven, do you mind just buying a "100 Grand Bar", and I'll give you the dollar (CDN) in Toronto.  Although it will be a loonie coin and your bank won't accept it in the U.S.  Cheers!

 

Ha ha. First, in terms of the bet itself its about language precision, my friend.  I felt good and still feel good about what was going to happen with the common but didn't want to speculate on anything else further up the capital structure.

 

No need to worry (yet) about my dollar or 100 Grand Bar. There is still 9 1/2 months to go. We will declare a winner on Dec 31. If you would like to concede then that is another story. In terms of Toronto I wish I could come this year but unfortunately will not be able to make it.  I wish I could thought just to get that 100 Grand bar. I haven't had one in probably 20+ years.

[wescobrk]

My second call of no more than 5 billion (I was referring to the common) was right on the money.

Parsad was wise not to take it.:)

[Cardboard]

Some of you guys are way too rational. The market won't care about a small little buyback and resulting value accretion. It is way too mathematical, way too logical.

 

If you want to make big returns in the stock market like Ericopoly then you need stocks to move up fast. Sell, then buy a cheaper one. Then repeat again. Not to go up at decent returns over the long haul. If I was running a business I would buyback shares too, but here what counts to a degree is Mr. Market impression.

 

That is why I am disappointed here. The stock will go nowhere now until earnings emerge. There is nothing else before the next round other than upside on settlements which I think are likely the opposite.

 

Cardboard

[Uccmal]

Some of you guys are way too rational. The market won't care about a small little buyback and resulting value accretion. It is way too mathematical, way too logical.

 

If you want to make big returns in the stock market like Ericopoly then you need stocks to move up fast. Sell, then buy a cheaper one. Then repeat again. Not to go up at decent returns over the long haul. If I was running a business I would buyback shares too, but here what counts to a degree is Mr. Market impression.

 

That is why I am disappointed here. The stock will go nowhere now until earnings emerge. There is nothing else before the next round other than upside on settlements which I think are likely the opposite.

 

Cardboard

 

That summarizes my position nicely.  I want the stock to go up fast, or I wouldn't have bought Leaps.  I like to see a company succeed but I have bought all the stock I will ever buy and now I want that share price up.  Raising the dividend to 0.50 instead of the buybacks would have pushed the stock above $15.00 quickly, possibly even up to $20.00.  Now we wait another year which means another cycle of leaps, and the frictional costs involved. 

[ourkid8]

What a shame  :)  Mr. Moynihan is running this business for the long-term and doing all the right moves. 

 

Some of you guys are way too rational. The market won't care about a small little buyback and resulting value accretion. It is way too mathematical, way too logical.

 

If you want to make big returns in the stock market like Ericopoly then you need stocks to move up fast. Sell, then buy a cheaper one. Then repeat again. Not to go up at decent returns over the long haul. If I was running a business I would buyback shares too, but here what counts to a degree is Mr. Market impression.

 

That is why I am disappointed here. The stock will go nowhere now until earnings emerge. There is nothing else before the next round other than upside on settlements which I think are likely the opposite.

 

Cardboard

 

That summarizes my position nicely.  I want the stock to go up fast, or I wouldn't have bought Leaps.  I like to see a company succeed but I have bought all the stock I will ever buy and now I want that share price up.  Raising the dividend to 0.50 instead of the buybacks would have pushed the stock above $15.00 quickly, possibly even up to $20.00.  Now we wait another year which means another cycle of leaps, and the frictional costs involved.

[Parsad]

Some of you guys are way too rational. The market won't care about a small little buyback and resulting value accretion. It is way too mathematical, way too logical.

 

If you want to make big returns in the stock market like Ericopoly then you need stocks to move up fast. Sell, then buy a cheaper one. Then repeat again. Not to go up at decent returns over the long haul. If I was running a business I would buyback shares too, but here what counts to a degree is Mr. Market impression.

 

That is why I am disappointed here. The stock will go nowhere now until earnings emerge. There is nothing else before the next round other than upside on settlements which I think are likely the opposite.

 

Cardboard

 

Where is our old rational Cardboard?  Who is this guy talking about Mr. Market and trading!  ;D  Don't worry it is going over tangible book soon...dividend or not!  Cheers!

[Parsad]

Some of you guys are way too rational. The market won't care about a small little buyback and resulting value accretion. It is way too mathematical, way too logical.

 

If you want to make big returns in the stock market like Ericopoly then you need stocks to move up fast. Sell, then buy a cheaper one. Then repeat again. Not to go up at decent returns over the long haul. If I was running a business I would buyback shares too, but here what counts to a degree is Mr. Market impression.

 

That is why I am disappointed here. The stock will go nowhere now until earnings emerge. There is nothing else before the next round other than upside on settlements which I think are likely the opposite.

 

Cardboard

 

That summarizes my position nicely.  I want the stock to go up fast, or I wouldn't have bought Leaps.  I like to see a company succeed but I have bought all the stock I will ever buy and now I want that share price up.  Raising the dividend to 0.50 instead of the buybacks would have pushed the stock above $15.00 quickly, possibly even up to $20.00.  Now we wait another year which means another cycle of leaps, and the frictional costs involved.

 

That's the risk with LEAPs...there is always a time arbitrage involved and hell of a lot shorter than the warrants.  Do you still hold any common or warrants?  Or did you switch it all to LEAPs?  Cheers!

[Cardboard]

Sanjeev,

 

I can't waste my time anymore with this value for the long haul shizer. I need to compound what I got at 100% a year for the next 8 years to be a billionaire. Well maybe more accounting for taxes... Even if I don't get there, I want an AMEX black card asap!

 

Cardboard

[PlanMaestro]

[txlaw]

I win the bet Kraven...$10.5B!  Where's my dollar...it's worth $1.02 Canadian...I can get alot for that extra 2 cents.  ;D  Cheers!

 

Not so fast my good sir. The bet was $7 bil returned to the COMMON. I was very clear about it and asked that you confirm. I can't find it right now but go back to where we bet. I am still winning here. I will happily pay when it's $7 bil to the common. There is still 9.5 months to go.

 

I went back and checked...you sneaky bugger!  Yes, you stipulated in brackets "(common only), no other security".  I'm going to have to get Txlaw to read any agreement between you and me on a bet going forward!  ;D 

 

Remind me to give you your "100 Grand Bar" in Toronto.  Now I've got to cross the border to get one.  Can any of you Americans coming to Toronto, pick one up!  Cheers!

 

Haha, don't forget again that Kraven was a transactional lawyer.  He knows how to craft his language just in the right way!

[Uccmal]

Some of you guys are way too rational. The market won't care about a small little buyback and resulting value accretion. It is way too mathematical, way too logical.

 

If you want to make big returns in the stock market like Ericopoly then you need stocks to move up fast. Sell, then buy a cheaper one. Then repeat again. Not to go up at decent returns over the long haul. If I was running a business I would buyback shares too, but here what counts to a degree is Mr. Market impression.

 

That is why I am disappointed here. The stock will go nowhere now until earnings emerge. There is nothing else before the next round other than upside on settlements which I think are likely the opposite.

 

Cardboard

 

That summarizes my position nicely.  I want the stock to go up fast, or I wouldn't have bought Leaps.  I like to see a company succeed but I have bought all the stock I will ever buy and now I want that share price up.  Raising the dividend to 0.50 instead of the buybacks would have pushed the stock above $15.00 quickly, possibly even up to $20.00.  Now we wait another year which means another cycle of leaps, and the frictional costs involved.

 

That's the risk with LEAPs...there is always a time arbitrage involved and hell of a lot shorter than the warrants.  Do you still hold any common or warrants?  Or did you switch it all to LEAPs?  Cheers!

 

A mix between all three of course.  Actually sold 200 Leap contracts in the last two weeks.  Selling while iron was hot.  Still hold about 500 Leap contracts.    I have been in this game a long time, as you well know, boss. 

 

Lots of cash to deploy when there is a pull back. 

 

 

 

[Parsad]

Sanjeev,

 

I can't waste my time anymore with this value for the long haul shizer. I need to compound what I got at 100% a year for the next 8 years to be a billionaire. Well maybe more accounting for taxes... Even if I don't get there, I want an AMEX black card asap!

 

Cardboard

 

Cardboard, get me one of those cards too.  I want to be a baller in Vegas!  ;D  Is that the right terminology?!  Cheers!

[Uccmal]

The other thing that bugs me about buy backs versus dividends is when buy backs are announced, and they just end up keeping the share count static as per WFC.  These are what I call bad buy backs.  I will take the cash in my pocket over managements any day.  If you can convince me that BAC wont follow suit, well lets just say good luck to that.  My bet is the stock awards start to soak up the buy backs.