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Bank of America Is Back Under $8, And Why BAC Shareholders Should Be Selling Into This Strength
And BAC retraces 50% from its pop. An 81 year old Buffett should really stick to washing himself while in the bathtub, flying in private jets with Becky Quick, and contemplating ways to have everyone in America pay more taxes, and maybe even consider retirement every now and then, than making "Long-Term" investment decisions.
And some more observations from Alex Gloy from Lighthouse Investments:
Remember those people who “co-invested” with Warren Buffet in 2008 in Goldman Sachs (he bought a convertible bond with 10% coupon, exchangeable into Goldman shares at $125. The shares tanked to $48, making those co-investors lose their shirt).
Today the market cheers again, seeing Buffet’s investment as a sign of confidence. Let’s look at the deal:
Poor shareholders of BAC (but they deserve it). Buffet is taking out 300m of their pre-tax profit indefinitely, plus dilutes some of their upside. And they love it (BAC went from $7 to $8.80 within minutes of the announcement).
The calls (atm at issuance I assume) were worth 2.34 a piece (20% vola, 2% risk-free rate), times 700m = 1.638bn
He paid 5bn for the whole package, so 5bn – 1.638 = 3.362bn for the perpetual cumulative preferred. But the preferreds have liquidation value of 5bn, so he bought them at 67% of par. So his current yield is not 6%, but rather 9%. If BAC redeems after 1 year (at 105%) he will have made 105-67 = 38+6 = 44 over 67 = 65% profit (plus profit from the options).
BAC must have been pretty desperate to offer him such a deal. Maybe his part was also not completely voluntary. Before the Lehman bankruptcy, Berkshire sold a lot of naked, multi-year puts on equity markets at elevated levels, so a melt-down is not in his interest. Also the “chat” with Obama on “job creation” in recent days is suspicious.
Note: All my calculations are just back-of-the envelope and prone to mistakes.
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My namesake is 81...there is no more long-term for the codger; maybe this move was to spite the heirs.
Senility, bitchez!
Our BAC common model has fair value assessed at $2.05. We are not buying a penny beforehand. Sorry Warren, you were too early, as always. And your $5b preferred purchase increased our fair value target by only .05.
I'm convinced it wasn't Buffet own money, but Obama bucks (yours and mine) under the name of Buffet.
The entire ponzi plot thickens. Thugs make headlines today, no one else. White collar criminals are everywhere.
You know Goldman was just salivating at the stock pop. Time to get the weak hands out and short the shit out of BAC.
Fonzi, I mean, Warren, be careful water skiing! There's a shark up ahead!
What are the odds of this ending flat for the day?
SELL THE FUCKING SPIKE!
Tyler, this reads now ever more like a personal vendetta against BofA on your part. Think about Buffet whatever you like - his investment credentials are undisputable. (and yes, i know, past performance... etc). What about yours? Talk is cheap - as are most of your articles re. BofA and Buffet. At these levels I'd rather sell a boatload of these silly priced atm and otm puts on BofA then to get out of this stock. 2-3 years from now you (and many others) may well stare in disbelief at a bofA stock price of $20+ (without any reverse splits ond the likes) and kick yourself for letting bias and personal disliking getting in the way of a truly great money making opportunity.
"investment" opportunity? apparently, you're in line to get the same "preferred" terms as Buffet on his "preferred". this is a trade at best, imo.
perhaps someone's bunny just had a good nose yesterday as well considering the action in BAC.
unfortunately, it appears to me that the news yesterday that Schneiderman, the New York AG was kicked off the settlement panel jumpstarted the financial stock party.
i'm sure the timing is coincidental that Buffet makes this offer now.
personally, i would have regretted not selling the euphoria this morning.
Hell yeah. .25 for a Nov $4 put? I'll take 100.
Thanks for the heads-up - already up 15% !
Drudge Report has a headline stating Obama called Buffet prior to purchase....
He was guaranteed to get his money back from taxpayer dollars, duh...
There are still billions from the 2009 stimulus bill that remain unspent (yes the $864B one that had to be passed before yesterday, or life on earth would cease). You can bet that any investment lost to Buffet by buying a favor-stake in BofA will be replaced for the poor struggling Mr. Buffett out of the pockets of our children and grandchildren. But really, all of our banks are SOOOO healthy AND SOLVENT! Really, they're great....
Exhibit 1: Becky Quick "calls in" live to CNBC ( minutes after the BAC item crosses on the newswires ), clearly a team player: taking some time off from maternity leave/nursing the impressionable ( just like his mom ) Junior Quick with what appeared to be the residue of a private conversation with The Oracle. What we do not know is if the conversation was cellular via "private number" or familiar in nature.
Exhibit 2: Excerpt from today's Wall Street Journal:
"The billionaire investor told CNBC he was in the bathtub Wednesday morning, when he got the idea to approach Bank of America CEO Brian Moynihan about an investment in the bank. The Oracle of Omaha said an assistant phoned a Moynihan aide later that morning to pass on his private number so the two businessmen could talk."
Irish Spring, or is Uncle Warren a loofa and body wash kind of chap, Becky ? We await CNBC's "special report" for this actionable information, from the actionable financial news network.
What delicious irony.
Buffet got the idea to go 5 bln long in BAC while in the bathtub, and I got the idea to short BAC while taking a massive dump.
Oh, sour grapes, sour grapes ! But I'm in the money ! "Bank of America leads financials higher"---says the byline. And my 7.37 purchase is now profitable. As for the advice to sell into the rally; HA HA HA; yeah, sell into the rally; go right ahead. ha ha ha. Buffet bailed me out! HA HA HA. Sitting out the Silver market. I may put in a price order for 38.80 or better tomorrow, see if New York is gonna give out some love, or not. Maybe just save the free equity for my short long bond position; I'm going to be piling on that as it collapses; by Thanksgiving all those smart yound farts in the financial center trading departments will have paid for all my Christmas Shopping.
Even Buffet can't polish a turd!
Gotta get mine in for the ZH TIT TRIFECTA
Sure, you have made more money this year, than Buffet, silly.
I feel sorry for you since you and your few clients miss a great opportunity!
Plad - Slaughterer - HWC - nice pics gentlemen!! However, my mind is either on sex or business, and I prefer not to combine the two. While pleasant to look at, I find your pics incredibly distracting in this environment. Just my .02.
It's like three racks talking back and forth...
Not because of your request, but due to the recent copy cats - I will be changing my avatar!
Yeah, it was all good when it was just you Plad. Hell, I looked forward to you posts just so I could see that beautiful set! It's gotten old with so many copycats and everyone using porn avatars. I must admit that you guys have impeccable tastes in tits!
Don't mind me... I thought it hilarious.
[Frankenstein, Igor and Inga in front of HUGE castle doors]
Dr. Frederick Frankenstein: What knockers.
Inga: Oh, thank you doctor.
Reuters:
Buffett to support EFSF with $70bn loan @10% plus option to buy Finland
very funny!
4 pair of tits in the first 8 comments or so. Does this say something about a relationship between whores and banks?
Nice funbags though!!have to admit!
Maybe it's a sign of the times, since B of A is almost "tits up"?
What part of too big to fail is too complicated for you? Everyday you guys write, TBTF, TBTF this and TBTF that. IT MEANS EXACTLY WHAT IT SAYS. Warren Buffet bailed me out !!! HA HA; that should make a good conversation stopper at the golf club; "so how's your stock trading coming, Jim?" Oh, it's fine, Warren Buffet bailed me out this week" that should get 15 seconds of complete silence.
Crazy eh? Such a tell on the mind-set here. My theory, ZH is frequented by many old guys who probably feel guilty if they go watch porn. This is where they get their kicks. So many requests for larger sized pictures. Rather strange.
BAC is BACk. The Buffoon is not going to lose sleep if it goes down to $1. Who says he did not hedge this? Ehhhhhh?
Vivek
http://aadivaahan.wordpress.com/2011/08/24/precursor-03-bottom-falling-out-still-still-and-a-gander/
Tits on ZH is tradition just as much as gold is tradition.
If you say so slaughterer.
Also, tits is a uniquely white/jewish fascination. In most of the east/africa, they were "ONLY" baby feeders.
Then the puritans came and ruined it all.
Vivek
I've seen some of those Indian temple carvings, youse guys are into big round ones too!
I say it. He didn't hedge it. Now go light some cow dung and make yourself some breakfast; nitwit.
Warren Buffett, Amerikranski's ULTIMATE WELFARE QUEEN - stick him in a Sunrise Senior Living Center with 40 days worth of tapioca and Ensure in the fridge.
Warren Buffett's 'bizarre' thank-you note to Uncle Sam--
Warren Buffett Gives Uncle Sam A HUGE Wet Kiss In Pro-Bailout Ophe shoud have had someone chew on his information for him
This was expected. $5 billion is not enough
done and done. just unfortunate he will not enjoy this payoff as he won't remember it...
Thanks for the laugh
Now down to just a 13% pop and dropping.
As expected, the devil is in the details, and the details have been published. Looks like desperation to me. BAC is probably locked out of the money markets.
Nice to see AAPL, a "toy producer" that just lost its CEO, outperforming the entire S&P 500 there for just a second. Things look really fixed.
Buffet probably has a backroom deal with the USG for a guaranteed bailout of the bank (or atleast his investment) if things go sour. What does the USG get out of it? A CONfidence play for the sheeple.
I can already hear Warren Buckethead lobbying for a bailout......
Some people challenged Buffet to send a check to the government after he asked for taxes on the rich to be raised.
Well, there it is. He just sent 5 billion $ to the government.
I think you have that exactly backwards
How so? The gov will bail out BAC before it goes bankrupt. Buffet is doing his (hopelessly futile) part to help the State.
OLD PEOPLE BITCHEZ!
He said he wanted to give away all his money before he died...did he ever specify how?
Not sure, but I do wish he'd hurry the hell up and die already!
My saviour; my new daddy, Warrenkins; and you can't even say anything nice about hm. He made my stock trade profitable, and I'm sure he's a wonderful, wonderful, old gentleman.
To the Goober Mint.
It's the Buffet to Obama Hail Mary Bluff! If it doesn't work, things are really fucked!
I officially change Buffet's name to Bluffet.
A bit off the subject, but can anyone explain why the FAZ (triple short the SPY) is down large when SPY is also down????
You mean other than the fact that I believe it tracks XLF or another banking index? Wait 5 mins and you'll be green.
Edit: sorry, 5 seconds.
> clagr
Suggestion: Keep Coming Back..(And 'Paper Trade' for awhile..)
Buffet did not reach into his pocket and hand Chanker on America $5 billion bucks...no he was just the bagman delivery boy delivering a package. Theyre all still believing 'America loves Buffet'...this was just a delivery of a package to make a couple insiders whole.
Do you think this is part of the larger con that's (not)QE3 this week?
Yea I do!
+++
Watching it come together.
Yeah, by time the rally is over, you'll be ready to buy it.
Heck, I thought high 5's would be overpriced for that POS.
Check your meds warren.
Man, I am glad I dumped BRK a couple of years ago. Uncle Warren is off his rocker. Must be too much high fructose corn syrup and blizzards in his diet.
Absolutely right that folks should be selling strength. Buffett, with dry powder, gets to set terms in these distressed situations. He gets to use this as very important leverage that the rest of us don't have.
The leverage the rest of us have is that we can cancel any transactional accounts with BAC-Merrill Lynch although I suspect most readers of this website don't get any enjoyment from the BAC customer experience.
Bloomberg
DAX victim of fat finger
Anyone have an update on the CDS spread?
I would never waste five seconds of my life referring to such a thing; and neither should you. Check your notes; it didn't predict anything usable or tradable. Just repeat that to yourself a few times till it sinks in.
It's ten years ol'Warren is throwing good money after bad... but his shareholders don't seem to have noticed...
http://stockcharts.com/h-sc/ui?s=BRK/A:$GOLD&p=M&b=4&g=0&id=p12561630619
Gap fill time!!! Lol!
Buffon probably needs to take a trip to Disney World & get with Goofy & Dopey.
Did Moynihan indicate there were any problems with capital? No. Did Buffett get a sweetheart deal that the public can't replicate? Yes. Did the calendar just tick back 3 years? Yes. Kind of scarily eerie.
Thank you Warren for another opportunity to add a short position.
Thank you Dr. Engali for being so thiick; after all my profits have to come from people like you.
If BofA has to be resuced by taxpayers Obama can pretty much kiss his re-election goodbye. This move can be best seen as Buffet's contribution to Obama's re-election. It was widely reported that they talked on the phone earlier in the week. Plus the terms of this deal versus the GS or GE deals are ridiculously generous (only 6% div and 5% premium).
Note: MY calculations are that this is the perfect start to a MARKET CRASH. Tomorrow must be BLACK(EST) FRIDAY, Bernank fuckery notwithstanding or precisely because of..........
Bernank simply cant meet the high expectations of a huge diamond encrusted free money bomb to Wall St.
Got to admire how the FED simply sat back and let every bit of bad news get pumped by the MEDIA since January DOW >10K with 'This means QE3 expectations are higher, therefore pump stocks'....Bernank has never mentioned QE3 once himself!
People filled in the blanks themselves... '$2.5 trillion QE3 minimum is whats comin' when nothing is coming but more 'we'll sit back and monitor events'. Gonna get ugly fast when reality sets in.
Dog, I hope yer right, the $/Toz of AU should shoot up faster that way!
Never ignore the importance of the 'RoboTrader ultimate dumb money indicator'....like this morning when the DOW popped +100 on open, he said better get all in here long.
Just sayin'.
LOL, tumbling faster than a BOJ intervention
I'm sure this is OT but :
http://dealbook.nytimes.com/2011/08/25/e-u-clears-lubrizol-deal/?smid=tw-nytimesdealbook&seid=auto
EU clears Berkshire takeover of Lubrizol....
COINCIDENCE BITCHEZ!!
As soon as the deal leaked I pulled out my iphone to read via Yahoo! Finanace: BAC:EPS: (1.64) USD, and thought WTF they're gonna split that between an additional 700 million shares? Please, you can keep it.
Gotta love the inverse correlation of gold with stocks right now.
You don't get it. DC has already leaked that it's planning a huge housing bailout to be unveiled in the next few days. One component is paying to allow underwater homeowners to refi at record low rates. It's supposedly going to free up $85 billion into consumer hands immediately. It's one of several fiscal stimulus measures to be unveiled shortly
'Adjust the rate' for unemployed bankrupt totaly underwater homeowners. Yea that'll fix it, throw more imaginary money into the fire has worked so well so far.
Refi? If they don't include principle reduction it won't do shit. Besides, $85 billion = .06% of GDP. Not exactly a game changer.
Yea, meaningless. And $85 billion from where? Buffet?
Or is the USA federal budget now entirely printing and handing out free money? People can think that ends well all they like.
I'm ready to believe anything similar to this; it's an election year; and they will stop at nothing. DO NOT SHORT THIS STOCK MARKET. Now, you can't blame me.
Think the Republicons will go along with ANYTHING proposed by the Obamatron? I predict MORE gridlock ahead!
Gold establishing long rejection tail today. Hasn't Roubini heard of a retracement? He's Tweeting like it's the end of the trend. Maybe it is but if things continue as they are, Gold should go higher. Gold futures have retraced half way back from it's blast higher.
Roubini has met the enemy and it is him
Why does anyone even talk about this assclown?
Didn't JP Morgan buy the Great Depression market, for a short term bump, before the big crash.
History repeats.
Stupid blog site making stupid opinionated statements again on envelope math. Maybe Tyler is just trying to 1 up himself and make a real news segment this time.
Maybe youre just a dick.
I love TD, just being sarcastic.
nice ass! Stupid comment GFY
Everyone is entitled to an opinion, so do you! It just does not have to be here!
Thank God for ZH.
Maybe it was a $5bn donation (charitable). No heirs?
Oh, he has heirs, alright ! His daughter collaborated on an UN-authorized biography. Many things are easier to understand after you read this.
As I was saying all the time for a week or so KEEP YOUR COOL, most of it is NOISE! ZH helps sort through the NOISE, but you need to do your own home work too!
C'mon feel the noise
Girls rock your boys
its gonna be wild wild wild
http://youtu.be/KW2J_UZ8lQU
Nice buy op on FAZ...Thanks...
i hope buffet gets fucked
hope is not a plan, short that fucker
Buffet pony's up 5 large to BAC = more debt for BAC. Commercial lending is dead, so where/how are they going to make the monthly on this?
BAC common goes up on news of more debt in a weak lending environment.
Sorry, I don't get it. The game is rigged.
Told ya, buy BAC, sell GOLD, but
you were enjoying the ride on the Gold train
http://img402.imageshack.us/img402/3118/trainwx.jpg
until
it gets off the rails :)))))
So over cocktails at the 19th hole on Martha's Vinyard, the O let you in a little secret?
COCK is the operative word here....
This is very suspicious considering the old fuck met with Obama recently, I bet he is a frontman on this deal with Obama's/govt money so to instill confidence in the bank and indeed the financial system, but it proves that B of A needed funds after all and this move will untimately end up backfiring!
If this was the big Obama/FED plan to lend credibility to the BK banking system, wow what a fart in a hurricane.
Of course; it's psychology. Uncle warren is a power broker, and potentially, a king-maker. that's exactly what he did, lend credibility to the banking system; and to the incumbent. (remember Clinton's famously cynical comment about politics, "it's the economy, stupid") You say it didn't work. The market says, it did work. Who should we listen to?
BAC now 7.83, WB job was to provide an exit for those in club and for WB heavy lifting a better yield than he could get in Treasuries. Mission accomplished.
Whole thing just a backdoored bailout for a few insiders who were in trouble. This was QE3.
Why does Buffett get the inside scoop from Obama and likely a sneek peak of Bernanke's speech before the public? Isn't this a form of insider information?
Yep, welcome to the New World Odor.
The timing of it is just absolutely stinky.
now, now. let's not have any more of that unjustifiable paranoia. Let's just say it's all part of the re-election campaign; and get it right the first time. You scratch my back, I'll scratch your back is not exactly a new concept in politics or finance.
Added to our BAC effective short position this morning (all via options). This is the same Warren Buffett who bought Solomon Brothers. And this deal is a huge screwjob for BAC shareholders (on the upside) and does nothing to protect them on the downside. I bet they will still need to issue shares, and maybe even do a preferred-common conversion, before all this is said and done. If BAC were liquidated tomorrow, I think many people, like me, believe the resulting "book value" would be a negative number. There is a significant chance that counterparties start to pull exposure soon.
"If BAC were liquidated tomorrow---" Jesus Christ what's it going to take for you to understand this simple statement. Too Big To Fail. It's not exactly quantum mechanics, is it? I hope you enjoy watching the value of your options evaporate like water in the Nevada Desert.
"and its gone, poof! next"
http://youtu.be/RAKsMnAM8vk
I took a gamble and bought some Nov 7.50 puts. Did well with that strategy with Wachovia a couple years ago - lets see if I can lucky twice. That hyperparabolic bounce just looked too irresistable.
Clearly, the only way Buffett can justify the purchase is if someone gave him a "get out of jail free" card. Somebody guaranteed that he wouldn't lose money on the trade.
He has traded on insider information for years....
Meanwhile the BAC shares bought at average volume over the last week by those in the loop get dumped today at a 20% profit hidden by massive dumb money volume.
and now that they have feasted on the poor, they begin to feed on each other.
$5 Billion is just a bridge loan to bankruptcy, BAC is so far gone, $50 Billion wouldn't help. This is Buffets cost in the end of acquiring Merrill when the Ch 11 trustee divies up the the plunder. Unfortunately for Warren, Merrill is probably worthless, this will end badly...for him!
at least we know qe3 is going to come tomorrw, but what you don't know is how the market will react AFTER the announcement. before the announcement, much like august 9, a ramp up just before . ...
Keep your eye on the fresh economic data, from August. Tuesday we learned ICSC week-on-week department store sales down another 1%. Today we learned new unemployment claims up some 4% week-on-week.
The bulls' only hope is a clear QE3 signal out of Bernanke. No QE Lite or QE Twist can help them here, they need QE Classic. They're not going to get that yet. It's not too late to add to your puts.
http://how-to-trade-armageddon.com/
Once again, we see big bank management giving a better deal to an outside financier than what their current shareholders own. Given that BAC is still up on the day over 10%, few BAC shareholders probably realize they are worse off in the long run than they were yesterday. But that is the truth of it. That is the great deception of these kinds of deals, and why I must respectfully accept that Wall Street type salesmanship is the most effective there ever was. Too bad for most investors that it’s all they’ve really got to offer.
It all gives me a great idea for a new video game. I’m going to call it Grand Theft Finance. Perhaps the thirteen year olds playing it will gain some understanding of just how corrupt and destructive our financial markets have become.
I wonder how many shares of Berkshire the top execs at BAC own?
Now you're making sense. Copywrite your name, and get to work on your game. A video game like that could be a money maker. On second thought; maybe I'll just copywrite your name, and farm out the programming.
bullshit, this is a set up. They are going to put al lof the TOXIC mortgauges in a RTC style sell of, remove them from the balance sheets, gaurantee the lossees, and ump them on the market, furthur cratering thee RE market, there bye reducing property tax intake, which they will have to raise property yax rates to cover the shortfall caused by the dump, creating another crisis, and the eventual downfall of the US. Why do you tink last week Obamster went to Buffet for advice? Buffet giving the gubment a big wet kiss on raising taxes? Buffet knows what they are gonna do, and will profit from it. Don't think he is a senile old 81 year old, he is wired to the gubmint.
Thanks, Billionaire Buffet for making my day.
Knowing that by continuing t not pay my (inherited) mortgage over the past 25 months I helped you throw $5 billion into the worthless POS that is Bank of America.
I hope you had a nice bath, Warren, because you're about to take another one.
Suckah!
I'm not that interested in the 'chat' he had with B.O. before doing it. I'd be very interested in the chat B.O. had with his bosses before the call! I can kind of imagine what was said.
Just another day in pair..of..dice. The Pit boss has extended the lines of credit another 5 bililion. Play on bitchez, just remember when the Casino burns to the ground you both lose. Reminds me of March 2009 when the tables were empty and the place was about to be torched, the Pit Boss said the economy had fallen off a cliff and then he recieved a huge loan from "somebody" to get the casino rolling again. This was followed up by the President's speech advising everyone that now was the best time to buy stocks... Poof... And the rest was history... Free markets bitchez...lol
Buffet-"$5 Billion on BAC's next roll...ahh shit! crapped out, guess I will take Merrill and run!"
You know Buffett got some guarantee from the govt to backstop BAC. It's the Taxpayer Put.
Nonsense, I'm sure he's just a lovely old gentlement who like to help out struggling Banks.
Guy belongs in a cell with Madoff
Is it any wonder that, unless you're the likes of Buffett, buy-and-hold is dead as an investment strategy ?
Getting kicked 700 million shares down the line and paying 6% for the privilege is an outrage!
Buffett has a great investment record, but I don't know. He kind of seems to be slipping a bit. First we find out that one of his trusted aides has been frontrunning him. Then he comes out with flakey statements about how multimillionaires aren't paying enough taxes. I get the sense that he feels he is going to die soon and has kind of given up on financial matters.