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Bank Of Berkshire America: Buffett To Buy $5 Billion In Preferred Stock In Bank Of America

Tyler Durden's picture




 

Goldman bailout part 2 is here. And so the Octogenarian of Omaha doubles down on another taxpayer bailout. At least we can put aside all the lies that Bank of America did not need capital. It needed capital: $5 billion of it. It also confirmed it was completely locked out of both debt and equity public capital markets - the bank's only recourse was a private raise with a crony capitalist who is once again doubling down on the global ponzi.

From the press release:

Bank of America Corporation announced today that it reached an agreement to sell 50,000 shares of Cumulative Perpetual Preferred Stock with a liquidation value of $100,000 per share to Berkshire Hathaway, Inc. in a private offering. The preferred stock has a dividend of 6 percent per annum, payable in equal quarterly installments, and is redeemable by the company at any time at a 5 percent premium.

In conjunction with this agreement, Berkshire Hathaway will also receive warrants to purchase 700,000,000 shares of Bank of America common stock at an exercise price of $7.142857 per share. The warrants may be exercised in whole or in part at any time, and from time to time, during the 10-year period following the closing date of the transaction. The aggregate purchase price to be received by Bank of America for the preferred stock and warrants is $5 billion in cash.

We are building the best franchise in financial services and we have laid out a clear plan to deliver long-term shareholder value,” said Bank of America Chief Executive Officer Brian Moynihan. “I remain confident that we have the capital and liquidity we need to run our business. At the same time, I also recognize that a large investment by Warren Buffett is a strong endorsement in our vision and our strategy.”

Bank of America is a strong, well-led company, and I called Brian to tell him I wanted to invest in it,” said Berkshire Hathaway Chairman and Chief Executive Officer Warren Buffett. “I am impressed with the profit-generating abilities of this franchise, and that they are acting aggressively to put their challenges behind them. Bank of America is focused on their customers and on serving them well. That’s what customers want, and that’s the company’s strategy.”

 

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Thu, 08/25/2011 - 09:14 | 1598844 alexwest
alexwest's picture

i wonder that is the usury rate? 20- 30 - 50%

 

alx

Thu, 08/25/2011 - 09:16 | 1598863 ZeroPower
ZeroPower's picture

Stock up 24% right now lol what a joke

Thu, 08/25/2011 - 09:20 | 1598904 Pladizow
Pladizow's picture

Irrespective of the company, when there are price moves of this magnitude (25%+), there is something fundamentally wrong!

Thu, 08/25/2011 - 09:29 | 1598989 Fish Gone Bad
Fish Gone Bad's picture

Let me get this right.  BAC just got another master.  Looks like this horse can get whipped some more.

Thu, 08/25/2011 - 09:30 | 1598998 Thomas
Thomas's picture

If we knew the details we would all splatter our screens with projectile vomits.

Thu, 08/25/2011 - 09:52 | 1599135 SWRichmond
SWRichmond's picture

I wonder if Buffett thinks this will get him in bed with Becky Quick?

Thu, 08/25/2011 - 10:49 | 1599359 TruthInSunshine
TruthInSunshine's picture

Buffet knows that the economy is CocaColaDairyQueenNebraskaFurnitureMartLicious:

 

08-25 9:31: Pimco's El-Erian says Bernanke must avoid QE3 in Friday's...

Pimco's El-Erian says Bernanke must avoid QE3 in Friday's speech ECONOMIC COMMENTARY

says

- should avoid any suggestion the US central bank intends to pursue purchases of Treasury Bonds and instead use a much anticipated Friday speech to press for economic reforms.

 

The Bernank is lobbying the TOTUS to get El-Erian branded as a threat to national security. 

--In other Recovery Summer™ 3.0 News--:

 

Foreclosures made up 31 pct. of home sales in 2Q

The Associated Press - 31 minutes ago

Foreclosure sales, which include homes purchased after they received a notice of default or were repossessed by lenders, accounted for 31 percent of the market in the April-June quarter, foreclosure listing firm RealtyTrac Inc. said Thursday.

The share of the market would likely have been larger this spring if not for a state and federal investigation into faulty paperwork by banks and servicers. The probe has led many banks to delay foreclosure sales. Once that is complete, foreclosures will likely surge later this year.

 

--and even with record low mortgage rates--

 

New-Home Sales Fall, 2011 Could Be Worst Year In History - ABC News abcnews.go.com › Money  

2 days ago

 

---and, just for the big cherry on top, the real unemployment rate is confirmed by yet another source to be higher than 20%--

 

The Jobless Effect: Is the Real Unemployment Rate 16.5%, 22%, or ?

Raghavan Mayur, president at TechnoMetrica Market Intelligence, follows unemployment data closely. So, when his survey for May revealed that 28% of the 1,000-odd households surveyed reported that at least one member was looking for a full-time job, he was flummoxed.

"Our numbers are always very accurate, so I was surprised at the discrepancy with the government's numbers," says Mayur, whose firm owns the TIPP polling unit, a polling partner for Investors' Business Daily and Christian Science Monitor. After all, the headline number shows the U.S. unemployment rate today is 9.5%, with a total of 14.6 million jobless people.

However, Mayur's polls continued to find much worse figures. The June poll turned up 27.8% of households with at least one member who's unemployed and looking for a job, while the latest poll conducted in the second week of July showed 28.6% in that situation. That translates to an unemployment rate of over 22%, says Mayur, who has started questioning the accuracy of the Labor Department's jobless numbers.

Thu, 08/25/2011 - 11:27 | 1599731 Bananamerican
Bananamerican's picture

Spooky...

"Black Tuesday, 1929. A wind came by and blew a few cards off the house of said cards. People saw stocks were actually falling (something they hadn't done in a long time) and the trendreversed. People hurried to get out of stocks and minimize their losses. As this happened, more people did the same which exacerbated the situations.

J.P. Morgan made a valiant effort to save the economy by putting the modern equivalent of tens of billions of dollars into certain banks, but to no avail. Folks wanted out quickly at whatever cost."

http://www.essortment.com/causes-great-depression-37980.html

Thu, 08/25/2011 - 10:27 | 1599373 nope-1004
nope-1004's picture

Wow.  I just love the incredible foresight and knowledge this wise ol' investor has.  It's truly amazing.  He meets with Obama, then has the one-in-a-million vision to invest in BAC, a wholly insolvent entity.

It takes courage people for someone with such incredible investments skills to invest in an insolvent bank.

NOW I'M TURNING MY FUCKING SARCASM OFF!!!!

Warren's a bankster thug.  It's easy to tithe your excesses as he does and garner adoration on the surface, meanwhile under the radar you help manipulate this gloriously free market.

I'm ready to puke.  Thug.

Thu, 08/25/2011 - 16:47 | 1601533 Freewheelin Franklin
Freewheelin Franklin's picture

I wonder if Buffett thinks this will get him in bed with Becky Quick?

 

 

Been there, done that.

Thu, 08/25/2011 - 09:39 | 1599053 Mercury
Mercury's picture

They essentially took Cramer's advice proffered a couple days ago:

"Find a billionaire to vouch for you..."

Thu, 08/25/2011 - 09:56 | 1599167 Citxmech
Citxmech's picture

So did Berkshire have $5 billion in cash "just sitting there," or did they have WF print it up for them? . .

Thu, 08/25/2011 - 11:39 | 1599791 NotApplicable
NotApplicable's picture

Probably took it from their loan loss reserves, knowing they won't need them. *wink, wink, nudge, nudge*

Thu, 08/25/2011 - 12:30 | 1600045 Sancho Ponzi
Sancho Ponzi's picture

He had about $48 billion in cash

Thu, 08/25/2011 - 16:48 | 1601540 Freewheelin Franklin
Freewheelin Franklin's picture

Fuuuuuck meeeee

Thu, 08/25/2011 - 09:45 | 1599108 I think I need ...
I think I need to buy a gun's picture

doesn't bofa own merrill lynch who is a bullion bank

 

maybe this is a backdoor gold buy right before open market operations in gold very shortly

Thu, 08/25/2011 - 09:23 | 1598933 Cognitive Dissonance
Cognitive Dissonance's picture

Looks like Warren's BAC botox inject will work for a while. Can't wait to see what happens tomorrow in Jackson Asshole. It seems to me that there are a lot of poeple on one side of the boat.

Thu, 08/25/2011 - 09:32 | 1599013 Don Birnam
Don Birnam's picture

Hold the phone !

"Becky" Quick is calling in live on CNBC -- ostensibly from her maternity leave/breast feeding session with the new Junior Quick -- and reporting on Uncle Warren's exercise in senility. These two are curiously -- and unsettlingly -- joined at the hip.

Thu, 08/25/2011 - 09:36 | 1599042 Cognitive Dissonance
Cognitive Dissonance's picture

What's wrong with a Dec 29th/April Fool relationship? And who said the Junior Quick is who we assume he is? The world is full of stranger bedfellows than these. :)

Thu, 08/25/2011 - 09:42 | 1599056 Don Birnam
Don Birnam's picture

Ha -indeed, CD.

Touche ! 

Junior Quick ? There is a curious resemblance, though...

http://newsimg.bbc.co.uk/media/images/46615000/jpg/_46615134_2--warren-b...

Thu, 08/25/2011 - 09:51 | 1599132 Cognitive Dissonance
Cognitive Dissonance's picture

I can't wait to see the pictures of Junior Quick so we can compare them to Warren.  

Baby Warren

Thu, 08/25/2011 - 09:54 | 1599149 SheepDog-One
SheepDog-One's picture

Try adding horns and hooves to the above, then youre closer.

Thu, 08/25/2011 - 11:50 | 1599254 FEDbuster
FEDbuster's picture

Becky should have stuck to blowjobs for interviews.  One too many rum and Cherry Cokes on the plane to China?

Fri, 08/26/2011 - 05:16 | 1599182 The Limerick King
The Limerick King's picture

 .

Thu, 08/25/2011 - 10:02 | 1599210 Founders Keeper
Founders Keeper's picture

Becky Quick is out on maturnity leave?

GET OUT of here.  She was pregnant?  I'm serious.  Oh, the magic of Hollywood.

 

Thu, 08/25/2011 - 09:38 | 1599044 Founders Keeper
Founders Keeper's picture

Hi CD.

Indeed.

And one has to wonder how Warren's "investment" has been backstopped by the US taxpayer.

 

 

Thu, 08/25/2011 - 09:43 | 1599095 Sig Sauer
Sig Sauer's picture

thinking the same thing....wasn't it earlier this week or late last week the Teleprompter in Chief was said to have called Buffet?

Thu, 08/25/2011 - 09:53 | 1599143 Founders Keeper
Founders Keeper's picture

You remember correctly.  Thinking the same.

(Green arrow for your sidearm.)

 

Thu, 08/25/2011 - 10:00 | 1599196 Cognitive Dissonance
Thu, 08/25/2011 - 10:07 | 1599236 Sig Sauer
Sig Sauer's picture

close...P232

 

Thu, 08/25/2011 - 10:31 | 1599396 Cognitive Dissonance
Cognitive Dissonance's picture

I see it now that I'm squinting at your Avatar. Tyler needs to put in bigger Avatar's or this old man needs better eyes. I love how smooth the Sig action is. Nothing like it.

http://www.sigsauer.com/CatalogProductDetails/p232-stainless-whogue-grips.aspx

Thu, 08/25/2011 - 09:45 | 1599101 SokPOTUS
SokPOTUS's picture

Yep.  He already knows the bailout terms are finalized.

Thu, 08/25/2011 - 10:00 | 1599200 FEDbuster
FEDbuster's picture

At least the old fart understands "Too Big To Fail".  Granted he squeezed them pretty good 6% + 700K in the money warrants, but when B of A goes down and the government steps in to save them, Warren will be at the front of the line.  Warren also said, "this is an investment in the United States".  He wants it to look like he is the brave captain of capitalism willing to go down with the ship.

Thu, 08/25/2011 - 10:18 | 1599296 Founders Keeper
Founders Keeper's picture

"At least the old fart[Warren] understands "Too Big To Fail".  Granted he squeezed them pretty good 6%..."

Are we still talking about Becky Quick?

 

Thu, 08/25/2011 - 10:27 | 1599365 FEDbuster
FEDbuster's picture

I thought we had moved on to "bailouts". 

Becky is just looking to quit her day job, when Uncle Warren sets up a trust fund for the little bastard. 

BTW, does Zerohedge make some money everytime I click on the "Obama 2012" ad?  Does Obama's campaign fund pay for the ads or is Google giving them ad space for free?  The fucking asshole comes up about every third page.

Thu, 08/25/2011 - 17:42 | 1601766 antaresteleko
antaresteleko's picture

Hi folks, this is my very first comment at ZH, and I have to say that by no means I am an expert in finance... so please be gentle with me...;-)

Just wondering: that preferred stock 6% dividend per annum, couldn't it be that 6% dividend comming from the equity share BAC owns from the FED? Could it be possible that there is some private agreement for Berkshire Hathaway to own the dividend rights that in turn BAC has on their share of the FED? In that case, if finally BAC crashes Warren Buffet would have secured a very good damm deal... 

I know I came a bit late into the conversation but... any thoughts?

 

Thu, 08/25/2011 - 10:13 | 1599272 fx
fx's picture

there is no need for any backstop. The warrants themselves have a value far above the 5 bn Buffet paid for the preferreds - and he gets those 5 bn back with interest! So Zh was obviously right that BAC was really in desperate need of cash. I wonder what Bruce Berkowitz thinks about all this. I could imagine he has a lot less sympathy now with BofA's CEO. I mean, he made a public cc with Moynihan and now the whole world can see how he (and all other listeners) got bullshitted to the hilt. And Buffet got such stunning terms. I mean, he could at least have asked Bruce if he wanted to participate with a couple hundred million $ , no? but perhaps he has...?!

Thu, 08/25/2011 - 09:24 | 1598946 AccreditedEYE
AccreditedEYE's picture

Total BS. First of all, he picks NOW to get involved in Bank of Countrywide Merrill Lynch. Forget about the fact that is against all of his investment "criteria". So much for being a long term investor... this is a trade pure and simple. Just like Goldman was. He throws his name and money around knowing the equity will get goosed. Except, you better watch out this time Uncle Warren... this ain't The Squid. There's LOT's of bodies buried around this dump of a stock. This may be the one that finally tarnishes your name.

Thu, 08/25/2011 - 09:29 | 1598985 HoofHearted
HoofHearted's picture

Other sources are reporting this is 50,000 preferred shares at 100,000 apiece with a 6% dividend. Shows how desperate BAC is. I just shorted at 8.60, and I'm already making some fiat. Everyone will recognize that it took this sugar daddy to save BAC so that Buffett can help his buddy Obama out. They've got Soros left, but how many other billionaires out there will do what they can to save O's arse?

Thu, 08/25/2011 - 09:50 | 1599015 AccreditedEYE
AccreditedEYE's picture

Congrats on the fiat. After the ass-rape that the SWF's took injecting capital WAY TOO EARLY into the banking system last time, the bastards can't count on that this time either. Europe will trigger everything.

PS- thanks for the hat tip Uncle Warren... now we know we REALLY have a tsunami coming if you're touching this POS.

Thu, 08/25/2011 - 10:05 | 1598962 Translational Lift
Translational Lift's picture

Article lead-in says it all.....Goldman bailout part 2 is here.

Unfortunately.....This like giving artificial respiration to a drowning victim......may get the heart going but the victim is still brain dead.....

Thu, 08/25/2011 - 09:31 | 1599009 strannick
strannick's picture

I remain confident that we have the capital and liquidity we need to run our business.

-So you can scrape together enough cash to keep the lights on? Now theres a glowing endoresment if you ever heard one.

"At the same time, I also recognize that a large investment by Warren Buffett is a strong endorsement in our vision and our strategy.”

-Uncle Warren getting in at loanshark rates isnt a strong endoresment. Its desperate times calling for desperate measures.

 

Thu, 08/25/2011 - 11:28 | 1599735 FlyPaper
FlyPaper's picture

Damn right Uncle Warren is getting loanshark rates - and how do the stockholder of BoA benefit from 700 million warrants?   

Warren's no dummy, and likely there is some kind of discussion with the Fed and Treasury for bailout of BoA hence Warren is investing in a government guaranteed company and getting a great return, while the taxpayers are on the hook for the results of the "Strategy"....

Could turn out to be a very smart move for Berkshire.

The major risk I see is if BoA is "WAMU'd" into good assets in a bankruptcy.  I don't think citizen sentiment is where it was in 2008... hence objections may abound.

 

Thu, 08/25/2011 - 09:22 | 1598928 septicshock
septicshock's picture

Does anyone else feel like zero hedge gets it wrong as much as it gets it right?

Thu, 08/25/2011 - 09:25 | 1598950 Gully Foyle
Gully Foyle's picture

I here that. Virtually no mention of Jimmy Buffet.

Thu, 08/25/2011 - 09:39 | 1599058 Dr. Richard Head
Dr. Richard Head's picture

Wasting away again in Bank of Americaville. 

Looking for my bailout of stock.

Some people claim that it's an insider trade.

But I know, Uncle Sam can be bought. 

Thu, 08/25/2011 - 09:50 | 1599129 Gully Foyle
Gully Foyle's picture

Hehehe

Have you seen what Ray Stevens has been doing?

 

http://www.youtube.com/watch?v=J6TcpfBHlbs

Ray Stevens - Obama Budget Plan

 

And then there is this

http://www.youtube.com/watch?v=0-tsgMsU4Ws&feature=related

Wasting Away in Obamaville

Taxing the rich
I know there’s a hitch
All of those Gulf waters smothered in oil
Beatin’ my Racism drum
Singin’ my immigration hum
Smell those voters they’re beginnin’ to boil

Wastin away again in Obamaville
Searching for my lost majority
Some people claim that there’s a Bush to blame
But I know it’s my own naivete

I don’t know the reason
I stayed here all voting season
Nothin to show but higher unemployment
My wife left for Spain
Spending those tax dollars in vain
All I’ve got left is disappointment

Wastin away again in Obamaville
Searching for my lost majority
Some people claim that there’s a Bush to blame
But I know it’s my own naivete

I blew out my mandate
Hoping it was Pelosi and Reid voters would hate
But now I know they’re too smart for that
I hope there’s life in my lies
And that people don’t realize
The truth before November

Wastin away again in Obamaville
Searching for my lost majority
Some people claim that there’s a Bush to blame
But I know it’s my own naivete

 

Thu, 08/25/2011 - 09:25 | 1598953 Stoploss
Stoploss's picture

Are you too retarded to tell the difference between a green arrow and a red arrow?

Thu, 08/25/2011 - 09:31 | 1599005 Gully Foyle
Gully Foyle's picture

The Green Arrow is Oliver Queen and Red Arrow is grown up Speedy.

Thu, 08/25/2011 - 09:35 | 1599035 Gully Foyle
Gully Foyle's picture

What tactless twat would junk a DC comics reference? Especially one regarding classic characters. For fucks sake Speedy was a JUNKIE! A Goddamned junkie who clawed his way back into the hero's pantheon.

 

Thu, 08/25/2011 - 09:53 | 1599141 eisley79
eisley79's picture

marvel fans, that don't like their heroes, as homer puts it, "Flaaaaaaaming"

Thu, 08/25/2011 - 09:25 | 1598954 Pladizow
Pladizow's picture

Where was BAC 1yr, 3yr, 5yrs ago compared to today?

Thu, 08/25/2011 - 09:25 | 1598958 Robot Traders Mom
Robot Traders Mom's picture

ZH lays out the facts. There was nothing untrue with what Tyler has been saying. BAC has had a firesale the last two weeks and now raises $5b more ala Goldman.

If you are too ignorant to see this is a manipulated market and you are a puppet, maybe you should go troll somewhere else.

Thu, 08/25/2011 - 09:32 | 1599019 Zymurguy
Zymurguy's picture

Yes... they've been selling off various business units around the globe for months now.

Thu, 08/25/2011 - 09:39 | 1599057 falak pema
falak pema's picture

I hope you spank your son often.

Thu, 08/25/2011 - 09:46 | 1599112 septicshock
septicshock's picture

I have been part of zerohedge for a while now... Own silver and gold to the hilt.... Was just making an observation. Look at the animosity. Never trolled in my life.

Thu, 08/25/2011 - 09:50 | 1599130 Robot Traders Mom
Robot Traders Mom's picture

Since Tyler is wrong so often, you should probably just go sell your 5 shares of GLD and 10 shares of SLV...

Thu, 08/25/2011 - 09:59 | 1599191 mendigo
mendigo's picture

thing is, ZH is right about half of the time on subjects that are at the leading edge of financial news and that the MSM and other protectors of the staus quo try to keep from the public (for our own good) an when they are wrong they are at least making a genuine effort to put it our their and they do not use vague/ambiguous language which leaves one wondering about their interpretation. under the circumstances their efforts are nothing short of heroic (and heretic) and your shitty comment was way ignorant but it is cool that you make the observation so the forum can let you know what a naive ass yuo are

Thu, 08/25/2011 - 11:47 | 1599835 FlyPaper
FlyPaper's picture

I look at Zero as the best overall web site for salient insight.  Writers make arguments (sometimes good, sometimes.... not so good) and its up to the readers to filter.  I love this site!    That said, the F-bombs and name calling is a bit tiresome as are accusations of Trolls and Shills.  There certainly are trolls out here.   So what?   

BTW, I miss Robot Trader.  People who take a contrary stand are to be lauded.  After all many ZH bloggers are the ultimate contrarians when it comes to national "finances" and "the establishment."

Thanks for commenting...

Thu, 08/25/2011 - 09:48 | 1599120 septicshock
septicshock's picture

Looks like i have also been a member longer than most of you pukes.

Thu, 08/25/2011 - 09:30 | 1598997 tmosley
tmosley's picture

Does anyone else feel like the trolls always make baseless assertions without any evidence and expect people to just accept it as fact.

Thu, 08/25/2011 - 09:36 | 1599040 Almost Solvent
Almost Solvent's picture

I thinks that's part of the definition of a troll?

Thu, 08/25/2011 - 09:36 | 1599039 slaughterer
slaughterer's picture

There goes Tyler's sub-1000 ES set-up for QE3. 

Thu, 08/25/2011 - 09:39 | 1599061 slaughterer
slaughterer's picture

Seriously though, Warren was reducing exposure to BAC all throughout 2008-2009 in favor of WFC and some other more conservative financials.   Whatever explains the change of heart is a mystery to me: the terms of the preferreds are not too usurious.  I guess the warrants are what sealed the deal. 

Thu, 08/25/2011 - 09:55 | 1599151 jayman21
jayman21's picture

BAC is in a pickle.  Buffet likes pickles, on sale pickles.

Thu, 08/25/2011 - 10:02 | 1599205 earnulf
earnulf's picture

I would think that a 6% return on a 5 billion investment is pretty darn good (of course it pales next to credit cards, but that's another story) especially if he gooses the golden goose enough to use those additional purchase points when the stock goes above that magic mark (snort) to claim a few extra mil.   Of course, he has to goose it pretty good, hope he brought something to smooth the way

Thu, 08/25/2011 - 12:20 | 1599982 steve from virginia
steve from virginia's picture

 

That 6% has to come from somewhere, from here it looks like a Buffett frontrunning with cash due to flow from the taxpayers in some manner, shape or form.

BAC's problem is capital adequacy but its Real Problem is cash flow. Right now cash flow is negative and the Buffett deal does not address this at all.

There are two runs on BAC: out of its stock is one but its balance sheet is still leaking. 'Part II' of the BAC bail is TBA.

Thu, 08/25/2011 - 10:12 | 1599245 unununium
unununium's picture

This news seems amazing knowing what a black cesspool BAC is.  But it cannot be considered an investment.  It is charity.

It makes sense if you've read the Buffett biography "Snowball."  Warren's father was a Republican Congressman and Warren believes he's very lucky to have been born in the USA.  Couple that with his recent massive giving to charity, and the picture is clear.  This "investment" is charity for his favorite cause -- the America that he remembers.

 

Thu, 08/25/2011 - 09:40 | 1599072 New_Meat
New_Meat's picture

alx-he made $1BB in one month with his attempt to take over CEG back in '08.  A $5BB investment with 20% in one month.  Some vig.

And don't forget the GE Bank and Holding Company.  His $5BB "investment" went to pay that week's payroll.

- Ned

Thu, 08/25/2011 - 09:45 | 1599104 msohn
msohn's picture

The preferreds earn a 6% rate of interest.

The 10-year at-the-money warrants would have had a theoretical value of nearly $3 per share (using $7 BAC common stock price and a generous implied volatility value of 45%) . . . So Buffett collects 6% p.a. and pockets a warrant (trades at 80 delta) that is worth 40%+ of the common stock value.

Thu, 08/25/2011 - 09:45 | 1599106 msohn
msohn's picture

The preferreds earn a 6% rate of interest.

The 10-year at-the-money warrants would have had a theoretical value of nearly $3 per share (using $7 BAC common stock price and a generous implied volatility value of 45%) . . . So Buffett collects 6% p.a. and pockets a warrant (trades at 80 delta) that is worth 40%+ of the common stock value.

Thu, 08/25/2011 - 09:14 | 1598846 slaughterer
slaughterer's picture

ES futures and Berk CDSs go gonzo crazy. 

Thu, 08/25/2011 - 09:14 | 1598849 HelluvaEngineer
HelluvaEngineer's picture

Brilliant!  If you can't be smart just cheat!

Thu, 08/25/2011 - 09:14 | 1598851 Zonker
Zonker's picture

6% - BAC Short mega implosion!

Thu, 08/25/2011 - 09:14 | 1598852 Irish66
Irish66's picture

Deal we could never get

Thu, 08/25/2011 - 09:48 | 1599119 Founders Keeper
Founders Keeper's picture

kah-row-nee-ihsm

 

Thu, 08/25/2011 - 09:14 | 1598853 caerus
caerus's picture

typical

Thu, 08/25/2011 - 09:14 | 1598854 orca
orca's picture

Senile moron, but today he's my best friend, since I went long yesterday 6,49

Thu, 08/25/2011 - 09:15 | 1598855 LawsofPhysics
LawsofPhysics's picture

Ah yes, Buffet is high on hopium.  Let's see, remember the great depression.  What did all those famous rich old people do again to improve "CONfidence" right before the collapse?  Oh yeah, buy stock.  Can I have some "preferred" shares too Warren? 

Thu, 08/25/2011 - 09:19 | 1598892 trampstamp
trampstamp's picture

You were around that long ago to remember? dam

Thu, 08/25/2011 - 09:25 | 1598955 LawsofPhysics
LawsofPhysics's picture

I wasn't, but my physical gold was.  I sold my paper gold last november for a 437% profit to purchase more land and equipment.  How long have you been in the market?  If you entered the market in 2000, then you are still down 30%.  In other words it took you ten years to LOSE money.  Keep supporting the banksters if you like.  I choose to support myself and my family.  Good luck.

Thu, 08/25/2011 - 09:39 | 1599051 Almost Solvent
Almost Solvent's picture

Unless that guy is a known troll, I don't get where he asserting supporting the banksters nor not supporting himself or his family.

 

Or, unless he edited his post after your reply.

 

Looka like simple snark to me.

Thu, 08/25/2011 - 09:40 | 1599071 Long-John-Silver
Long-John-Silver's picture

Did you skip History in school? You can obtain History Books (gasp!) covering that subject extensively.

Thu, 08/25/2011 - 09:26 | 1598961 spanish inquisition
spanish inquisition's picture

The Hubris trade - When you are absolutley ,positively sure that your posse is completely in control of a situation and money will be made.

The cynic in me sees a little choreography in the last couple of days with this and gold. I think Bernanke is going to give a steady as she goes speech citing green shoots (yes, I said it) of gold down, investment up and employment flat. All the while, being prepared to shoot a load of liquidity on his friends.

Thu, 08/25/2011 - 09:15 | 1598857 slaughterer
slaughterer's picture

Warren always buys too early.  This is no exception. 

Thu, 08/25/2011 - 09:15 | 1598861 cbaba
cbaba's picture

Omaha thief cannot save the whole banking industry, his wells fargo bank and all other his business will also crash together with all other banks.

Thu, 08/25/2011 - 09:18 | 1598881 IMA5U
IMA5U's picture

The Omaha thief and The Commander in Chief

 

this whole week has been orchestrated by The Old Country Buffet.  funny this on same day as Jobs stepping down

 

this is perhaps the greatest global government propoganda week of all time

Thu, 08/25/2011 - 09:49 | 1599122 gmrpeabody
gmrpeabody's picture

So is it Obamaha..., or Omabama?

Thu, 08/25/2011 - 16:23 | 1600297 ActionFive
ActionFive's picture

They will be pushing him front center in his wheelchair to establish the next meme.

It will get like Dick Clark and Rock'in Eve.

Thu, 08/25/2011 - 09:16 | 1598864 Fake Jim Quinn
Fake Jim Quinn's picture

Buffet says "be fearful when people are greedy, and be greedy when people are fearful". The guy puts his money where his mouth is. And yes he might be wagering on a bailout. But since this site is about making some money, we might want to consider the play.

Thu, 08/25/2011 - 09:20 | 1598910 Commander Cody
Commander Cody's picture

No wager at all.  He received assurance from the POTUS earlier this week that BAC would be bailed out.  There will be no TBTF failures.

Thu, 08/25/2011 - 09:28 | 1598983 SteveNYC
SteveNYC's picture

Spot on. To drop $5Bn on this stinking P.O.S. would require an unconditional tax payer guarantee. To think otherwise one would have to be severely brainwashed or missing a good portion of their frontal lobe.

Thu, 08/25/2011 - 09:43 | 1599091 Dr. Richard Head
Dr. Richard Head's picture

Ahhhh....the full faith and credit of Bank of America. 

Thu, 08/25/2011 - 10:22 | 1599094 pazmaker
pazmaker's picture

That sounds about right Steve.  Will this cash influx save BAC?   It definitely will give it a longer life..I really was hoping to see it implode.  It just goes to show The TBTF club is truly that!

Screw Buffet...I hope this backfires on him!

Thu, 08/25/2011 - 09:34 | 1599031 Dangertime
Dangertime's picture

Exactly.

That is why he was meeting with Obummer....to discuss the Bailout Buffet.

Thu, 08/25/2011 - 09:49 | 1599123 tarsubil
tarsubil's picture

You know it. Public covers the risk, Warren pockets the profits. He's probably going to get billions for this. The whole world is a joke. That is the best reason to buy gold and silver.

Thu, 08/25/2011 - 09:59 | 1599183 Ricky Bobby
Ricky Bobby's picture

Right you are. Obviously he received the guarantee of the treasury and the fed in addition to the sweet terms. Financial confidence is a national security issue don't you know. It pays to be a shill for the Oligarchy.

Thu, 08/25/2011 - 10:07 | 1599238 docj
docj's picture

Exactly.

Here you have a guy, The Crony Capitalist of Omaha, who takes phone calls from The Teleprompter on "economic advice" and is probably on Benron's speed-dial as well. Ask yourself - do you want to be on the other side of his trades?

Benron's going full-on QE3 tomorrow - probably not even going to try to hide it. This will be the "helicopter drop" moment we've all been looking for.

Thu, 08/25/2011 - 09:26 | 1598963 GFKjunior
GFKjunior's picture

Actually this site is not all about making money. Read up son www.zerohedge.com/about

Thu, 08/25/2011 - 09:37 | 1599047 falak pema
falak pema's picture

ty good reminder of mission statement, before my time. I like.

Thu, 08/25/2011 - 09:27 | 1598969 Gully Foyle
Gully Foyle's picture

The other Buffett said this

Nibblin' on sponge cake,
watchin' the sun bake;
All of those tourists covered with oil.
Strummin' my six string on my front porch swing.
Smell those shrimp
They're beginnin' to boil.

Wasted away again in Margaritaville,
Searchin' for my lost shaker of salt.
Some people claim that there's a woman to blame,
But I know it's nobody's fault.

Don't know the reason,
Stayed here all season
With nothing to show but this brand new tattoo.
But it's a real beauty,
A Mexican cutie, how it got here
I haven't a clue.

Wasted away again in Margaritaville,
Searchin' for my lost shaker of salt.
Some people claim that there's a woman to blame,
Now I think, - hell it could be my fault.

I blew out my flip flop,
Stepped on a pop top,
Cut my heel, had to cruise on back home.
But there's booze in the blender,
And soon it will render
That frozen concoction that helps me hang on.

Wasted away again in Margaritaville
Searchin' for my lost shaker of salt.
Some people claim that there's a woman to blame,
But I know, it's my own damn fault.
Yes, and some people claim that there's a woman to blame
And I know it's my own damn fault.

Thu, 08/25/2011 - 09:32 | 1599018 tmosley
tmosley's picture

Yeah, it's about MAKING money, not LOSING money.  Investing in bailed out banks is not the way to make money.  Period.

Thu, 08/25/2011 - 09:17 | 1598874 slaughterer
slaughterer's picture

Guess we do not need QE3 when we have "sugar daddy" patriotic billionaires.

Thu, 08/25/2011 - 09:17 | 1598876 cbaba
cbaba's picture

This is also a confirmation that BOA is DEAD.

Thu, 08/25/2011 - 09:19 | 1598901 IMA5U
IMA5U's picture

not really    the government will get its meat hooks into it per the countrywide settlement

 

omaha theif and obama chief can then hold hands.  one gets $  the other gets more power

 

 

Thu, 08/25/2011 - 09:32 | 1599024 HelluvaEngineer
HelluvaEngineer's picture

Seems like common shareholders are about to be wiped out but 'tards are buying anyway of course.

Thu, 08/25/2011 - 09:59 | 1599186 kito
kito's picture

@cbaba, as much as many of us dream about the end of bac and c and jpm much the same way krugman dreams of aliens, it doesnt confirm they are dead. this investment changed the investing mindset for bac. buffetts 5 billion was the antidote to their demise.

Thu, 08/25/2011 - 09:17 | 1598877 mynhair
mynhair's picture

This is cause to ignite the rocket on the futures?  BS

Thu, 08/25/2011 - 09:17 | 1598880 DaBernank
DaBernank's picture

I thought Buffet was going to cut a $5b check to the treasury.

Thu, 08/25/2011 - 09:19 | 1598902 -Michelle-
-Michelle-'s picture

Perhaps he considers this the same thing.

Thu, 08/25/2011 - 09:25 | 1598957 DaBernank
DaBernank's picture

Hahaha, it's a "Build (Bank of) America Bond"

Thu, 08/25/2011 - 09:28 | 1598980 IMA5U
IMA5U's picture

no  the treasury writes him checks

 

he ll pay higher taxes if he gets the kick backs of colluding with the government

 

he is a scumbag

Thu, 08/25/2011 - 09:18 | 1598882 Oh regional Indian
Oh regional Indian's picture

The beauty of this is that Buffoon stands to lose nothing and gain big, depending. Such a rigged game, main street stands no chance.

I'd like to know one lever, ONE lever, except non-participation that anyone on main street has.

None.

Vivek

http://aadivaahan.wordpress.com/2011/08/24/precursor-03-bottom-falling-out-still-still-and-a-gander/

Thu, 08/25/2011 - 09:21 | 1598923 snowball777
snowball777's picture

There's that whole ballot thingy, if they could pull their heads out of their asses and use it effectively. (still breathing in the meantime)

Thu, 08/25/2011 - 09:33 | 1599028 Oh regional Indian
Oh regional Indian's picture

Ah, but 2000, hanging chads, electronic voting machines, Florida, then Ohio, mike mcConnell....... all that happened, ne?

Plus, how does a populace withstand the TV onslaught in election (silly) season?

Vivek

Thu, 08/25/2011 - 09:40 | 1599074 Gully Foyle
Gully Foyle's picture

Oh regional Indian

"Plus, how does a populace withstand the TV onslaught in election (silly) season?"

With Netflix and Hulu streaming video.

I once read that polls are skewed because only those without answering machines answer the phone. That is a very limited group.

Now with the ability, and the sheer amount of channels, to stream or download commercial free video one manages to avoid any mention of politics. I'm waiting to see if that even gets considered in the next cycle. Will fewer people watch debates because they receive more concise information from other sources? Will the majority even care about the debates if they can stream Scream 4 that night?

 

Thu, 08/25/2011 - 09:45 | 1599103 PY-129-20
PY-129-20's picture

Whenever I am in an idealistic mood, ORI, I have this thought and it depresses me. See - not very clever, I know, but certainly human.

Thu, 08/25/2011 - 09:23 | 1598932 Commander Cody
Commander Cody's picture

The ONLY thing you need to believe in is that no TBTF will fail.  Got it?

Thu, 08/25/2011 - 09:30 | 1598995 Gully Foyle
Gully Foyle's picture

"There must be some way out of here," said the joker to the thief,
"There's too much confusion, I can't get no relief.
Businessmen, they drink my wine, plowmen dig my earth,
None of them along the line know what any of it is worth."

"No reason to get excited," the thief, he kindly spoke,
"There are many here among us who feel that life is but a joke.
But you and I, we've been through that, and this is not our fate,
So let us not talk falsely now, the hour is getting late."

All along the watchtower, princes kept the view
While all the women came and went, barefoot servants, too.

Outside in the distance a wildcat did growl,
Two riders were approaching, the wind began to howl.

Thu, 08/25/2011 - 10:24 | 1599352 pazmaker
pazmaker's picture

Agreed, but I wouldn't call it Beauty!

Thu, 08/25/2011 - 09:18 | 1598883 Irish66
Irish66's picture

Can you tell us who is getting smoked on the other side of this trade?

Thu, 08/25/2011 - 09:22 | 1598929 snowball777
snowball777's picture

J6P

Thu, 08/25/2011 - 09:39 | 1599059 Seer
Seer's picture

Future J6Ps?

Thu, 08/25/2011 - 09:32 | 1599021 DefiantSurf
DefiantSurf's picture

the US Taxpayer, just like always....

Thu, 08/25/2011 - 09:46 | 1599111 Long-John-Silver
Long-John-Silver's picture

Taxpayers are tapped out. Revenues have and continue to drop. The end is coming.

Thu, 08/25/2011 - 09:18 | 1598885 spandrall
spandrall's picture

hold on - did Obama recently chat to the Oracle for investment advice? hmmm

Thu, 08/25/2011 - 09:21 | 1598920 Charlie Bravo
Charlie Bravo's picture

He sure as hell did!

Charlie Bravo

Thu, 08/25/2011 - 09:40 | 1599067 strannick
strannick's picture

Actually I think it was Buffet going to Obama for advice. Buffet asked Obama if the TBTF BAC was TBTF. Obama told him yes, so Buffet went all in.

Thu, 08/25/2011 - 09:18 | 1598886 Seer
Seer's picture

Perfect example of why a debt reset WON'T work.  The same folks who have created all this mess will STILL have all the power!

Thu, 08/25/2011 - 09:18 | 1598888 slaughterer
slaughterer's picture

This is to distract attention that Berk has no succession plan for WB like AAPL did with Steve, 

Thu, 08/25/2011 - 09:18 | 1598890 gwar5
gwar5's picture

The American Rothschild, bailing out BAC. Has it really come to this?

 

Thu, 08/25/2011 - 09:18 | 1598891 bonddude
bonddude's picture

Sorry Henry , Einhorn or whoever. Face-ripping short cover on.

Thu, 08/25/2011 - 09:19 | 1598893 Everybodys All ...
Everybodys All American's picture

Got to mean Bernanke goes all in tomorrow as well.

Thu, 08/25/2011 - 09:19 | 1598894 TradingJoe
TradingJoe's picture

Saw his deal terms...?! none of us could ever get that kind of deal, NONE OF US! I am afraid though that this time little warren will get taken to the cleaners!

Thu, 08/25/2011 - 09:32 | 1599020 dhengineer
dhengineer's picture

Not so sure.  He basically skipped to the head of the line.  This isn't about keeping BAC alive.  It's all about grabbing the remaining value out of that bank.  He probably figures that he can walk away with a cool 50 percent gain on his "investment".  When BAC goes BK, he will be at the head of the line pulling the juiciest morsels off of the carcass, leaving virtually nothing for the shareholders.  Warren may be an oily shyster, but he knows how to find the last dime in your pockets.  If I held any BAC shares, I would be selling them into the short-covering rally today or tomorrow at the latest.  Next week, when the air goes out of this balloon, the share price will be down with a one- or two-handle, and warren will be licking his chops, waiting for his big payday.

Thu, 08/25/2011 - 09:19 | 1598899 Biggvs
Biggvs's picture

Warren's warrants are already $1b in the money.

Thu, 08/25/2011 - 09:24 | 1598942 snowball777
snowball777's picture

If you want to make money at a firesale, it's best to show up early and get a spot next to the trough.

Thu, 08/25/2011 - 09:25 | 1598956 Misery Index
Misery Index's picture

I was just about to post that.

 

 

Buffet--->Winning!

 

Just wait till QEn blast the stock to infinity...I knew I should have bought calls yesterday.

Thu, 08/25/2011 - 09:22 | 1598903 falak pema
falak pema's picture

Buffet is to BofA what Rothschild is to Soc Gen. The Oligarchs protect their own banking vehicles. The guy from BofA, lobbyist point man,  went to see Buffet and for ONCE changed his line : "Can you help us?", he asked. Extraordinary line from a pavlovian chimer whose corporate one liner is "I'm from Bofa. We can help you" ... "Yes", replied the Oracle of Omaha to messenger boy.

He came back to his boss and knee jerked his drop dead : "Boss, your boss says, ...I can help BofA".

Mission accomplished. Now the corporate drill can rebegin and he can go back to telling all and sundry on Corporate Capitol  Hill, "I'm from Bofa, we can help you". Rinse and wash as you guys like to say.

How do you like my play?

Thu, 08/25/2011 - 09:26 | 1598964 snowball777
snowball777's picture

It makes me want to puke; history plays suck. ;)

Thu, 08/25/2011 - 09:41 | 1599078 Oh regional Indian
Oh regional Indian's picture

Wash, rinse, repeat, to be precise Falak. ;-)

Vivek

Thu, 08/25/2011 - 09:20 | 1598908 ben_bernanke
ben_bernanke's picture

Huge gains on FAS for me today. What a great day to be bullish long term on financials, the most hated sector. Another great Zero Hedge fade.

Thu, 08/25/2011 - 09:24 | 1598939 fuu
fuu's picture

Good job, now maybe you can afford a hairpiece and a beard trim.

Thu, 08/25/2011 - 09:20 | 1598911 orca
orca's picture

Good for the Donald too, who went long ~7 last week. One senile moron, one a**wipe with a ridiculous hairdo, the company I keep is getting better by the day.

Thu, 08/25/2011 - 09:20 | 1598913 OuaisBla
OuaisBla's picture

BAC saved? No need for QE3 then.

 

So stock will be moving up or down on Friday?

Schysophrenic thoughts.

Thu, 08/25/2011 - 09:27 | 1598973 snowball777
snowball777's picture

"So stock will be moving up or down on Friday?"

Yes.

Thu, 08/25/2011 - 09:40 | 1599069 SheepDog-One
SheepDog-One's picture

This was QE3, LOL!

$5 billion, not even half of 1 day of Bernanke POMO, BFD.

Thu, 08/25/2011 - 09:28 | 1598918 cbaba
cbaba's picture

"Bank of America is focused on their customers and on serving them well. That’s what customers want, and that’s the company’s strategy."

 

This is very funny, i do have a very small account in BOA, they start to send me some Spanish invoice, even though i didn't request it and i don't know any Spanish. I went to the bank asked them specifically not to send me any Spanish invoice/info, that was  3 years ago, requested many times later on, they promised to correct this, they told me that it may take 3 months, but guess what, i still get an invoice in Spanish, it has been 3 years:)  yes they are very focused on their customers and serving them well.:)))

Thu, 08/25/2011 - 09:21 | 1598921 monopoly
monopoly's picture

This is exactly why I do not short this market. The guy is over 80 and has no clue. BAC takes care of its customers. Yeah at 29% interest on credit cards and defrauding home owners. Probably an awesome short here but will just pick away at my favorite miners.

Beyond words all.

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