Zesty Wrote: ------------------------------------------------------- > @lowyielder; Rookie? Who is the one defending is > obviously wrong call here? > > Bofa is not giving WB a hand out, now you sound > like the rookie. Bofa welcomed the much needed > vote of confidence for WB. This is more of an > issue of shoring up confidence in Bofa. Let me > know if you need more lessons; class is in > session. Please go back through this thread and point out my “wrong call”. I’ll be waiting. Other than that, you are clearly not worth having a conversation with. Take care.
@Sweep the Leg, I agree that Bofa in not in the best of shape BUT they’re not going to fail or collapse or go into Chapter 11. So yes I agree they’re not in the best condition as I said above.
@LowYielder, you said, “That’s sort of the point, and the reason the stock is a POS…” This was in the context of others who were stating that they were buying or thinking about buying BAC Puts.
So, I said the stock is a POS, and that makes me wrong because it gets a bounce TODAY? Its been almost halved this month. And my point was that it is impossible to know the true health of the capital base because of the amount of derivatives held in SPVs. I wasnt addressing put buying. Your reading comprehension is suspect. I still cant understand why you have decided to plant your flag here.
Both HighYielder and I stated on the first page we didn’t think BofA was going under. I’m not even sure what your position is other than “you guys are wrong.” Four days after I started this thread, I think it’s clearer than ever that they have major issues.
the deal is for $10B btw. $5B in prefs and $5B in warrants if exercised. this should actually be great for BAC as the prefs were perpetual at only 6%, whereas fair market yield on $5B in similar prefs would likely be around 8%. the warrants were at a premium to market price and aren’t really that dilutive in the grand scheme of things. if a similar action is taken with one or a number of the french banks, then this mini-credit crisis we are in is likely over. but until then, the effects of this spectacular deal for BAC will not be seen. and also, although GS fell substantially following WB’s investment, WB looked at GS’s books and decided that it was virtually impossible to go the way of the big banks. WB’s investment in BAC must tell us much of the same; the realization that BAC is not going to die, which is what BAC needs to trade at a more reasonable valuation.
hey guys n gals lets not argue n hypothesize ; let’s just set up a google finance portfolio or even ur personal portfolio and make the trade u feel is best and lets compare like say in a month or when pnl are realized… ill start it off im long 150 shares BAC @ 6.75 … as stated previously its a gamble but one i thought to make …lets narrow discussions on actual trade ideas
MattLikesAnalysis Wrote: ------------------------------------------------------- > the deal is for $10B btw. $5B in prefs and $5B in > warrants if exercised. this should actually be > great for BAC as the prefs were perpetual at only > 6%, whereas fair market yield on $5B in similar > prefs would likely be around 8%. the warrants were > at a premium to market price and aren’t really > that dilutive in the grand scheme of things. > > if a similar action is taken with one or a number > of the french banks, then this mini-credit crisis > we are in is likely over. but until then, the > effects of this spectacular deal for BAC will not > be seen. > > and also, although GS fell substantially following > WB’s investment, WB looked at GS’s books and > decided that it was virtually impossible to go the > way of the big banks. WB’s investment in BAC must > tell us much of the same; the realization that BAC > is not going to die, which is what BAC needs to > trade at a more reasonable valuation. i agree one think that is worrisome is how much did WB look at the books?
MattLikesAnalysis Wrote: ------------------------------------------------------- >this should actually be > great for BAC… > > the effects of this spectacular deal for BAC… I don’t share your enthusiasm. I don’t think WB has done a deal in decades that was good for the other side. This is a huge boon for Buffet. He’s fleecing BAC. From ZH: “This is just hilarious: According to Bloomberg, Bank of America’s main hesitation was taking Warren Buffett’s money when bank had said it didn’t need capital, CNBC reports without saying where it obtained the information. It adds, the symbolic value of investment worth boost to confidence; “$5b not lot to raise” - also apparently “Terms better than public market.” Here is our retort: Bank of America could have told Buffet: “No thank you” and leaked it. Instead it confirmed what Zero Hedge has been saying since October 2010 - that it is absolutely desperate for capital. Also, as to the saying that “terms were better than the public market” - why of course they are - the bank has absolutely no access to the public market. BAC IS LOCKED OUT! But at least we will soon see just how efficient Dodd-Frank’s bank insolvency contingency is in real life. Because we have a feeling the brilliant legislation penned by Barney Frank and Countrywide’s senator, may be just a little short…”
I will stick with my long puts and long preferreds…and I would lean towards a mix of the Preferreds (I think some of the variable rates have the best capital appreciation potential). Get the ML ones in there too…
my several retorts: if BAC is locked out of the public market, wouldn’t the terms of the deal be well below market rate? to suggest otherwise is to have complete lack of understanding of financial markets… saying “no thank you” and leaking it would have a positive effect on BAC’s sentiment. but the real problem with BAC is not its equity valuation but its bond and pref valuations. making a statement like “no thank you” does not have the same effect as raising capital to bond and pref holders. also, the fact that BAC was able to issue quasi-fixed income at 200 bps below market rate, this gives an automatic boost to current prefs and bonds. also, raising capital at a premium allows BAC to sell fewer assets, the last of which may be high return assets when mixed with BAC’s continuing operations. if BAC were actually starving for capital, they would be raising much more than $5B plus $5B that is only worth exercising above $7.17. ZH are permabears so they’ll put a negative spin on every single news release. its what they do. i’d rather think for myself. permabears will use the selling pressure since the open to justify their cause, but flexible investors can understand that BAC is not the problem, French banks are, and that is where the confidence needs to be boosted most; and until that happens, BAC will continue to have depressed valuation b/c it has trading and counterparty relationships with SocGen, CredAgri, and BNP.
MattLikesAnalysis Wrote: ------------------------------------------------------- > ZH are permabears so they’ll put a negative spin > on every single news release. its what they do. > i’d rather think for myself. Agree with that. What a depressing group. There is a difference between having a well-researched and analyzed pessimistic view of something and looking at every single news item as more evidence that the world is ending before our eyes.
MattLikesAnalysis Wrote: ------------------------------------------------------- > my several retorts: > > if BAC is locked out of the public market, > wouldn’t the terms of the deal be well below > market rate? to suggest otherwise is to have > complete lack of understanding of financial > markets… You could not be more mistaken…
jorgeam86 Wrote: ------------------------------------------------------- > MattLikesAnalysis Wrote: > -------------------------------------------------- > ----- > > my several retorts: > > > > if BAC is locked out of the public market, > > wouldn’t the terms of the deal be well below > > market rate? to suggest otherwise is to have > > complete lack of understanding of financial > > markets… > > You could not be more mistaken… Yeah, the point ZH was making was that there was no deal to be had in the public markets, thus any deal they could get out of Buffet was a good deal. Ultimately this deal changes nothing. Home prices are down 6% YoY, foreclosures are rising again, and BAC faces huge settlement costs aside from the losses they’re going to have to incur on their loans anyway. Per their latest filing, they’ve only set aside enough cash for mortgage writedowns provided an additional 3% drop in home prices. That’s not much of a comfort zone.
Sweep the Leg Wrote: ------------------------------------------------------- > jorgeam86 Wrote: > -------------------------------------------------- > ----- > > MattLikesAnalysis Wrote: > > > -------------------------------------------------- > > > ----- > > > my several retorts: > > > > > > if BAC is locked out of the public market, > > > wouldn’t the terms of the deal be well below > > > market rate? to suggest otherwise is to have > > > complete lack of understanding of financial > > > markets… > > > > You could not be more mistaken… > > Yeah, the point ZH was making was that there was > no deal to be had in the public markets, thus any > deal they could get out of Buffet was a good > deal. I stand by my statement. If that’s what ZH meant, they shouldn’t have said that. To say a $60B company is “locked-out” of the equity markets is sheer stupidity. BAC could’ve raised $5 no problem in the open market, at the right yield, and at the right price. raising $30B on the other hand would have required a discount of 50% or so. if a company is TRULY locked-out and not “locked-out according to ZH”, then a private equity raise would be at a discount to current market VALUATION OF COMPARABLES (but not necessarily a discount an identical equity raise in the public markets). it all comes back to ZH being numbskulls from literally numbing their skulls with bearish spins on every news release ever.
Since this deal does not at all represent the capital they’re going to require, we’ll get a chance to see exactly how they will go about raising $50B-$100B.
ChickenTikka Wrote: ------------------------------------------------------- > You forgot countrywide. > > Anyone know what happens to call and put options > in this mystical scenario? I own both. Did you make money or loose?
Didn’t BAC just tell us a few days ago that they didn’t need to raise capital?
^Yes. Hence the 4 page thread.
equity_analyst Wrote: ------------------------------------------------------- > Didn’t BAC just tell us a few days ago that they > didn’t need to raise capital? Didn’t BAC also say the mortgage crisis was behind them?