Back in June I questioned the estimated settlement amount (approx. $9B). BAC was trading then at today's current levels...This new settlement number is staggering (10%+ of Mkt. Cap!)...And, it's not finalized yet. Will someone rationally explain me the long case for BAC? Thanks...RJ
BAC will not be parting with 9 Billion cash in a one time payment. It will be metered out over time so as to not be so adverse on our bottom line. We are large and long and qualify to converse with some non staff lawyers of BAC and close to same. BAC knows they have done massive damage to shareholders who are livid and very,very threatening with added litigation. Fortunately, most do not have sufficient cause for any further legal action as precedent has been established. This settlement eliminates any further legal action by DOJ ,..unless for a different cause, so BAC has added that clause to settlement. NO MORE DOJ SUITS!
You need to remember, at least according to the reports, is that the impact depends largely on how the settlement is applied. Reports suggest that $9 billion will be in cash, and that is what hits the bottom line. The rest will be in various forms of mortgage assistance and loan alterations, for which the impact is spread out over time and gets absorbed in operations. The other consideration is what the tax benefit will be to the bank, and there will be a benefit. It's a big settlement, but don't let the headline number keep you from reading the fine print. All you have to do is look at past settlements to see how these things work.
And as I've posted before, the WSJ reported BAC has set aside 10 billion from January thru June of this year for settlement and litigation expense. Last earnings were .41 per share before litigation expenses, I believe. The cash settlement could be 9 billion? So how would that seriously imact earnings? For how long if 10 billion has been set aside? The Feds will raise interest rates soon. So it appears to me, the sun is rising, not setting, on BAC. I'm holding, hoping to exploit any sell-off that could occur. When Warren is alarmed, then I'll pay attention.
Unless you think they are going to continue to pay back billions and that the worst is yet to come, you need to stay away. If you believe the worst is about to be behind them you need to load up as it will be much higher in a couple of years. They are a money making machine if you don't count the DOJ's embezzlement tactics, plain and simple.
Yes they will crank out money but the idea that you'll see the equivalent of 5 to 15 (3x money) is a dream that wont happen. The stock isn't going to 45. Period. It's an old fogey's stock. If you're young and screwing around with this stock in your portfolio...you're dumb.