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American Capital Agency Corp. Message Board

  • olee2116 olee2116 Oct 14, 2010 3:08 PM Flag

    Bank of America

    The BAC message board is garbage. I figured since this is one of the most intelligent boards on yahoo, this is a good place for discussion.

    I'm long BAC. The reason is because I believe BAC has a favored position with the Fed, and the Fed can create money out of thin air.

    http://www.npr.org/blogs/money/2010/10/07/130408926/quantitative-easing-explained


    Bernanke and Paulson weren't swayed. They told Lewis that the Fed's legal staff had read the contract, and that under the law, BofA absolutely had to close the deal. They also said that a failure to buy Merrill would put the entire banking system at risk. They made it clear that renegotiating the price - a natural move in normal times - was not an option. The reason: It would take two months to issue new proxy statements and hold shareholder votes at both companies, while the fate of Merrill stayed in limbo. Bernanke and Paulson said they would provide a rescue package for BofA to ensure that it had adequate capital to complete the deal.

    http://www.businessinsider.com/2009/2/did-the-government-force-bank-of-america-to-buy-merrill

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    • Holy mc noodles!

      Scooped up some more shares of BAC today.

      I don't think Bank of America will return to the 40-50 range ever, that business model is broken. 30? Maybe?

      My sell target is 19. I know everyone else will wait to 20 to sell, so better to pull the trigger first.

    • I don't get why BAC is going up.

      They posted 10 billion in losses. Are people happy because they would have earned 27 cents per share if they didn't lose 10 billion...

      Are people happy because there's a partial resumption of foreclosures...

      There goes my buying opportunity.

    • Shep: I looked at those stocks and am not interested, but thanks for the suggestion. I am looking at price to book value and price X forward earnings. BAC is under book, those are way over. APOG is also construction related , thats probably why yahoo shows 69 X forward PE?
      BAC is showing 8 X forward PE on yahoo, of course that could drop

    • olee,

      I was just thinking the same thing about BP. I made a bunch on those puts. The news flow was getting regular and predictable along with the fall in the stock price. They came up with a lot of failed attempts. They would put out a press release and then fail, and the stock would drop further and further. I kept watching that pipe spewing millions of gallons and then it hit shore. I made a nice amount of money, but I then made a critical mistake. I bought some puts and then the news came out that they were cutting the dividend. The shares went up and I lost 1/2 of my gains.

      It was the only time that I have really made a call against the market. Cramer was saying buy BP, all the analysts were saying by BP, etc., but you could just see the mess unfolding.

      The difference here is that the banks aren't saying that there isn't a problem and they might come out with a legislative solution. However, listening to Rep. Waters and Elizabeth Warren made me pause because they want more investigation and Obama wants vote.

      I think this is wait and see, but in the end their will be a great opportunity to buy BAC (which I have never thought about until now) at a really good price. It just can't be as bad, but the S&P downgrade is not cool at all.

    • Excellent analysis.

      I'm thinking BAC will bottom out right before the Novemeber elections.

      This reminds of me of BP when people were worried about unlimited liabilities. I wonder how low BAC will go, I missed out on BP because I didn't call the bottom right...

    • That's a lot of money. Enough to effect earnings for a while, but not nearly enough to bankrupt BOA, especially since they have backing from the Fed.

      Hmmm...

    • This is why I quit buying options only write calls:
      Even though you may be right time decay works against you most of the time as an option holder.

      This mortgage issue will play out within a few weeks..

    • I am right there with you, and I guarantee I will be be buying again. We have all seen this banking mess playing over and over again, and this was one leg I just wish hadn't happened. It sucks to be honest. However, I refuse to lose money because I can outthink the market. I can always hit the buy button.

    • Yes but Ben, the flip side to this whole mess is the Fed. As Bernanke will be there with more QE support.

      Assest purchases via treasuries and MBS are likely as this will help strengthen the balance sheet. Bernanke said this morning in his speech that short term rates are too high.
      This will help existing homeowners who have a mortgage as rates for a 15 year mortgage should fall to 3%.

      The Fed's mandate is to have inflation at roughly 2% so it appears that the bond bubble is alive and will be extended for some time. Short term this will slow equity purchases but demand for dividend stocks will still be in favor.

      The MREITS are still the place to be as the spread should not decrease from the current 2%. I just do not see pre-pays as being a threat to earnings at this point.

      Remember we have elections in a few weeks and the timing of this whole thing is very suspect in my view.. The politicans will milk this for all they can as their agenda is to be re-elected.

      Of course the media blows this up bigger than it should be and that gets people nervous. To me this is typical market noise that creates opportunity to make some $$..

      I just see no reason to panic as I believe this will blow over within a few weeks.. Just my thoughts..

    • While you are right about the technical trends, here is an excerpt from an article explaining the sell off:

      Quote: "An alarming report on Bank of America, compiled by Branch Hill Capital, a San Francisco hedge fund, circulated widely on Wall Street Thursday. Branch Hill suggested that the bank, the nation’s largest, could be facing more than $70 billion in losses from mortgage securities that it may have to repurchase from Fannie Mae and Freddie Mac, as well as private investors."

      The perception is the reality.

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