Bank of America has been the topic of discussion lately, and not for the right reasons. It’s been a mess at the largest U.S. lender since the sub-prime debacle, but the recent trouble for the bailed out bank started a couple months ago in June. John Paulson , the billionaire who bought a $2.7 billion stake in BofA during the second quarter of 2009, told clients in June that he reduced his stake. Since the end of June, shares are down roughly 35%. On Wednesday, chief executive Brian Moynihan held a conference call to calm shareholders. He said, “We believe our capital targets are the right targets to run our company.” He went on to explain that Bank of America would be able to restore its credibility by “continuing to do what we’re doing.” However, by looking at the slide in the stock price, if the bank continues to do what they’re doing, shares are poised to hit zero (if it wasn’t considered TBTF of course).
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Investors aren’t the only ones jumping ship. The bank’s head of global credit strategy, Jeffrey Rosenberg , has left the company to join BlackRock Inc . . After joining BofA in 2002, Rosenberg will be the chief investment strategist of fundamental fixed income for the world’s largest money manager. Rosenberg declined to comment on the change, as did Rinat Rond, a BofA spokeswoman.
Reuters reported on Wednesday that BofA is now in negotiations with Kuwait and Qatar sovereign wealth funds to sell its $17 billion China Construction Bank stake. Although the move clearly signals capital worries at BofA, problems for the bank are seen as an opportunity for another billionaire, Donald Trump . On Thursday, the real estate tycoon made headlines not by his presidency aspirations, but by announcing that he is purchasing stocks. Trump said, “I’m not a stock person. I love real estate, but good real estate is very hard to get.” Donald Trump explained that he bought stock in Bank of America , Citigroup , Caterpillar , Intel , Johnson & Johnson , and Procter & Gamble . Donald Trump also said, “I love these companies. I’ve watched them for years and I’ve never owned stock in them. I went out yesterday and said, look I’m not getting interest on CDs, so I went out and bought some stock.”
Investors should take note of the stocks Trump purchased. He stayed mostly with Dow blue chip stocks (Citigroup was removed from the Dow in 2009). Trump may be willing to take some risk in equities, but he’s not being too aggressive. Investors looking to be more defensive may want to consider gold , which is one of John Paulson’s better investments.
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Disclosure: No positions.
- Bank of America
- John Paulson