I have read everyone’s opinion on the Bank of America fiasco. Many talked about what a good deal it was for Warren Buffett. No…it was a great deal for Buffett. Many talked about how BAC gave away the store. Many talked about their suspicions about the deal based on a meeting Buffett had with Obama. For me, none of that matters. There is only one thing that mattered to me. The CEO of BAC has now lost the trust of Wall Street. Within a week’s time, the CEO, Brian Moynahan, went from saying they did not need to raise capital to ooops, we are going to raise $5 billion. Yes…raise $5 billion at a 6% yield plus giving an option to buy a ton of stock at today’s prices for 10 years…but you didn’t need to raise capital. Desperation anyone?
For the past few months, I have been telling you that the financials were acting like it was 2007 all over again. They underperformed badly when markets went up and they led down when markets went down. In 2007-2008, the chieftains of most all of the big banks lost investor’s trust by their lies and obfuscations. I think Mr. Moynihan may have just lit that fuse again. Why would anyone believe a word he says going forward? Trust is the #1 intangible on Wall Street. Remember that!
I can be a little shorter on the Fed. Very simply…anyone who believes the Fed is not going to do something more drastic soon…well, I have a few acres of Everglades land for you. Remember what I have told you. Bernanke knows he cannot get the economy going so his only goal now is to get markets moving.
Gary Kaltbaum owns Kaltbaum Capital Management, LLC (“KCM”), an investment adviser registered with the U.S. Securities and Exchange Commission. The opinions expressed herein are those of Mr. Kaltbaum and may not reflect those of KCM. The information offered in this publication is general information that does not take into account the individual circumstances, financial situation or individual needs of an investor. The information herein has been obtained from sources believed to be reliable, but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results.