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Posted
Oct 19 2007, 08:08 AM
by
Matt Koppenheffer
Rating:
Money Blog: Top Stocks Blog - MSN Money
Shareholders contemplating Bank of America's third-quarter earnings are likely reacting with one word: "yuck."
The investment banking division of the bank -- which includes capital markets, advisory services, business lending, and treasury services -- was absolutely miserable. Net revenue for the segment was down 44% over the prior year, and the segment's net income, which accounted for more than a quarter of Bank of America's total net income in its third quarter of last year, fell an astonishing 93% to $100 million.
Pretty much everything that could go wrong did go wrong in that segment. Most notable of all were the capital markets and advisory services, which managed to produce a negative $184 million in revenue. These guys might even make Bear Stearns look good. And what did Bank of America have to say for itself?
"Unprecedented market disruptions impacted trading results."
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Posted
Jan 11 2008, 01:58 PM
by
Matt Koppenheffer
Rating:
Money Blog: Top Stocks Blog - MSN Money
The best person to ask would be Ken Lewis, CEO of Bank of America, since B of A went ahead and announced an agreement to buy Countrywide for roughly $4 billion, or $7 per share.
Ken is a bit busy, though so I'll go ahead and tackle it. Here are three scenarios from most to least optimistic:
- Countrywide's stock has been beaten down so far that Bank of America could no longer resist buying a valuable asset at a price well under its true value. Plus, B of A sees the opportunity to build its mortgage lending arm and lower borrowing costs for Countrywide.
- Having already sunk $2 billion into Countrywide, B of A decided that it'd rather take matters into its own hands than continue to watch the value of its investment sink.
- And finally (tip of the hat to Herb Greenberg on this one), Countrywide was really on the edge of bankruptcy and the Federal Reserve got into the mix by pushing for the deal and offering government backing for any losses from Countrywide.
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Posted
Apr 21 2008, 01:01 PM
by
Matt Koppenheffer
Rating:
Money Blog: Top Stocks Blog - MSN Money
After watching relatively positive reactions to horrible earnings reports from the likes of Citigroup and Merrill Lynch last week, investors are far less chipper about the news out of Bank of America today. So it wouldn't be surprising if investors watching the financial sector are wondering when bad is good and when bad is just... well, bad.
The beginning and end of that story is expectations. Think about it this way: say you are expecting a meteor to crash into earth and create an ice age that will end life as we know it. The following week you wake up to hear that the meteor will end up missing earth, but you find that somebody has stolen your car. On balance you're still probably pretty psyched about the situation.
In that same way, Citigroup and Merrill have had some very pessimistic expectations thrust on them. In fact, it's been so bad for Citi that, as Charley Blaine pointed out last week, Apple is now worth more as a company than Citi. In a situation like that, investors are really pretty impressed with anything north of abject failure.
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Posted
May 06 2008, 01:06 PM
by
Matt Koppenheffer
Rating:
Money Blog: Top Stocks Blog - MSN Money
After Countrywide's ugly $890 million first quarter loss, speculation has been rampant that Bank of America will try to pull a Houdini and wiggle out of its agreement to buy the mortgage lender. Speculation took to new heights this week when Friedman, Billings, Ramsey analyst Paul Miller strongly cautioned BofA against the deal, and suggested that the bank may try to renegotiate the price down to the $0 to $2 per share level.
The question at hand here really isn't whether Countrywide is going to suck for the foreseeable future -- despite what CEO Angelo Mozilo said late last year, that's pretty much a given. The issue is whether Countrywide will suck more than BofA's proposed buyout price suggests. Since BofA's original buyout offer was at about $4 billion, it's possible that it's already expecting at least another $9 billion hit to Countrywide's book value. That would assume a buyout at one time projected book value, which would be relatively cheap given Countrywide's trading history.
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Posted
Jun 17 2008, 12:18 PM
by
Robert Walberg
Rating:
Money Blog: Top Stocks Blog - MSN Money
While I still believe the electoral math favors Sen. Barack Obama in the upcoming presidential election, many of you responded to my last blog by asking how I might construct a portfolio based on the assumption that Sen. John McCain prevails in November. Perhaps you were unimpressed with my Obama report, or you're a staunch Republican, or you simply want to see balanced analysis. Whatever the case, a plausible argument can be made for McCain becoming our next president, so let's see how that would play out and identify what sectors/stocks might make good investments.
First, it's important to identify McCain's obvious hurdles -- age, less money and the Bush factor (the president's low popularity likely to weigh on McCain, as Clinton's did on Gore in 2000). Despite these issues, McCain can pull off a win by merely doing what Republicans have been doing for the last three decades -- winning the south and most of the west. Unless the African-American and/or youth turnout jumps by more than 30% from the 2004 vote totals, McCain should win every state in the south, including Florida. A clean sweep of the southern states would give McCain 132 electoral votes. Toss in Texas and he's at 166.
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Posted
Jun 26 2008, 10:51 AM
by
Minyanville
Rating:
Money Blog: Top Stocks Blog - MSN Money
You know that plan awaiting action in the Senate to help ease the foreclosure crisis and how it's not really a bailout of banks? It turns out it's really a bailout of banks, which makes sense considering it was actually proposed by banks.
The Washington Post today takes a look at the mechanics of the proposal, first suggested by Credit Suisse, which will essentially allow hundreds of thousands of homeowners to refinance their mortgages with lower-cost government-backed loans, very conveniently relieving the banks of the impaired debt. Bank of America soon got in on the act with a more elaborate proposal of its own.
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Posted
Aug 08 2008, 08:34 AM
by
Minyanville
Money Blog: Top Stocks Blog - MSN Money
This morning, Fannie Mae joined its smaller cousin Freddie Mac in announcing losses that exceeded Wall Street's already dour expectations.
The company lost $2.3 billion in the second quarter and plans to slash its dividend to a paltry $0.05 per share, down from $0.25, according to Bloomberg.
All eyes now turn to Paulson, who just weeks ago asked for -- and received -- a blank check from Congress to support the beleaguered government sponsored enterprises, should the need arise. He had hoped the mere existence of the backstop would calm Investors' nerves such that he wouldn't need to step in.
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Posted
Aug 19 2008, 11:11 AM
by
Minyanville
Rating:
Money Blog: Top Stocks Blog - MSN Money
Of late, “What will happen to Freddie Mac and Fannie Mae preferred shareholders?” and “What will happen to Countrywide debtholders?” seem to be the most pressing questions on the minds of credit market participants.
Given the magnitude of the credit losses both incurred to date and yet to be incurred, I believe market participants would be far better served by spending more time trying to figure out how these losses will be allocated and far less time trying to project whether those losses will total $500 billion, a trillion or even $2 trillion
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Posted
Sep 07 2008, 09:40 PM
by
Charley Blaine
Rating:
Money Blog: Top Stocks Blog - MSN Money
Now that the Federal Government has taken control of Fannie Mae and Freddie Mac, what happens next?
Futures trading in U.S. stock indexes suggests the stock market will start the day with a huge rally, with the Dow Jones industrials up at least 250 points, a gain of at least 2%. Asian markets were higher today, and bank stocks in Asia and Australia were higher.
This seems to fly in the fact of such market bears as MSN Money columnist Bill Fleckenstein, who sees more stress ahead for the markets because the economy is so dicey.
Assuming the market moves higher on the day, the big question remains: How much higher can stocks move and for how long?
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Posted
Sep 15 2008, 03:38 AM
by
Douglas McIntyre
Rating:
Money Blog: Top Stocks Blog - MSN Money
Merrill Lynch is gone, sold to Bank of America for $44 billion. That's $29 a share, well below its 52-week high of $79, but above the $17 close on Friday.
Merrill would have opened below $10 -- the schizophenia caused by the current credit crisis is that great. The brokerage may well have had a balance sheet that could have allowed it to remain independent, but with Lehman gone, the doubt was spreading to the next company on the list. Short-sellers would have swamped over the company like leeches.
The word is that Paulson at the Treasury encouraged the deal. He didn't want another beggar at his door if the financial community wanted him to back
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