Short it then, I wouldn't at this level. This dog has been beaten enough in my opinion. If we dip back below $5 I will reconsider but I feel fine holding at this level. Im not saying that anythings been solved but if you cant read between the lines that a coordinated central bank move like this doesnt spell out that they arent going to allow mass bank failures than you arent being true to yourself. I just jump on the train when I feel theres a profit in there, not saying that all of a sudden everything is ok.
BAC last bid 4.98, S&P downgrades 37 global banks...
- Thread starter ASusilovic
- Start date
Short it then, I wouldn't at this level. This dog has been beaten enough in my opinion. If we dip back below $5 I will reconsider but I feel fine holding at this level. Im not saying that anythings been solved but if you cant read between the lines that a coordinated central bank move like this doesnt spell out that they arent going to allow mass bank failures than you arent being true to yourself. I just jump on the train when I feel theres a profit in there, not saying that all of a sudden everything is ok.
Thanks, I've been short since March but I was interested in what you see other than an attempt to form a temporary support area. BTW, not criticizing, just curious.
GordonTheGekko
Guest
Doubling money in 4 months? For anyone not managing more than several billion (not hundred millions territory), this is not a good buy.
Even still, BAC is not a good buy IMO, and from the Streets' consensus. Haven't you heard the fund managers and what not ranting in the trading desk chatter? Too many people hate the stock alone for it to make a serious move... it's like the most annoying kid in a freshman seminar. Nobody says anything because of awkwardness, but when the cards are down (i.e. US debt downgrade last august), everyone jumps in. BAC: $15 to $3 faster than you can say 'too big to fail, too dumb to succeed.'
One last bit of input: If you'll remember 9 months ago, many saying "hey, it's possible BAC could go to $30, but there are better ways to make money in macro companies, like Apple" ...AND people two years ago loading up on BAC. That didn't necessarily work out now did it...
(just ask the HF managers who got/are getting hosed by loading up on more BAC).GordonTheGekko
Guest
Shorting penny stocks (I know it's not really a penny stock since its so huge, but normally stocks under $5 get into this category) can be very lucrative... Kodak went from $3 to $1, or tripled shorts' money with no real leveraged outside of share borrowing. If BAC has a mega problem (hint: they've had extraordinarily close near death experiences more than once since 2008) it will be money growing on trees for bears. On the reverse side, and more important one IMO, it's simply -not a good company to buy-. If I had shorted since $12, I would of covered days after the downgrade just to take money off the table. There are fundamental problems with the company, many of which are unique.
I agree with you and my trade was to get long when $5 held and look for a bounce which I have gotten. I have protected some of my profit by selling calls against the position and will reassess it again if we crack the ever so important $5 mark. Yes, a stock can be a very lucrative short even after it has been beaten down but I dont put BAC in the same boat as Kodak, two different businesses, contrary to the noise you have heard about Bof A they actually are profitable to the tune of 30 billion a year. If you feel that the real estate market is going to have another 30% decline than yes BAC will have issues with their Countrywide and Merrill aquisitions, I believe that we wont see more than another 10% correction in housing. As far as the Euro soverign issue goes I dont stand to know their exposure, and no one really does which is part of the reason why we have traded at a $8 discount to book value.
And here's another thing you need to think of when shorting America's largest bank and hoping it goes to $0, what would happen if B of A went out of business, its just too catastrophic for the federal government to let happen. After all the money spent to prop up the system in 2008 the govt will not let BAC fail, its just too damaging and the runs on banks will lead to mass social unrest. BAC wanted out of Merrill deal and they were practically begged by the federal government to take them over to avoid utter disaster, the govt owes BAC a favor. Also since Buffet was willing to put $5 bil up he is no dummy and although he doesnt own common stock he still stands to lose if they went under. With all these factors I stand behind my position, I feel that this pigs been beaten enough. I can change my mind one morning when/if s and p futures are down 50 handles but until that day comes I believe theres a $8-$10 stock in here somewhere.
GordonTheGekko
Guest
Thanks for your great post. It's refreshing to know there are some great insights on ET, amidst the many stupid ones!
During the day of the downgrade, BAC was beaten down considerably harder than most securities... while another downgrade isn't very probable (it wasn't downgraded on 11/23), that first week of August was a little out of the blue. Even though talk about a downgrade was around, the markets had not made any movements to respond... and it sure didn't help that S&P announced it was "reconsidering" before downgrading less than a few minutes before 8pm eastern on a Friday night (before post market trading)... made one heck of a gap fill race Monday morning. Anyways, an event like that that doesn't spell the end of BAC will not be a good position at all for long positions, especially on margin (if you can get margin on BAC anymore...?).
BAC is considered to be a terminal short. The argument out there is what would happen if they were to fail? My thought is, I don't think they will "fail" as in Lehman sense but I think plans are in place to break this TBTF apart which would render the stock worthless. You would have to think that there have been arrangements made already for buyers/takers of the bank's underlying business lines such as it's deposits, IB, Merrill Lynch WM/U.S. Trust, Commercial banking, etc. They've (BofA) already separated the bank in half, Commercial bank and Consumer bank.
Another thing that makes me very suspicious of what's going on there is the current CEO, Brian Moynihan. This guy has been bouncing around within the bank between multiple lines of business running them to the ground over and over since the Fleet Boston merger. When I learned that he was to succeed Lewis, I knew something was definitely up. Since that time, the bank has been drifting lower and lower to ruin one lawsuit/CMO blow up/Executive attrition at a time. I think the company has been set in ghost ride.
Another thing that makes me very suspicious of what's going on there is the current CEO, Brian Moynihan. This guy has been bouncing around within the bank between multiple lines of business running them to the ground over and over since the Fleet Boston merger. When I learned that he was to succeed Lewis, I knew something was definitely up. Since that time, the bank has been drifting lower and lower to ruin one lawsuit/CMO blow up/Executive attrition at a time. I think the company has been set in ghost ride.