They are paying the equivalent of 11% annually. Why not borrow at 0.25% instead?
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IF BAC is doing so well why borrow at 11% from Warren?
- Thread starter noob_trad3r
- Start date
I guess the worst thing that can happen here is a run on the bank. And Warren's stamp I think implies that the bank is sound from a bankruptcy stand point. I think the move was done to appease employees and depositers.
Warren's deal with them doesn't prevent them from having to raise Tier 1 capital.
Warren's deal with them doesn't prevent them from having to raise Tier 1 capital.
Your premise is false. They didn't borrow from WB, he invested in BAC. Big difference.Quote from noob_trad3r:
They are paying the equivalent of 11% annually. Why not borrow at 0.25% instead?
They could have easily raised 5 billion by offering 6% CD's but that wouldn't have helped their capital situation.
In the end, they needed investment and getting a blessing from WB is worth what they had to give up considering the way the market sentiment was headed prior to the transaction.
Quote from GTS:
Your premise is false. They didn't borrow from WB, he invested in BAC. Big difference.
They could have easily raised 5 billion by offering 6% CD's but that wouldn't have helped their capital situation.
In the end, they needed investment and getting a blessing from WB is worth what they had to give up considering the way the market sentiment was headed prior to the transaction.
Essentially, BUFFET and his boys invested in BAC via PREFERRED STOCKS and WARRANTS. To simplify, he's basically somewhat of a bond holder and has an option.
The deal saves BAC money and earns Buffet money. Win-win.
Quote from Froglet:
Essentially, BUFFET and his boys invested in BAC via PREFERRED STOCKS and WARRANTS. To simplify, he's basically somewhat of a bond holder and has an option.
Apropos of 2008, this avenue, of preferred stock to recapitalize a teetering bank, is what the unlamented Treasury Secretary Hank Paulson wrecked when he didn't bail out the preferred stockholders of Fannie and Freddie. That Monday, the preferred stock market fell by something like 13%, if I remember correctly. Lehman was closed out of using it, because no one was going to buy the preferred shares of any bank after that, and its death spiral really began on Tuesday, when Fitch lowered its ratings on a bunch of outstanding Lehman paper, not because they thought they were bankrupt, but because they thought it would have a very hard time raising capital. By the next Sunday night it was gone, and the financial crisis was on bigtime.
John Dizard, of the FT, estimated it would cost the Treasury 200 or 300 billion if they didn't bail out the preferred shareholders of Fannie and Freddie. He was off by 3 or 400 billion, as it turned out.
Be grateful BoFA can still use the preferred sharemarket. You really don't want them to be locked out of it the way Lehman was. We're no longer in a position to afford another 750 billion dollar bailout, partially thanks to the hard work of Paulson. All we're in a position for now is a nice big fat depression if 2008 repeats.
Fuck that shit. Let it fail & bring on Lehman 2.0. Government needs to stock fucking with the free markets.
Quote from trefoil:
Apropos of 2008, this avenue, of preferred stock to recapitalize a teetering bank, is what the unlamented Treasury Secretary Hank Paulson wrecked when he didn't bail out the preferred stockholders of Fannie and Freddie. That Monday, the preferred stock market fell by something like 13%, if I remember correctly. Lehman was closed out of using it, because no one was going to buy the preferred shares of any bank after that, and its death spiral really began on Tuesday, when Fitch lowered its ratings on a bunch of outstanding Lehman paper, not because they thought they were bankrupt, but because they thought it would have a very hard time raising capital. By the next Sunday night it was gone, and the financial crisis was on bigtime.
John Dizard, of the FT, estimated it would cost the Treasury 200 or 300 billion if they didn't bail out the preferred shareholders of Fannie and Freddie. He was off by 3 or 400 billion, as it turned out.
Be grateful BoFA can still use the preferred sharemarket. You really don't want them to be locked out of it the way Lehman was. We're no longer in a position to afford another 750 billion dollar bailout, partially thanks to the hard work of Paulson. All we're in a position for now is a nice big fat depression if 2008 repeats.
I am not done venting about my, what
was to be, a beautiful trade on BAC.
I watched in disbelief, as all of my accumulated losses in my retirement
account, that I am gambling with, had gone to
a $300 dollar net profit.
Maybe it's small potatoes compared to alot of you on here,
but to me, it was a significant accomplishment, and I was
very happy with the state of my account.
Then, again a moment of disbelief, the abnormal event that was to come,
the knowing that one needs to hedge against the unforeseen.
And seeing the news, come up on the screen, my win now eroded,
I covered on the trade, my spirit crushed for the day.
How , and I can at least be free to put the trade away, and now it
is surely, ingrained, a good lesson, I still made money and my net loss is $94 now. I've recouped my bad INTC purchase that was made in haste and now stands at a 13.85 % loss in my account. I know, stop loss at 5%. I am trying to reconcile liking a company, and separate it from making money from a stock. I've tried to work this out in my head, and I guess I'm missing something, and maybe somebody can give me some tough love here. I can handle it.
And now, Dear Warren,
I do not blame you for my chickening out on my BAC position.
But, in looking at the companies you have decided to invest in, I can't help noticing that their prices get fucked up.
You help them, and the share prices fall.
Something makes the prices fall when you buy into them.
I bet that it's easy for you to make money.
You announce your helping a company, and then you sell the stock.
I would love to sell, too.
But you see, my account that was being managed by somebody else has lost about $4000, so I can't short at this moment in time.
So maybe, since you have more money than you will ever be able to spend in your lifetime, do me a favor.
Stay the fuck out of, the helping business, so I can make some money.
was to be, a beautiful trade on BAC.
I watched in disbelief, as all of my accumulated losses in my retirement
account, that I am gambling with, had gone to
a $300 dollar net profit.
Maybe it's small potatoes compared to alot of you on here,
but to me, it was a significant accomplishment, and I was
very happy with the state of my account.
Then, again a moment of disbelief, the abnormal event that was to come,
the knowing that one needs to hedge against the unforeseen.
And seeing the news, come up on the screen, my win now eroded,
I covered on the trade, my spirit crushed for the day.
How , and I can at least be free to put the trade away, and now it
is surely, ingrained, a good lesson, I still made money and my net loss is $94 now. I've recouped my bad INTC purchase that was made in haste and now stands at a 13.85 % loss in my account. I know, stop loss at 5%. I am trying to reconcile liking a company, and separate it from making money from a stock. I've tried to work this out in my head, and I guess I'm missing something, and maybe somebody can give me some tough love here. I can handle it.
And now, Dear Warren,
I do not blame you for my chickening out on my BAC position.
But, in looking at the companies you have decided to invest in, I can't help noticing that their prices get fucked up.
You help them, and the share prices fall.
Something makes the prices fall when you buy into them.
I bet that it's easy for you to make money.
You announce your helping a company, and then you sell the stock.
I would love to sell, too.
But you see, my account that was being managed by somebody else has lost about $4000, so I can't short at this moment in time.
So maybe, since you have more money than you will ever be able to spend in your lifetime, do me a favor.
Stay the fuck out of, the helping business, so I can make some money.