Buying BAC for the long run on Mondayby big snack on September 15th, 2008 at 1:36 am |
(11 votes, average: 2.55 out of 5)
Loading ...There is plenty of speculation on where BAC will open on Monday morning and I’m hoping at least down 10-15% . I will use this weakness to do something I almost never do… INVEST. I am a trader all the way, but this is a once in a lifetime opportunity to put something in the vault for my family at an unreal price. It is true that Bank of America may have over payed for MER in the short term, but just like in the case of Country Wide, in the long term this will be a great move.
I fully believe that when we get on the other side of this “100 year flood” our system will be better for it and BAC will hold all the cards when it comes to the housing, banking and now brokerage sector. Look, JPM getting BSC at 10 was nice, but its not half the jewel of MER. Now, could we go into some sort of mini crash here? SURE. Under that scenario BAC might trade to the low twenty’s, but regardless I think that buying BAC on weakness tomorrow will yield at least a 100% return over the next 3-5 years.
Good luck to everyone Today.
Â
USA financial system broken — yes
USA entrepreneurial spirit broken — no.
Something to keep in mind.
September 15th, 2008 at 1:40 amI understand your temptation to get in “on the cheap” with BAC. But let me tell you this: we are in YEAR 1 of a credit crisis. They never end quickly — just as housing is still working its way south (despite bottom-calling every 6 months).
Washington Mutual and AIG are next to disappear. JP Morgan, with its mountain of derivatives exposure will implode at some point (though nobody thinks it’s possible now), and GS, which has remained Wall Street’s darling throughout by offering godly trading wins to offset CDO writedowns will be taking siginificant hits on its commodity-ladden portfolio going forward.
And then you have the US government — running high historial debt ratios (60% debt to GDP) — which just increased the notional value of its debt by about 70% in its “takeover” of FNM and FRE. The only reason US bond yields haven’t spiked is due to a temporary flight to “safety” by funds who are scared shitless by the equity market. That will change. The US’ credit profile has deteriorated dramatically already. The looming Social Security and Medicare (both huge unfunded liabilities) crises, combined with the baby boomer shift from a class of contributors to that of benefecators (ie. will stop paying taxes, contributing to social security, and will start to draw funds), should prompt rating agencies to downgrade US government debt at some point in the next 4-5 years. In fact, last year (before the Lehmans, AIGs, Bear Sterns and FNM/FREs really hit the fan), Fitch came out and said that if the US did nothing to address its unfunded liability crisis and things marched along as they are, the agency would probably be downgrading the US from AAA within the next “3 years”. I dont know what you think, but if the US loses its AAA rating, you know its basically over for America.
Bottomline? The US is going into a long-term decline. Quite frankly, I wouldnt buy a single stock “for the long-term” much less a bank stock. My 401k allocation continues to be short US bonds (35%), short the US markets (35%), only long high yielding market blue chips (10%), long GLD (20%). We are in the early stages of a US depression. There’s absolutely no reason to be bullish on America other than to resort to the Buffetian mantra that “it doesnt pay to short America”. I believe this time it will — and for a long time.
September 15th, 2008 at 7:43 amPhil knows it….BAC hit a low of $18 a monthe or two ago so that should be your guide over the next 3-6 months. Only prints below that would be of potential value. You need digetion of all the new losses coming onto the books.
September 15th, 2008 at 7:55 amGLT
See your thoughts, here, but way too early, IMHO.
BAC below $10 maybe, like C back in the early nineties.
The real prize will be GE.
Come to Papa.
September 15th, 2008 at 4:19 pm