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August 2011

Recs

4

A bit more on Bank of America's preferreds

August 27, 2011 – Comments (0)

Bank of America's existing preferred stocks were selling at a significant discount because the market was starting to think that the company was going to have to raise capital at dilutive rates to offset its loan losses (aka Countrywide's loan losses). As a matter of fact, I read a strong case that Tim Geithner should make plans to nationalize BoA. That, and the market is entering a very uncertain time. Then, Buffett gave BoA his sort-of stamp of approval, which lifted both the stock and the preferreds. As I said earlier, I don't think this is an outright endorsement of the company's common stock at its current price, but clearly he thinks the bank isn't going under.  [more]

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Analyzing Berkshire's investment in BoA

August 25, 2011 – Comments (0)

Warren Buffett put a bit of Berkshire Hathaway's growing cash hoard to work in preferred stock plus warrants in Bank of America:  [more]

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I just bought Bank of America ... or at least their capital trust preferreds

August 25, 2011 – Comments (0) | RELATED TICKERS: BAC

Bank of America is one of the two most troubled large banks in the United States today. The other guy is Citi. While they have two strong franchises, namely their retail bank and Merrill Lynch, they also have a lot of potential loans going sour - thanks mainly to Countrywide (which they paid way too much for to boot). Furthermore, it's a large bank and it's hard to run, and management hasn't exactly inspired much confidence - for example, poor controls on foreclosure practices got it a lot of bad press. The bank's earnings potential is significant, but thanks to their charge offs, the market has been thinking that maybe Bank of America was going to die.  [more]

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Checkup: the Fairholme Fund

August 08, 2011 – Comments (1)

The Fairholme Fund is my largest individual holding, stock or fund. In my portfolio risk review, I have to admit I neglected to consider Fairholme, and it turns out that most of the fund is invested in financial services and real estate. Furthermore, they're in some rather hairy names - AIG, Bank of America and Citi, plus Sears.  [more]

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Checkup: Energy Transfer Equity, Spectra Energy and other MLPs

August 07, 2011 – Comments (3)

During the last great selloff, Master Limited Partnerships really sold off hard, such that you could buy strong firms like Magellan Midstream, Enterprise GP Holdings, and Energy Transfer Equity at 8-10% yields. I wouldn't be surprised if ordinary investors saw those yields and thought there had to be something wrong - but while too-high yields are indeed usually a bad sign, there was actually nothing amiss with the major MLPs here. I've heard that Lehman Brothers had large MLP holdings for its own investments, and was forced to liquidate them. That led to a lot of selling pressure. Don't forget, most mutual funds aren't allowed to own MLPs due to the tax issue.  [more]

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Checkup: Berkshire Hathaway

August 07, 2011 – Comments (0)

I can't believe that when I listed stocks I was looking to buy more of in a downturn, I left off Berkshire Hathaway. The company needs no introduction: it's a conglomerate, the two largest features being an auto insurance company and a railroad. It's Warren Buffett's investment arm as well.  [more]

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A Thesis on Health Care REIT (HCN)

August 06, 2011 – Comments (1)

In real estate investment trusts (REITs), I'm attracted to boring and stable. REITs, to recap, must pay out 90% of the funds they receive from their operations (FFO) to investors, and are exempt from corporate income tax. Their dividends are treated as income, rather than true dividends, so they don't qualify for the 15% rate.  [more]

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Veolia

August 05, 2011 – Comments (0)

Veolia had been a pick of mine, and it was one of my top international stocks. However, I haven't been following it closely (thankfully, I don't own this in real life!). It seems that Veolia has been far too aggressive, and that the tide is now coming out. Furthermore, it seems that they've committed accounting fraud in the U.S. - not a mere error, not even a significant error, but actual fraud. The current total amount they are disclosuing (90m Euros) is not a company-ending amount but it is quite large, and if this escaped their internal controls, one must wonder. I've ended my pick until the magnitude of the situation is clearer.  [more]

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What To Do About the Selloff: Remain Calm

August 05, 2011 – Comments (3)

I thought that the stock market had got ahead of itself, and frankly, I was sort of hoping that a downturn would turn up some buying opportunities. I was admittedly not hoping that previous GDP data would be revised downward sharply and that we'd have a debt ceiling crisis. In my view, the cuts from the debt ceiling deal will remove aggregate demand from the economy, which could cause a double dip recession. I'm emphatically not in the school which says it's all about uncertainty, but the debt ceiling deal doesn't really help us there, either - we still don't know what's going to be cut and when the cuts will happen.  [more]

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