Posted on 08/22/2011 8:49:32 PM PDT by DeaconBenjamin
find a credit union to join.
At under $5, pension funds will have to unload their shares of BAC. If they cannot raise the capital nor halt the price slide, BAC may have to reverse split to keep their price from cascading.
I’d make BofA a nice loan. For 12% interest. Really! Call me.
But seriously, the day I dumped them was one of the best of my life.
FWIW: article from last year reagarding B of A’s CEO
Die, BoA, Die!
BOA’s Balance sheet as of 6/30/2011 (in millions):
(that’s right, they have $2.2 trillion balance sheet)
_____________Assets______________________Liabilities
_____________$2,261,319________________$2,039,143
____________________________________________________
Book Value_______________________________$222,176
Ok, we’ve got about $222 billion as “book value”. That’s about 9.8% of Total Assets. That’s what the company books and records indicate the firm is worth: Assets minus Liabilities.
Incidentally, this means that if the Assets are actually worth 9.8% less than the company carries them on their books at, that’s the point when the company is insolvent.
We have a market capitalization of about $10 billion. That’s the market price of the shares of the company stock, today, times the total number of shares outstanding. In theory, that’s the starting price for negotiation just in case you want to buy the whole company from the existing shareholders.
Wow - the market thinks the company is worth less than 5% of what the company thinks it is worth.
Well, is it worth $10 billion ? Or $222 billion ?
Let’s take a look at the balance sheet detail.
I see an asset called Goodwill for a little over $71 billion.
Debt securities about $331 billion. They - like many banks - are relying on the government being able to borrow enough to pay back it’s Treasury debt outstanding.
Loans and leases about $941 billion, with about $37 billion allowance for losses. They need everyone to pay back what they’ve loaned them.
Ok, seems normal to the “lay” person. It “depends”. The devil is in the details.
IMHO, they’re in worse shape due to not being connected quite well enough.
Let’s be serious; Hank Paulson forced B of A to conclude deals to buy Merrill and Countrywide, two failed balance sheets. B of A is a far-too-large bank to be a shining example of efficiency, and certainly it’s balance sheet was no marvel before the forced mergers, given the housing bubble effects that it was experiencing in the years leading up to 2008. Having no choice, B of A has been working away trying to improve it’s balance sheet, but with such low interest rates and lack of loan demand, I’m amazed they’re still going. Obviously, the stock market knows all this based on the market cap collapse. On October 12, 2007, it closed at $52.07, representing a market cap of around $76 billion. It’s fallen about 87% since then.
One thing boys: this time, if they do fail, simply chop up the pieces and have smaller banks take over the pieces. Stop playing games.
Oh, and same goes for Citi, JPMorg and GS.
Seriously.
Just let all the central banks know, do it halfway intelligently. Calm down and just transfer assets and liabilities, and do it like a normal bank insolvency.
Or the sovereign debt balloon is going to burst and it’s going to look like the fat guy eating “one more mint” in that Monty Python movie.
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