My friends,
Selling BAC at $11.80 wasn't the best move, seeing as how it has still climbed. It also wasn't the worst thing we could have done, as it was a profitable move and an educated decision based on facts. Every financial analyst is baffled by what's happening right now and agrees that you should take profits and wait to rebuy. We just happened to have sold our position before it peaked, but that's nothing to be ashamed of. It happens all the time - if we could predict peak prices we'd all be quitting our day jobs. Anyone that says they knew BAC would rise 30% on news they'd need to raise new capital is lying - because every expert said to sell on the news.
However we still have to be steadfast with our decision. The fact is that we haven't missed out on anything just yet - history shows that bear market rally's (which is what we're in now) last about 8 weeks. They then drop off again. This rally isn't sustainable, people are buying into the market now panicking and thinking that this is the time to "get in". We should still expect BAC to retrace back to the $9-$10/range. Don't believe me? If you'll all remember back when we first bought BAC we thought it was a steal at $13/share. Then it was a steal at $12, then $10 - etc etc, eventually BAC hit lows of $6. Will we hit those lows again - doubtful, will we fall below $10, I think so. We have a company here with a market cap of under $100B that needs to raise $36B in the next 6 months. Every analyst agrees that this will absoultely dilute common shareholders stocks - it's just a matter of when.
http://www.cnbc.com/id/30607907
Stay strong, don't let things get you down. Sure, BAC hit $15 today - but no one would have predicted that, and even if we did, we probably would have sold our position before it hit $15 anyways.
4 comments:
Well said Mr. President.
Good morning. There are a few unanswered questions that were not figured out prior to a near unanimous vote to sell BAC. Has a rebuy price been established? If we're relying on history to delay the dip in share price, why not reinvest the $300+ elsewhere while we wait weeks the for the bear market to wind back down?
The market is up 20% since March 1. The stimulus package has injected billions into local economies. Oil is at a six month high because major construction projects have begun and a clear indicator is that Caterpillar has climbed nearly 30% from our April meeting just a month ago. Banks are lending and people are spending and it's clear investors are playing the market again.
Analysts are speculators- they provide educated guesses based on trends and recorded history. And just because we don't have a corner office on the sixtieth floor of a downtown building doesn't mean we aren't analysts too. We formed this group to learn as much as we could about the market and to make some money based on our own ability to break down charts, data and figures.
Yes, BAC has to raise money. CreditSight.com, TheStreet.com and TheFool.com all include information about BAC assets that they can afford to sell. They will probably unload FirstRepublic (a high-end bank under the Merrill name) and Columbia Management (an asset manager). They also have $4.7b invested in Brazil and Mexico which can be sold.
Babe Ruth famously said that "Every strike brought me closer to my next home run." We can only hope BAC sinks to our TBD buyback price so we aren't left getting called out on strikes with the bases loaded.
If BAC doesn't retrace to it's prevous lows, i'll be the first to say I was wrong. I'm not going to apologize though for it - I was simply going off of my gut based on the numerous articles I read (and continue to read, even today) about BAC. The latest WSJ article said that best case scenario we're looking at about a 25% dilution of common stock - even if they sell off assets. They still need an extraordinary amount of money, and the stress tests factor in their cash on hand (i believe currently 140B) - so even though they have 140B cash on hand, the stress tests are saying that they need that, PLUS 36B extra.
ONly time will tell, and obviously I'm praying we can re-enter the stock. On the upside, if BAC doesn't retrace, it means that everyones lives are going to get a lot better because that means we'll be on a road to recovery. That means the rest of our portfolio should see an uptick, and it means we will have other opportunities.
Talk later,
-the guy who for once is wishing the market would go the OTHER way!
my new, very slim gut, might I add.
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