Thursday, August 25, 2011

Think The Buffet Investment In BAC Is Investing Savvy?

Think again.  This sequence of events is not a coincidence, and it's going to utilize your tax dollars to turn it into a quick home run for guys like Buffet:   Monday:  Buffet "discusses" the economy with Obama;  Tues/Wed:  Bank of America looks ready to collapse;  Thursday very early:  Buffet announces a $5 billion preferred stock investment in Bank of America, thereby addressing BAC's immediate liquidity crisis;  Thursday right after the Buffet announcement:  the White House announces it is looking at a plan to bail out distressed residential mortgages.  BAC just happens to be one of the largest holders of distressed residential mortgages.  Think this is all a coincidence and Buffet is some kind of genius?  If you do then I might be able interest you buying a really nice bridge that connects the upper east side of NYC to Long Island.  Really, I have the title to it in my desk drawer...

The coup de grace of all of this will be if the rumors are true and JP Morgan eventually takes over BAC with the help of a $100 billion preferred investment by the Treasury/Taxpayer.  Buffet ponies up $5 billion to keep BAC solvent, in the meantime he gets a 6% cumulative dividend and gets taken out at a 5% premium to face value if a deal like the JPM rumor actually occurs.  Free money for all involved financed by the taxpaying middle class.  Please note:  a lot of Obama's support base do not pay taxes but do benefit from entitlement programs.  Buffet's comment is that "BAC is plenty profitable."  Anyone who knows basic accounting can look at BAC's financials and see that all the profits are generated by GAAP accounting manipulations are not based on cash economics.  So no, Warren, BAC is not profitable and I think you know that.  But it will be very profitable for you thanks to the generosity of the Taxpaying middle class and the straw-man President that you control.

Not only did the above sequence of events unfold like clockwork, but the NY Attorney General who is trying to hold the big banks accountable for their role in the mortgage fraud has been removed from the settlement negotiations after very heavy influence to do so by Obama because the AG wants the banks to pay a lot more more money.  You think this guy in the White House is working for the people who elected him?  NO.  He's working for guys like Buffet, who coincidentally, is also now hosting a big $38k per head fundraiser for Obama in NYC.  And DO NOT forget that Obama's White House Chief of Staff, Bill Daley, used to be a senior executive at JP Morgan...see how this works?  The above sequence of events is NOT a coincidence...

This system has become completely corrupted and is being run for the benefit of the billionaires and banking CEO's who have control of the politicians.  I said back in 2002 that the elitists would keep the system from collapsing until they've swept every last crumb of middle class wealth off the table and into their pockets.  The above deal is a perfect example of this, as the Taxpayers will ultimately be bailing out the banks again and guys like Buffet who are in a position to reap billions from this will be taking full advantage.  And your beloved Obama will appear to be helping the homeowner who can't make his mortgage payment, when in fact what he is doing is using the Taxpayer wealth to bail out the the corrupt banks who made it possible for the idiots in this country to take on a house they couldn't afford.

This time around Dave in Denver shrugs.  The system is going down the toilet and it's going to get a lot more overtly corrupt and lot more painful for all those who maintain their slavish faith in Uncle Sam and red, white and blue.  If you want some kind of revenge, convert as much of your paper dollar confetti into physical gold and silver.


  1. Think crony capitalist corruption!

    Obama Goes All Out For Dirty Banker Deal

    The idea behind this federally-guided “settlement” is to concentrate and centralize all the legal exposure accrued by this generation of grotesque banker corruption in one place, put one single price tag on it that everyone can live with, and then stuff the details into a titanium canister before shooting it into deep space.

    This is all about protecting the banks from future enforcement actions on both the civil and criminal sides. The plan is to provide year-after-year, repeat-offending banks like Bank of America with cost certainty, so that they know exactly how much they’ll have to pay in fines (trust me, it will end up being a tiny fraction of what they made off the fraudulent practices) and will also get to know for sure that there are no more criminal investigations in the pipeline.

  2. Instead of the phone next time give him the electric shaver....

    Where's The Retraction, Pumpers? (BAC)

    Six percent eh? That's damn expensive money - something like 30 times the official "overnight" rate to borrow. In addition he got warrants to buy 700 million shares at $7.14 each, which are (at this writing) about 75 cents each in the money. Oh, and there's no lock-up period on those either.

    Can I ask an inconvenient question on the latter? 447 million shares have traded hands on BAC this morning thus far. Were any of them shorted against the box by Berkshire, given that there are no apparent restrictions on his disposition of those warrants?

    Buffett conceived of the investment while in the bathtub yesterday morning and had his assistant contact Moynihan’s to get the banker’s private number, CNBC reported, citing an interview with Buffett.

    Riiiiiight. The phone call that was reported with Obama and the incessant pumping yesterday of exactly this "idea" in the corporate media (CNBS, again) didn't have anything to do with it I'm sure. I'm also sure there's no sort of backdoor deal in the wings from the government; after there there's no record that the 2008 "investments" were ultimately backstopped by the government, right?

  3. Bank of America Is Back Under $8, And Why BAC Shareholders Should Be Selling Into This Strength

    Poor shareholders of BAC (but they deserve it). Buffet is taking out 300m of their pre-tax profit indefinitely, plus dilutes some of their upside. And they love it (BAC went from $7 to $8.80 within minutes of the announcement).

    The calls (atm at issuance I assume) were worth 2.34 a piece (20% vola, 2% risk-free rate), times 700m = 1.638bn

    He paid 5bn for the whole package, so 5bn – 1.638 = 3.362bn for the perpetual cumulative preferred. But the preferreds have liquidation value of 5bn, so he bought them at 67% of par. So his current yield is not 6%, but rather 9%. If BAC redeems after 1 year (at 105%) he will have made 105-67 = 38+6 = 44 over 67 = 65% profit (plus profit from the options).

  4. NEWSFLASH "Warren Buffet to hire 417,000 new workers at BAC to make up for today's jobs number!!!" The fairytale of smoke and mirrors is so pervasive.

    or how about this headline "Weekly jobless claims at -417,000 should assure us a new round of QUeazing!!!!"

  5. Warrens got to keep the game going before the bottom of the bag falls out...

    Middle class retirement now largely a postcard fantasy – How Wall Street fabricated a buy and hold fairytale and jumped ship with taxpayer golden parachutes. Did baby boomers think about who they would be selling those 401k and pension stocks to?

    As Wall Street bankers and hedge fund managers rob the public blind, the mission statement sold to baby boomers is starting to become a large bait and switch catchy enough to make it on a Hallmark card. For decades Wall Street begged and lured the public in either directly or through pension funds into their web of easy money. Save $100 a month and you’ll retire a millionaire! As it turns out, the golden parachute was only available to a tiny fraction of the population while the oligarchy in the financial sector offloads their toxic bets onto the taxpayers struggling balance sheet. The end game? No retirement. At least no retirement like those plastered on glossy mutual fund brochures. What the Wall Street banking charlatans failed to tell you is that you eventually need to sell those stocks to use the money for real world spending. What they also failed to mention is that the baby boomer generation is now going to sell into unrelenting headwinds of demographics bringing on a younger and poorer generation to purchase their stocks. Of course Social Security is in the crosshairs of the financial elite since they already secured their financial piece of the pie. You know things are bad when the Federal Reserve is stating that stocks are not exactly a winners bet in the years going forward.

  6. You are EXACTLY spot on once again, with all of this post.

    As I said earlier this week:
    " ... when power becomes too concentrated, there is a thin line between design and circumstance, maybe even thinner between design and coincidence."

    ... and then just this morning:
    Those paper promises are made by men who would create a fantasy world for you, where they are your savior, not your enemy–where they “protect you” from being victimized, rather than enable it, where you should be happy to vote for them in these trying times, because you need them, to give you that corrupt brand of justice they are selling.

    I think we holders are growing in number as the curtain falls.

  7. We need a new mascot...

    A Wolf in Sheep's Clothing

    Anyone that has read these pieces for a while knows where I stand on Warren Buffett. Namely I can’t stand him. It has nothing to do with the fact that he has so much money. I am not an envious person and moreover I think having wealth anywhere near his is more of a curse than a blessing. The reason I can’t stand him is because he is a fraud.


    "Gold" Stocks—Some Investments Mine Your Pocketbook

    The price of gold bullion—which recently touched an all-time high—has sparked considerable interest in gold investing, not to mention aggressive marketing and advertising of gold investments, including gold stocks. And even a cursory Internet search will pull up numerous websites, blog posts, investment newsletters and social media posts (including YouTube videos and Tweets) devoted to the topic of investing in gold.

    But some of the stocks and opportunities being promoted have precious little value, and others are outright frauds. This spring, for example, the Commodity Futures Trading Commission (CFTC) took three separate actions against precious metals firms engaged in various schemes involving investments in gold, silver and other precious metals. In one action, the CFTC charged a precious metals firm in Florida with running a boiler room fraud that bilked investors out of more than $23 million.

    As with other commodities, there are prudent and not-so-prudent ways to invest in gold. We are issuing this Alert to warn investors about investment scams that promote the latest "hot" gold stock and to provide information on how to invest wisely in gold.

    Spotting "Gold" Stock Scams

    (oh looky look...they want to scam...i mean help you)

    Alternatives to Gold Stocks

    While you may be tempted to invest in a single stock, it is very risky to put all your “golden eggs” in one basket. Investing through a mutual fund or exchange traded fund (ETF) that focuses on gold companies or gold itself can help spread out and potentially lower your risk. Take the time to research fees and other expenses. Review the underlying securities that make up a given fund. You can do so by going to the issuer’s website, reviewing the latest quarterly report showing the fund’s major holdings or, in the case of an ETF, the exchange on which the ETF trades. Research the fund's manager or management team and read the prospectus carefully, and consider enlisting the help of an investment professional before you invest.

  9. Nanex: Again, Where Are The Damn Cops?

    The intent behind this is clear - to stuff the quote channels so as to create arbitrage "opportunities" - that is, to be able to intentionally steal from other market participants.

    There can be no other rational explanation for issuing a quote stream such as this with no executions.

    Not only does this make a mockery of alleged "efficient and honest markets", it appears, under black-letter law, to be flatly illegal.

    Yet this has been going on since at least the Flash Crash - more than a year now - and exactly nothing has been done. There have been no investigations. There have been no indictments.

    And more-importantly, nobody's plug has been pulled.

  10. FINRA-(F)inancial (I)lliterates (N)ever (R)egulate (A)ppropriately


    Lassonde - Mining Shares To Outperform Gold Going Forward

    With gold rallying strongly off of the lows yesterday along with mining shares, King World News interviewed legendary Pierre Lassonde to get his thoughts on what to look for going forward. When asked about the mining shares specifically Lassonde responded, “Well, I’m encouraged by the action that we’ve seen in the last month. What I see is when the general market really tanked a couple of weeks ago, the only shares that did not go south, in fact they increased in value (over time), were the gold stocks. So finally we are seeing the gold stocks perform as they should.”

  11. Top News
    UPDATE 1-Russian to offer gold-backed loans at 7 pct
    Fri, Aug 26 06:16 AM EDT

    * offers 90-day gold-backed loans at 7.0 pct

    * Facility seen in demand at times of liquidity strains

    * Loans may win up to 1 pct of refinancing market - economist (

  12. I cross collateralized the crossed collateral?

    First-ever foreclosure in billionaires' block as recession finally catches up with New York's mega rich

    That something like this could befall 740 Park has stunned the wealthy elite of New York, not least Mr Swig’s neighbours.

    They are subject to stringent rules designed to stop this happening must reportedly have $100million in cash in order to move in.

    So tight are the regulations that Barbara Streisand was rejected from buying an apartment there, as was Barbara Walters.

    Mr Swig and his wife bought their apartment in 2007 but reportedly stopped making payments on two loans at least 23 months ago.

    Mr Swig, 50, has been accused by Bank of America of not paying off a $4.7million loan he took out on the apartment.
    He also reportedly stopped making monthly payments of more than $62,000 on a second loan for $12.8 million.

    Read more:

    my cash balance was a derivative of a derivative?

  13. This exchange is offering a new international-facing allocated ‘Spot’ Gold and Silver contract, with an 8am Beijing-time ‘fix’. The fix will only involve Chinese Banks; indeed the owners and members of the exchange are in no way related to the western banks that dominate the existing Spot and Futures Precious Metals markets. PAGE is launching in Q4 2011 a new Spot Precious Metals contract to challenge the emaciated LBMA ‘loco London’ system. International investors will now be able to buy allocated and, crucially, Rmb-denominated ‘Spot’ Gold and Silver contracts. The importance of this cannot be overstated. The Renminbi will be accessible to international investors through this exchange, but in a controlled fashion - using Gold as a synthetic choke on demand for the currency. By buying an Rmb Gold contract on PAGE and selling the equivalent $ denominated contract elsewhere, investors will be left with Rmb exposure.One would imagine that the incentive to own Rmb in the present climate is by inference likely to lead to a whole lot of demand for Gold contracts through this new exchange. Add to that the real demand for allocated Gold that will migrate across from the existing Spot market and you are looking at something that looks sure to have major implications for the Precious Metals market.
    At any cost the existing mechanism will resist delivery, which is what makes the recent demand by Hugo Chavez to repatriate Venezuelan Gold reserves so interesting. This move towards delivery by the Venezuela leader plays into the same important dynamic as the Pan Asia Gold Exchange.

    My contention is that this new exchange represents a far bigger challenge to the hegemony of the existing bullion banking system and it price discovery mechanism than most realise. Given the choice between being the unallocated and unsecured creditor of a fractionalized LBMA market or holding title to deliverable and allocated bars within the PAGE system I anticipate much of the ‘loco London’ business will migrate east, lured by the twin benefits of certainty of outright ownership and long-awaited international market access to Renminbi.

  14. Faber quotes this article in his last newsletter.

    Recently a reader of mine, Julie Deluca (thank you very much) attracted
    my attention to the “” which published a comment by “Dave” that exposes in just a few sentences what is wrong with our crony capitalistic system (
    investment-in-bac-is.html - you may have to cut and paste if you wish to access the blog). Now some readers may think that I am promoting here - some “conspiracy theory protagonist” but since many other well-informed observers of the American financial scene have made similar comments, I assume that if not all, at least a lot of it is true and factual. Here’s what Dave wrote: (and then follows the quote)

  15. (Dave)

    Thanks Tuur! That's funny - I'm referred to as a possible "conspiracy theorist." Funny thing is, a good friend of mine in NYC who helps run a big hedge fund use to accuse me of seeing "black helicopters." This was back in 2003/2004. Everyone I said would happen has happened and now he's got a lot of his net worth in gold/silver investments and he's going to unload one of his IRA's a few months and buy physical. LOL

  16. go warren buffet!!!!!!!!!go the 1% everyone with no money hates people with money it just jelousy

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