Warren Buffett rides in to town and invests $5bn into a black hole. This is not positive news I assure you, this is an act of utter desperation from your CENTRALLY PLANNED government. Between the all out raiding of GOLD & SILVER the past few days to the mysterious run up in stocks pre Jackson Hole speech by Helicopter Ben which will only disappoint, we are entering the late innings which is surely going to be nothing less than an utter blood bath and spectacle post labor day.
Here is how things work. When a bank says they don’t need capital, it means they need capital. When they repeatedly go on record in the public saying, we don’t need capital, and take some you know they need a lot more. When they agree to take money from someone whose only worth is the credibility of his name which is now tainted like everything else related to the financial system, it means not only do they need $5bn but they will likely need a multiple more. This is the cheapest capital they will get because its a favor courtesy of everyone that could care less about you and I. BAC stock price zoomed up to $8.89 on this news. I can promise you whomever bought those shares will regret every dollar spent with 1 month as they will lock in at least a 25-30% loss in that time.
SO that’s my prediction. By September 25 BAC stock will be back to $6.22. Warren Buffett will have lost all credibility and Obama and his centrally planning team of thugs will be back in a corner trying to come up with every last piece of ammo to save this market and unfortunately they will have nothing.
What happened this morning is a pure disgrace to the free markets and I promise will turn in to nothing short of utter chaos. Its disgusting, perverse and it shows the desperation involved in propping up too big too fail banks. Warren Buffett is private money with implicit federal backstop. Remember that at the end of the day. This is nothing short of a smoke and mirrors like maneuver and if you have money in the market, use todays move to reduce your risk.
We are embarking on end game. Get your seatbelts on.
Bank of America Corporation (NYSE: BAC) has just scored its saving grace. Berkshire Hathaway Inc. (NYSE: BRK-A) is investing $5 billion in 6% preferred shares and warrants. What makes this different from other bank investments is that Buffett actually approached Brian Moynihan for this one.
BofA is selling 50,000 shares of Cumulative Perpetual Preferred Stock at $100,000 per share to Berkshire Hathaway in a private offering with a 6% dividend payable quarterly. These shares are also redeemable by the company at any time at a 5% premium.
Berkshire Hathaway will also receive warrants to purchase 700,000,000 shares of Bank of America common stock at an exercise price of $7.142857 per share. Mr. Buffett is already profitable on these this morning now. The warrants can be exercised in whole or in part at any time during the 10-year period following the closing date of the transaction.
Brian Moynihan was quoted, “We are building the best franchise in financial services and we have laid out a clear plan to deliver long-term shareholder value. I remain confident that we have the capital and liquidity we need to run our business. At the same time, I also recognize that a large investment by Warren Buffett is a strong endorsement in our vision and our strategy.”
Here is where Buffett takes the claim… “Bank of America is a strong, well-led company, and I called Brian to tell him I wanted to invest in it. I am impressed with the profit-generating abilities of this franchise, and that they are acting aggressively to put their challenges behind them. Bank of America is focused on their customers and on serving them well. That’s what customers want, and that’s the company’s strategy.”
If you recall, Buffett also invested in General Electric Co. (NYSE: GE) and in Goldman Sachs Group Inc. (NYSE: GS) during times of need. The difference is that Buffett got 10% preferred shares then. This is a 6% preferred share.
The big question is simple… Does this mean that Buffett is changing his tune on increasing his Wells Fargo & Co. (NYSE: WFC) super-investment? That is one of his largest holdings.
BofA shares are soaring on the news. Right before the open we have shares up 21% at $8.47 after a $6.99 close. The 52-week range is $6.01 to $15.51.
Buffett may have just put a $1 billion paper gain on the balance sheet of Berkshire Hathaway.
JON C. OG