Buffett's 'Boffo' BofA Buy

Aug 25, 2011 | 10:49 AM EDT  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

bac

,

gs

,

gs

,

ge

In order to counter the verbal drooling on Bubblevision regarding Buffett's $5 billion investment on Bank of America (BAC), here is my 2 cents. First, they raised very expensive capital when they said they didn't need to. Second, the $5 billion deal doesn't save the bank or the industry. Add a "0" to the number and the bank is good, but this is chicken feed. As for recapitalizing the industry, it's a joke. Ha ha.

Third, Buffett has not done particularly well with his recent preferred deal injections at Goldman (GS) or GE (GE). Just look at those share prices since the deal. And this in a raging bull market! Fourth, Buffett has made little money in bank stocks for a very long time. It's not like the guy has the Midas touch with financial stocks. That's right, the biggest single beneficiary of the government bailouts of the banking industry has not been able to make a buck in the shares, even with billions of free money from taxpayers -- i.e., you and me.

Despite my bearishness for bank stocks over the past four years, I predicted a dead-cat bounce here a few days ago. I even toyed with a BofA long rental when the talking heads brought up the Berkshire idea of a capital injection. I think Buffett has a TV in his bathroom and got the idea from CNBC yesterday morning.

Too bad I didn't take my own advice.

So little was really accomplished with this BofA sweetheart deal regarding fixing the banking industry. Yet, listening to CNBC, one would think His Almighty came down from the heavens and blessed the entire space. Buffett may or not may make money on this. I think he might, but his record with banks -- and rescue deals in general -- is not good. However, as far as fixing the structural problems that plague the entire banking industry, well, this deal is like tossing a cup of water into a swimming pool. Treat it as such.

Columnist Conversations

GS has cleared the important hurdle on the way up which increases the odds for an eventual rally towards the 1...
A good quarterly report has sent shares of Calamos Asset Management (CLMS) sharply higher. CLMS was up about ...
Electronics distributor Ingram Micro (IM) reported better than 16% growth in its Q3 sending the stock up about...
Market posting decent day considering Ebola getting headlines again. Believe investors have learned not to pa...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.