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Friday, September 23, 2011

Bank of America - Where now?

August 25, 2011, 9:22 am Investment Banking
Buffett Invests $5 Billion in Bank of America




On August 25 Warren Buffett bought USD 5 Billion is Bank of America.
The very next line in this New York Times article was:


1:04 p.m. Updated Warren E. Buffett comes to the rescue, again.


See the link below
http://dealbook.nytimes.com/2011/08/25/buffett-to-invest-5-billion-in-bank-of-america/

It was a vote of confidence for the beleaguered financial firm the article said, but was it really? Don't get me wrong. I have absolutely nothing against Warren Buffett or Berkshire. Buffett and Munger is in a league of their own, but was this a wise bet?


I'm sure that Buffett and Birkshire walked away with a profit, the very minute the deal was announced. The question is will anybody else?


Looking at the chart below. I would say no, but I'm positively sure, that Bank of America, some how will be saved and Buffett will get his money back. That is not the problem here. The real problem is the small investors who followed Warrent Buffett on the back of this deal. Will they make money? No way! They will very soon see their "investment" disappear. Operation Twist announced by FED yesterday is bad news for Bank of America. I have no idea who or how Bank of America will be "pick" up, but the remains of this once proud company. One person or one company will look back at a handsome profit and that is Buffett and Berkshire, the rest? Don't ask me, but I doubt if they will leave with anything, if they hold on to their investment, as we are headed for the 3.75 area.



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