Does Anyone feel like Bailing

[classicman]

An interesting turn of events

Bank of America Soars as Lewis, Directors Buy Shares

Jan. 21 (Bloomberg) -- Bank of America Corp., the biggest U.S. lender by assets, gained 31 percent in New York trading after Chief Executive Officer Kenneth Lewis and five directors bought more than 500,000 shares for at least $3 million.

Lewis bought 200,000 shares of the bank at prices ranging from $5.98 to $6.06 yesterday, while director Robert Tillman also bought 200,000 shares for $5.77 to $5.78, according to a filing today. Temple Sloan Jr., lead director of the Charlotte, North Carolina-based bank, bought 41,800 shares. Buyers also included William Barnet III, Jacquelyn Ward and John Collins.

Purchases by insiders typically are seen as a vote of confidence, and the filing helped Bank of America stock regain some of the ground lost this week. Jamie Dimon, CEO of JPMorgan Chase & Co., also bought 500,000 shares of his bank valued at $11.5 million, according to a separate filing. Lewis bought his stake as the bank prepared to dismiss about 1,000 people, part of a reduction that may ultimately affect 35,000 jobs.

Bank of America shares advanced $1.58 to $6.68 at 4:15 p.m. in New York Stock Exchange composite trading. Earlier in the session, the shares reached $6.88. The company fell 29 percent yesterday to $5.10, a two-decade low, after Paul Miller, analyst at Friedman Billings Ramsey Group Inc., said the bank needed to raise $80 billion of capital to reach adequate levels. JPMorgan added 25 percent today to $22.63.

Whats this all about? Anyone?

[tw]

Originally Posted by classicman

Whats this all about? Anyone?

I can think of at least three possible interpretations.

First, stock prices looked like they were about to drop below December's new lows. A good time to buy(?) when management must proclaim buying decisions in advance.

Second, more Enron accounting was discovered in Merrill Lynch causing another complete loss of confidence in Bank of America. Either that was also another good reason to buy OR, well read the next paragraph.

Third, Lewis may be in for a proxy fight because of the Enron accounting and BAC now running to government for more welfare. Lewis's job may be on the line.

Well, yes, a vote of confidence may be another reason for the purchase. Or maybe the executives are still in denial as to how much trouble their institutions may be in. Reasons for the purchase could include parts of each above three points. Doubtful we will ever know their thinking. However even Bank of America and Citigroup have been sucked into a swirl around the drain.

Appreciate the problem. American financial institutions were running massive debt to equity ratios based only mythical accounting practices that claimed risk was under control. Europe demonstrates what better banking did. Bank of Scotland is in serious trouble because their ratio was 14:1. Most European banks were 5:1.

Morgan Stanley and others were operating at 30:1.

BTW, did anyone see 60 Minutes that demonstrated how Morgan Stanley, et al could run up the price of oil now that deregulation made it possible to manipulate markets with secret contracts? Enron accounting practices were alive and well for years. Why did Morgan Stanley own more oil than Exxon? Deregulation lobbied for in Congress in 2000 by Enron (that also made the mythical CA energy crisis possible) is still legal. Our banking and investment markets are a mess. Just another example of why finance markets must be so heavily regulated.

Does Lewis of BAC think things can only get better with regulation? Well how many more "Enron accounting" failures are there waiting to be exposed? How many more shoes will fall.

The Detroit auto show demonstrated that Chrysler has zero innovations in the pipeline and little hope of surviving as is. Nardelli is doing to Chrysler what he did to Home Depot. But then maybe we have already discounted the inevitable. Maybe that is but another reason why Lewis believes the bottom has been found.

Suggested are only a few reasons for his decisions. Nobody really knows how many more "Enron accounting" disasters await exposure. It is still a mess. We can only speculate what Lewis is speculating.