See Anchor Women of CNBC for more on Maria Bartiromo.Below are some key excerpts from this interview.
BofA took $45B of taxpayer TARP money so far.
Fundamentally, they can run the company as they want and managers can and will work for $500,000 a year until they get out of trouble, he is worried 20 to 30 others beyond top management could leave for better salaries elsewhere. Lewis hopes Obama rethinks this restriction on salaries.
On Nationalization: Worry about nationalization has BAC down nearly 90% from the top. Lewis says nobody has said to him that nationalization is the way to go. Nationalization "appears to be vicious rumors." Nobody in government or anywhere has ever talked to him about this as the way to go.
He hopes to make money and pay the taxpayers back in three years.
On Merrill Lynch purchase, he bought when he did rather than wait for it to perhaps go lower as he was worried others might step in and buy it before him.
Kirk Comment: In retrospect, it would have been good to let his competition implode with this toxic time bomb.
On walking away from Merrill Lynch deal when he had the opportunity: At the end of the day, he felt getting out of the ML deal was not in BofA's or the countries best interest. He was pressured by the Treasury, probably Hank Paulson, to go through with the deal because part of what is good for America is good for BofA in the long term.
MB: How does he justify paying out $4B in bonuses to Merrill Lynch.
This was not directly under him and he seemed to hesitate to comment on it saying there is pending litigation. Lewis said he and his direct reports requested they not take their bonuses this year. He said BofA determines 2009 bonuses for 2008 in February so they can see the end result of the past year. It sounds like ML paid their bonuses out just before the terrible results for 2008 were known.
MB: How do you keep good people at the firm.
MB: How do you reassure investors BofA has a plan?
KL: "We are going to get on with doing business." We had a pretty good January in terms of customer flows, refinancing..... trading has been better.... "we had some nice flows in January."
Good flows on debt originations. Refi boom - Countrywide on fire. Refis free up a lot of cash flow for consumers.
MB: When will you be profitable?
KL: We were profitable in 2007 and 2008. Merrill Lynch lost all that money before they were part of BofA. He avoided saying what impact of ML losses will be on 2009 earnings.
We do NOT need more money from the government. Categorically, I can say NO.
MB: What is most important change you can do to succeed in the future?
KL: We are doing it now. We downsized certain areas. We hired 3,000 people in our mortgage group.
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Disclosures: I currently have a positions in the financial exchange trade fund, XLF (Charts), in my personal portfolio and "Kirk Lindstrom's Investment Letter" explore portfolio. BAC was over 9% of XLF as of 9/30/08
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"Kirk Lindstrom's Investment Letter" covers the "core and explore" approach to investing. Its portfolios are suitable for moderate to aggressive investors. FREE SAMPLE.
Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 94% vs. S&P500 DOWN 14% vs. NASDAQ down 28% vs. Warren Buffett's Berkshire Hathaway (BRKA) up 37% (All through 12/31/08) (More Info)
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Hi, Kirk. I hope things are going well for you.
ReplyDeleteAn out of the blue question: do you know if corporations must report an itemized list of charitable donations in an SEC filing somewhere? I can't find anything. I've looked high and low, I've called corporations, and I've even called the SEC. (I was very disappointed when the SEC could not tell me yes or no. I guess Markopolous would not be surprised to hear that...)
Anyway, I thought it would be worth asking to see if you knew offhand. It seems to me that this is the kind of thing a corporation would have to report -- to ensure investors aren't indirectly giving to a charity they find objectionable.
Thanks for any help.
I believe companies already report their charitable contributions to one Federal agency (the IRS) so reporting them to a second would be redundant. I don't see why the SEC would care either but who knows, I sure don't know for a fact they do not report this info to the SEC.
ReplyDeleteI BELIEVE if a company donated a significant amount of their stock to a charity, then the SEC would be notified of the new major shareholder. You might look at (Google Search) Bill Gates and/or Warren Buffett and how they handled their transfer of wealth to the Gates Foundation.
Thanks for your response. I find this topic very interesting, and remain disappointed that the SEC didn't have a definitive answer when I called. Maybe I'll try an e-mail to them.
ReplyDeleteFor example, here's a representative excerpt from a company's bylaws. A director would not be considered "independent" or "unaffiliated" if they did not meet the following restriction:
"If the Board member or his or her immediate family member serves as an officer, director, trustee or primary spokesperson of a charitable or educational organization, and donations by the Company (excluding Company matches of charitable contributions made by employees or directors of the Company under any non-discretionary charitable matching program) do not exceed the greater of $1 million or 2% of such organization's total annual charitable receipts in any of the last three fiscal years."
If shareholders don't have access to charitable donations, how can they be sure directors the company labels "unaffiliated" really are?
Going in a completely opposite direction....I've only recently begun reading your blog and need to backtrack to catch up on old postings. Having said that, I'd like to see a general "State of the Market/Economy" post to get a feel for your thinking these days.
Personally, I'm comfortable being longterm bullish for the first time in nearly fifteeen years. I don't feel like we are walking on the thin ice we had since the mid-90s. There are no guarantees, of course, but man, I sure like buying stocks when the man-in-the-street hates them rather than loves them. P/E's are actually looking reasonable for the first time in .... a couple of decades? And those P/E's are off of recessionary earnings. Anyway, I'd be interested in hearing your take.
I'd like to see a general "State of the Market/Economy" post to get a feel for your thinking these days.
ReplyDeleteThat is why I write "Kirk Lindstrom's Investment Newsletter."
If anyone is interested in my current thoughts on those issues, follow the instructions to subscribe here.
Thanks for reading.