How far will gold and silver fall?

Explain it to us then. Please tell us what Buffett's risks might be in this deal. Certainly someone such as yourself can make a point that doesn't consist of insults towards others. I've explained my position. You haven't beyond offereing opinion.

 

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Well, in the Lehman bankruptcy, their $7billion in preferred stock was settled for about $250million. Warrants went to zero. If you believe BAC can't survive or pay their debts, then Buffett will most likely take a substantial loss. For more facts regarding your misstatements on currency, banking and preferred stock, please see posts 87,91, 93, 96, 99, 102 and 105.

 

In my perspective it's not very relevant whether Uncle Warren stands to lose money or profit. This prop up had to happen to keep BAC from nosediving, and the Fed couldn't do it because then that would signal to the market that they think things are in bad shape. PR is everything. So in steps someone who can do it without flashing that signal. In fact it sends the opposite. A very smart play by TPTB if you ask me, and may very well save the bank although I'm not holding my breath.

 

But you contend that BofA is healthy, so how could this example possibly apply? However if you now admit that BofA is in the same state as Lehman, then I accept that.

 

Warren Buffett believes BofA is healthy. You do not. I was addressing your contention that preferred stock investments were risk free with yet another example which proves you are wrong again on that point of discussion.

 

I was responding to your point to me that Buffett's involvement in BofA meant it was a healthy bank. Obviously you don't think this if you now compare it to situations at Lehman or you are just saying anything to argue. Your choice.

Safe to say that neither of us knows what Buffett thinks of BofA. We do know what he thinks about making money on sweetheart deals that only he can get. As it turns out, he is only putting $2B into this so his return is more like 15%. A very nice return for an investment in a "too big to fail bank".

 

Wide Awake News - Aug 25th Warren and Demcad

http://www.youtube.com/watch?v=qmkbRCZA-ok

 

No. Gold went from $35/ounce to $850 in the late '60s and early '70s - its last primary bull market. When the crash came, it bottomed at $300. You never saw $100/oz again, let alone $35/oz.

Silver bottomed at about $4, but that was more than three times its starting price in the mid-60s.

Gold going back down to $300 or $250 in the future would be like the metal going down to $35 in the '80s, which it never did. The same applies to silver at $4.

 

Prices have come up since Buffett bought his combination of preferred stock and warrants, but anyone can mimic his deal, although it will cost them more per unit than Warren, due to price increase. Most people do not understand that preferred and warrants are valuable portfolio weapons as the preferred limits loss of dividends, although they may be callable, and warrants function as long term option like leap calls. This article discusses them.

http://news.morningstar.com/articlenet/article.aspx?id=392815

Jim

 

I think it depends on when inflation starts to become more of a problem (in the public mind) then priming the economic pump with low interest rates. I have been buying and holding back from buying on the premise that when the market stabilizes after the fall it will be around 30 for silver and 1400 for gold.

During the fall and at the nadir of the prices, it will be very very hard to be able to buy any, at least that is what I am told from those who experienced the last big metals bubble. I think the low might be 700 for gold and 12 for silver but there will be little to be had at those prices.

 

This is my last post on the matter because it seems to be beyond your comprehension.

1. I believe there is a high probability that BAC is sound.
2. Buffett believes BAC is sound, otherwise he wouldn't have invested in it. This confirms my analysis.
3. Your statement that preferred stock is risk free is wrong, and I gave you Lehman as an example. I was not comparing Lehman to BAC, but refuting your belief that Buffett's investment was risk free.

Even you admit that Buffett is making money on his investment, so your contention that the bank would never be able to survive is put to rest. So that's it, proof for anyone willing to learn. If you are unwilling, I still wish you good luck. There is a good amount of study material in this thread if you wish to increase your knowledge. If you wish to believe otherwise, it is your choice. I help where I can, but ultimately your fate and level of knowledge are up to you.

 

You realize this was an opinion article? Yes the common stock did rise on Buffett's announcement. It rose the day before because of the rumor that JP Morgan was going to take it over and break it up. Despite all that however the bank is back to where it was on Monday stock wise.

 

Sure, he is making money. An undertaker makes money by putting corpses in the ground. It has absolutely nothing to do with the success or failure of said corpse. Likewise BAC has not been proven by you to be a healthy bank and peppering your posts with insults isn't doing your case any good.

You are entitled to feel as you do as I honestly don't care. I am responding to you because you decided to argue with me on what I had to say. My advice to you is that if that you raise an issue with someone else, you better be prepared for the answer. Responding by repeating yourselve over and over, ignoring points made, and insulting comments are not a discussion so yes I agree with you, it's time for you to stop.

BAC is not a healthy bank. This bank with other similar ones are the reason this economy isn't recovering. I will give them credit however for fooling the general public with these made up balance sheets. It's the reason that investment in PMs will continue to do well.

 

My point is that the same preferred stock and warrants are available through my broker and I suspect most others, although not at the same price as BAC is not at the same price. I suspect that many think such instruments are only available to certain prized investors, since they do not show up on their financial page. And yes, often when companies, funds, or large investors buy large quantities of securities they negotiate on the cost, as it is impossible to buy such quantities on the open market without large price changes.

I can see no reason you mention it is an opinion article except to minimize what it says. My , how bad compared to the bullion bloggers and sites which never are opinion pieces, but the "truth" of PM true place in the world, once the infamous and unknown "manipulators" are over ran by the knowing public. Right.

Jim

 

I am not trying to diminish the article because it was an opinion piece, but the reason that I don't normally post links to support what I have to say, is the party who wrote it isn't here to explain how they came to the opinion. I was only responding because you answered my post by stating that others could get the same deal as Buffett based on what this guy has to say.

I suppose it would have been more appropriate for me to ask in responese, why didn't Buffett simply buy one of these funds instead of getting into a deal that casts "sweetheard deal" on what he did. I asked the question earlier, that if he believed in this bank, he could simply buy the common stock on the open market. It's very cheap if you believe in BAC.

 

Buffet + Soros < John Paulson

 

Since the nature of preferred stock is that it will be paid back even if BAC goes under, and prior to paying back the regular stockholders, it doesn't seem like Buffet is actually putting a show of faith in the health of the bank which would only be evidenced if he would have gotten the regular stock instead. To say that he thinks the bank is sound is a bit of a stretch IMO otherwise he wouldn't be playing the failsafe.

 

I'm not sure where this incorrect information is coming from regarding preferred stock. In the capital structure of a company, secured bondholders get paid first, then non-secured bondholders, then preferred stockholders, then common stockholders. If BAC goes under, a very low probability event, then the preferred stock will be repaid only if there are sufficient funds to repay all bondholders first. It is not risk free. Preferred stock is more risky than all forms of debt and less risky than common stock.

 

I can't answer for him, but I can answer if I was lucky enough to be in his shoes.

Even relatively small amounts, say 1 million shares or about $5-6 million at then prices, is never done at market price, it is usually arranged with a broker so that it doesn't move the price upwards too much. Even a stock with a huge # shares, such a move is noticed by computers and the options and short interests would be attracted and the price would jump. Best to arrange a private placement of stocks or warrants to prevent this. Why should I suffer to justify someone else's idea of fairness?

There are many who say gold is going well above $2500 in the next year, why don't they go all-in, I mean I would think them foolish, but gee that is a great profit if the "many" are right. But then again everyone has their own idea of the future.

I think the warrants look somewhat attractive myself, and will be watching them , as I expect BAC to drop back before continuing along, and present a better deal. IMO.

Jim

 

There are over 10B shares of this stock and on average 325 million shares of it change hands each day. I don't think a million shares would be noticed at all. If Buffett put $2B of his money (what this $5B in preferred stock is costing him) into BofA common shares, it would take 275M shares, not even a days worth of volume. Would that be noticed? Most certainly so, and I'd expect it would cause a price hit to the stock. However if, as stated, he thinks it's a good investment for the long run, a strong brand, etc. it's irrelevant. The real question is why didn't he risk anything, not one cent, in this venue? This would have done wonders for proving his confidence in this bank.

I can't speak to other's ideas of fairness as that is between them and whatever moral system they might have. The point however is this. Many a banker over the years tell me the only thing a bank has to sell is their reputation. Once they lose that, then the bank is lost too. It's these sorts of moves that continue to destroy the people's confidence these institutions and yes, at Buffett's level fairness does become a big issue. He went into this, against his own advice that he has given for years, in a deal that only he can get, which as pointed out above has no risk for him. He did it in a very public way which in itself indicates it was done more as a publicity stunt. It's exactly the sort of smoke and mirrors games that has gone on with these TBTF banks for 4 years and anyone should see right through it.

As for the predictions of $2500 gold. Who says they aren't buying it up? It's exactly these kinds of shenanigans that are causing them to do so. Gold is the great equalizer.