Ride the coattails and think like Buffet

Excellent fundamental value and investing in the U.S. financial system.

Buffett Converts BofA Warrants Into $16.5 Billion Stake in Bank.

Warren Buffett’s Berkshire Hathaway Inc. exercised warrants to buy 700 million shares of Bank of America Corp., locking in an $11.5 billion investment gain in a move that was telegraphed earlier this year.  Buffett invested $5 billion in Bank of America in 2011 in exchange for preferred stock and the right to buy common shares.  The cash infusion helped the bank put to rest doubts about whether it had enough capital, and its shares have more than tripled since then. Berkshire said in a statement in June that it would convert its preferred shares into common stock once the Charlotte, North Carolina-based bank increased its dividend. The common shares that Berkshire received are worth about $16.5 billion. “In 2011, we welcomed Berkshire Hathaway as a shareholder, and we appreciate their continued support now as our largest common shareholder,” Bank of America Chief Executive Officer Brian Moynihan said Tuesday in a statement announcing that the transaction was completed.

See original by Noah Buhayar at Bloomberg by clicking here.

Don’t fight the Fed

Now if only the ECB and JCB would get off zero.  Good article from CNBC.

Unless something dramatic happens, the Federal Reserve won’t be hiking interest rates again until well into 2018, according to current market predictions.

Fed funds futures — contracts that indicate where the market thinks the central bank’s benchmark rate will be — point to no further moves until at least next June, and possibly a good deal later. Futures indicate that the Fed will approve just one increase between now and the end of next year.

“The reason for that is they are not getting anywhere close to their inflation target,” said Art Hogan, chief market strategist at Wunderlich Securities. “It’s that sort of secular change that we’ve seen in inflation. We’re just not going to get to 2 percent anytime soon. It keeps them at bay from being more aggressive on rates.”

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Federal Reserve

If the current trend holds, 2017 will mark yet another year that the Fed said it would raise rates on a consistent basis but then backed off. Should the futures market have it right, 2018 would mark an even further departure from intentions.

The most recent projections from Fed officials show anticipation of one more rate hike this year, three in 2018 and then three or four more in 2019 to bring the funds rate to around 3 percent from its current 1.16 percent [1 percent to 1.25 percent target range].

The Fed has hiked twice this year but whiffed on its projections for 2016, when it was supposed to move four times but instead approved just one increase.


See the entire article written by Jeff Cox by clicking here.