Bank of America, symbol BA, is a national franchise bank. It has the largest footprint of retail banking in the country. It has an enviable position in terms of access to customers. The deposit base is solid and the upside from it's business is bright. With that said the bank recently has been selling the parts of the business with the best outlook, notably some of the credit card business and the Chinese portion. Add in the continued missteps of the management and we get some serious downtrend in the stock price and no recovery in the last week either. In my opinion this all comes back to the CEO Brian Moynihan, who I have never thought was up to the position there. He began his duties as CEO saying he was going to do his work out of Boston and New York, not the headquarters in Charlotte, which said to employees that his comfort came first. Add to that his early desire to run BA like old Fleet Boston, which was bought by BA due to some weakness in operation, and you get the trouble you have today. I no longer think this bank has a positive upside. I did not say it was going to die or anything, just that it was going to perform like a regulated utility in the future. Just with a non existent or very low dividend. Dead money going forward. I have no position in BA.
Goldman Sachs which I have posted on a good bit about the price being beaten down too much and the upside for investors looked good is starting to change in my mind. The change is my mistake, as I did not think about another source of trouble for the investment bank going forward. GS is making all the right moves, in changing it's approach to suit the new Dodd Frank regulations, to enhance their profit opportunities. The moves of people and assets to Singapore is smart too to avoid many of the new US regulations. Ditto on being smart about contributing millions to Obama for reelection to get him to call off the government dogs. The thing I overlooked was the trial lawyer wing of the Democrat party. The trial lawyers and big education unions basically own the Democrat party and whenever they say jump the party obliges. Recently the problems for GS have not come from Obama, but from companies and people piling on law suits against GS for alleged mortgage issues. Trial lawyers see lots of profits here and Obama will not buck them so if this continues at the recent pace GS could have more trouble than even millions of donations can keep at bay. I own GS long, but now have concerns about that position.
Two local banks in my area continue to face problems differently. KS Bank, which is privately stock owned, continues to weather the recent real estate troubles quite well frankly. They continue to make some profits going forward and their write offs are manageable. KS is not hitting home runs or maybe even singles but they have not struck out either. Four Oaks Bank, on the other hand, can not stay out of the news. Bad news that is, they regularly get wrote up for some new adventure in federal oversight. FOB each time refutes the news with news of their own, but eventually you begin to think where there is smoke there might be fire. FOB is not currently profitable and has been writing off bad real estate loans for some time now. I have opined in my postings that with the new Dodd Frank regulations small community banks are in trouble. Just buying some of the new required software costs millions. That is millions most all of these community banks do not make in profits now. I expect what is happening to the small banks might not have been what was expected when the law was passed, but with any law not thought out well you get unintended consequences. These UC however costs jobs. Does anyone in the Obama administration care?
I attended a Smithfield Town Council meeting last night where the current town council set a meeting to ask the public to come comment on what they thought would make a good new town manager. With the recent trouble in town government centered on this post this was a good idea. The public at the meeting last night counted to 3 people, including me. All 3 of us spoke and gave opinions and the council said they appreciated the input. My mind wonders where everyone else was at this meeting. If people are really outraged as they say they are about the recent troubles you would think more would take time to be a watchdog on the council. Maybe the people believe a change in leadership in November will do the trick I do not know. But you got to wonder if we are back to business as usual. Maybe the recent property tax rate increase is not enough to be worth the trouble to come?
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