Thursday, June 11, 2009
(Cont'd from above)...

Jim (cont'd):   

But you know what… like what Tommie Lee Jones, aka Marshall Samuel Gerard shot back to Harrison Ford, Dr. Richard Kimball… I do not care… what I care about and what you should care about are the numbers… that is what we do here on Mad Money… not news about Lewis’ guilt or guile… his innocence or his insouciance… it is pronounced that way… none of that matters… especially not when Morgan Stanley drew a line in the sand this morning… with its astonishing conclusion that the numbers, the estimates for this beleaguered bank are way too low… Morgan Stanley went to what is known as street high… a piece of Wall Street jibberish, genuine, that you absolutely need to know because it matters… you go to street high in earnings estimates when you want to proclaim Kevin Rudolph… to the world, to the world, to the world… that you think that the stock is going higher.

Little Wayne does not think the stock is going higher… you do it by looking at all of the estimates already out there… and then trumping them… trumping them with an outlandishly high estimate… and that is what Morgan Stanley’s Betsy Graseck did this morning… from now on, I am proclaiming Graseck, the axe in the bank of America… another must know term, meaning the most powerful analyst in the stock… the axe is the one that can determine the stock price… the axe is the owner of the story… the axe woman cometh, and she is loving be away.

How did the axe get the streets high estimates.. she says that it is all coming together for this bank… from mortgage fees, and interest rates curves… how much they pay you for your deposits vs. how much you pay them when you borrow… right now, a record difference… notice the net interest margin… to what might turn out to be a good deal after all for Merrill Lynch… Morgan Stanley’s research is clear… brokerage, yep, the terrible brokers that they over paid for is pretty much on fire… because of retail and investment banking… instead of thinking about Merrill Lynch, that Merrill ate Lewis’s lunch… or that he should be lynched for Merrill… it is looking like the broker is gaining huge assets… while melding well with old Bank of America… and getting unbelievable synergies… melding, not yielding… as well as being on every deal where it gets gigantic fees… for this year the numbers do not mean that much… Morgan Stanley is pretty much going with the consensus… but for 2010, Morgan Stanley is looking for Bank of America to earn a whopping $2.54... she is the home of the whopping estimate.

Everyone else is looking for well below that… there is a big range, with Obra Kodiak Meredith Whitney at the low of .20 cents… and Wachovia at $2.19, formerly the highest… but most analysts are clustered around a buck… which means that we could see multiple number bumps over the next few days… and that means a sharply higher stock price… one I know that I am betting on as a veracious buyer of this stock for my charitable trust, ActionAlertsPlus.com, buy it almost every day… if Bank of America has that kind of earnings power, you ask, then not only will they be able to pay back TARP… but it is also in a position to go up gigantically, perhaps as high as $20... even if it gets half the market multiple of the other large banks out there… this thing is at $12... this could go to $20... you have to remember that just 3 months ago, the talk of the town from the oft quoted Nouriel Roubini, aka the Professor from Gilligan’s Island, if not Mary Ann, certainly not the millionaire… to even people behind the scenes at the White House… was that Bank of America would most likely have to be nationalized… a pathetic ward of the state… not unlike Citigroup.

Now, it is a company that could have gigantic earnings gains… not foul smelling taxpayer drains… or stains… one that Morgan Stanley says will return all $45B in TARP loans that it owns the government by the 4th quarter of this year… TARP money is expensive, so you are going to get a mammoth earnings gain just by paying the government back… I say, pull back the TARP… and you have an earnings explosion… because you can add back in the cost, all of that onerous government money… it is going to be huge for the earnings estimates… and low and behold, what is under the tarp… a pyramid of Oreos… an Oreo-a-mid… what do cookies have to do with Bank of America… nothing… but in banking speak, OREO stands for Other Real Estate Owned… I kid you not… meaning how much foreclosed real estate that Bank of America is up to its neck in… when things are bad… OREO are deadly, as banks have to take charges against it… but when things are turning, as we now know that they are with foreclosures peaking, we got those numbers today… and home sales booming, we know that already… OREO can go down and be a positive… remember, Other Real Estate Owned… I could not have used Hydrox, if you remember that.

Now, no one except me is looking for Other Real Estate Owned, OREO, to be a decrease for Bank of America… including the axe… but I can tell you that Other Real Estate Owned should end up eventually being a good thing for Bank of America… one more thing that could cause this stock to shoot higher… and the reason why I think that Bank of America is the single best play on the housing bottom… hence, the Oreo-a-mid… to go along with the Mac-n-cheese-amid, the Lister-mid, the Wart-amid, the Milk-amid, the Three-in-one-amid, and of course, the original Beer-amid… now, just so you know, for all of these, lets just say the original could be an NCAA Beer-amid, roll back tide.

To me the issue is this… now that the company has raised billions in equity offerings that it can take charges against for OREO… now that it has turned on the jets for investment banking, brokerage, fixed income secondaries with big fees, refinancing, the whole shooting match… and now that it is in a fabulous position to gain assets and cross sale… when will the real bears admit defeat… when will they upgrade… can you imagine what would happen if any of the bears like Meredith Whitney, who now seems completely out to lunch with that .20 cents estimate, or Credit Suisse with .80 cents estimate, or Deutsche Bank with its projection of a .47 cent loss… can you imagine if they were to break ranks… this stock would be lifting higher and higher… to quote the late noted stock picker Jackie Wilson… higher, and higher… Bank of America could be lifted higher and higher.

Here is the bottom line…

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The Bottom Line!:     Bank of America (BAC*) remains my number one name as the best way to play the turn in housing and the coming explosion in bank earnings… so Ken Lewis, might seem like the fool on the hill… but I say, turn off the hearings… look at the earnings… and go buy some… focus on the TARP removal… focus on the soon to be declining Other Real Estate Owned… focus on the Oreo-a-mid… focus on the numbers the axe is using… because you never go against the axe… and you will see Bank of America for what it is… perhaps the most compelling buy in the whole stock market today.

[verbatim recap]

[end of segment]

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