2008 Again

Mmmm.. this meltdown in BAC is reminiscent of a time when Citi was a bargain at $26 a share. You gotta be a masochist to buy US financials. Here comes the pain train. Choo Choooo

Stubborn

I am levering up on BAC here via buying at the money calls. Overall allocation to my BAC position will decrease as I intend to sell my equity position and use 80% of the proceeds to purchase 2012 calls. As long as the economy continues to recover slowly, it is my belief that as BAC was 'too big to fail' it will be 'too big not to succeed'.

My thought process for this trade:

I don't believe the stock can stay in the $10-15 range for 2011. If BAC is lower than $10 a share in 2012 then we are most likely headed for the next wave of equity apocalypse and buying opportunies shall be had. Else, the world ends and money is the least of my concern.

There are many reasonable cases in which I lose my entire position. But I think the odds and the upside is there.

Come and get it

So much for waiting for a pullback. This rally left a bad taste in my mouth last week but now that I am on to my second helping I am starting to get used to it. Luckily for me Faifax hasn't followed suit so I am going to start buying. Now is a good time to mention I'm not a professional; don't follow my advice unless you are willing to see the potential downside.

If I was a wild speculator, with earnings coming out on the 25th and a up to 10% share buyback program initiated recently , AND the recent resistance both above and below the 400-420 range, I might present a 'calm before the storm' argument for this position.

If I was a fundamentalist, I'd see a track record of 15%+ ROE, a great management team in a solid industry, and a trailing PE multiple of 6. Can't complain about that.