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By Christine Benz | 08-25-2011 04:51 PM

Deja Vu All Over Again?

Morningstar markets editor Jeremy Glaser looks at five stories from this week that are more of the same.

Christine Benz: Hi, I am Christine Benz for Morningstar.com and welcome to the Friday Five. Normally on the Friday Five we like to discuss the past week's new news. But some of the past week's headlines have felt a little bit same old, same old recently. Here to discuss some of them is markets editor Jeremy Glaser. Jeremy, thanks for joining me.

Jeremy Glaser: It's never the same old with you Christine. Thanks for having me.

Benz: So what you want to talk about this week?

Glaser: This week we'll talk about Warren Buffett's investment into Bank of America, bank layoffs, Steve Jobs' leaving Apple, housing data, and finally share repurchases.

Benz: So, Jeremy, Buffett's Berkshire Hathaway is sinking $5 billion into some BofA preferred shares. What feels familiar about that you?

Glaser: This really has all the hallmarks of a classic Warren Buffett deal written all over it. He's able to use the incredible amount of cash flow that comes off from the firm's insurance businesses and other businesses. He's able to invest in a company that he believes in very strongly and that he thinks has a strong franchise. He thinks Bank of America is going to do very well over time as he said in his statement when he made the investment, and he's able to get some incredibly favorable terms. He's getting a really nice yield on these preferred shares, much more than he was getting from that cash that was just sitting around earning basically nothing on his balance sheet.

He's able to get some warrants to buy shares at what he thinks are depressed prices for up to 10 years in the future. So he thinks that gives plenty of time for BofA to work out some of its mortgage problems and plenty of time for the bank to really get back to its core earnings. He thinks he's going to make a lot of money there. It just shows that even when we think that he doesn't have an another trick up his sleeves he finds another place to put that money to work, which has really been the hallmark of his entire career.

Benz: And for BofA, in addition to that capital infusion, it seems like it's probably a little bit of the seal of approval that if Buffett likes it maybe other investors should like it, too. Did Wall Street respond?

Glaser: Yeah, absolutely. It's a nice vote of confidence for the bank. We saw that during the financial crisis when Buffet made similar deals with General Electric and Goldman Sachs. It is really seen as a backstop and says that this man, who has had such a great track record, is really staking quite a bit of money on it. And we saw the stock pop quite nicely after the news.

Benz: Meanwhile, another familiar headline, banks are laying off more people both UBS and BofA coming out this week with news that they planned pretty big layoffs in the foreseeable future.

Glaser: Yeah, bank layoffs shouldn't be anything that would be too surprising to investors right now. Banking is a cyclical business, and it looks like we're entering a downcycle. The economy is certainly not growing at a hugely robust rate, and banks maybe hired hoping that the recovery would be a little bit stronger and that there'd be more demand for some of their services. But that demand just isn't materializing.

So these layoffs are going to hurt. I think that certainly when we're in an economy that's not producing a lot of jobs, losing these jobs is not going to be a net positive. But again, it's a story we've seen before that as the economy starts to slow down, the banking sector slows down. Banks are very quick to lay people off to try to align their costs with their revenue that's going to be coming in the door. And I think that once things start to get a little bit better all those people will get hired back because fortunately banks are also quick to hire people back when they see an opportunity.

Benz: Jeremy, that leads to the next point. One of the things that has been weighing on banks is the housing market. This week we've seen some data on housing that's a little bit mixed, some good, some bad. What's going on there?

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