Today well look at Bank of America (NYSE: BAC ), the financial services
behemoth that has been the source of much controversy lately. Besides banking
and credit cards, its Home Loans & Insurance segment offers consumer real estate
products and services, and provides property, disability and credit insurance.
The Global Commercial Banking segment offers lending products, including
commercial loans and commitment facilities, real estate lending, leasing, trade
finance, short-term credit, asset-based lending and indirect consumer loans; and
capital management and treasury solutions, such as treasury management, foreign
exchange and short-term investing options. Its Global Banking & Markets segment
provides financial products, advisory services, settlement and custody services;
debt and equity underwriting and distribution, merger-related advisory services,
risk management products, and integrated working capital management and treasury
solutions. The company's Global Wealth & Investment Management segment offers
investment and brokerage services, estate management, financial planning
services, fiduciary management, credit and banking expertise and asset
management products. The key driving factor behind Bank of America is its
mortgage issues. Simply put, there is too much uncertainty surrounding its toxic
mortgage holdings, along with whatever surprises are hiding in the Countrywide
purchase. On top of this, the government is suing the bank along with 16 others
for its role in the mortgage debacle. The kicker, though, is that Warren Buffett
was convinced to invest $5 billion in the bank. If BofA didn't need that
money, why is it taking it? Because somebody somewhere didn't like the
company's liquidity situation and asked Buffett to step in. The company also
just fired some top management and is about to cut 30,000 jobs. This is a
company in trouble. Normally, this is the part of the article where I'd delve
into financials. But Bank of America's financials are so complex and there is
so much that might be hidden that it's a waste of time. There are so many
other banks and financial services companies that are not in this kind of
trouble, and in fact are extremely healthy, that it makes no sense to even
consider Bank of America a viable candidate at this time. Conclusion I suppose
if you are a speculative investor and think BofA will experience a big
turnaround, you could drop some money into the stock and hope for a good
outcome. But this series isn't about making speculative investments.
Therefore: I believe Bank of America is a sell for regular accounts. I believe
Bank of America is a sell for retirement accounts. Lawrence Meyers does not own
shares of Bank of America.
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