UPDATE: 9:00 PM
UPDATE: 2:25 PM
Another way of viewing today’s H&S; pattern… If it completes at 1156, this one potentially takes us all the way to 1121, also completing the larger pattern with the 1032 target.
UPDATE: 2:00 PM
This morning’s spike has been successfully beaten back. The reversal leaves a head & shoulders pattern on the 15-minute chart.
Potential is to 1130, just 9 points away from completion of the larger H&S; pattern with potential to 1032.
For all the excitement around the Buffet/BAC deal, the after-effect is a perfectly-formed bearish Crab pattern that should quickly erase this morning’s bump and then some.
UPDATE: 9:25 AM
BUFFET’S BILLIONS BAIL OUT BOFA
BofA has 10.09 billion shares outstanding, with a market cap of $63.85 billion. For his $5 billion, Buffet gets cumulative preferred stock with a 6% dividend and redeemable with a 5% premium.
The real plum? He also gets warrants on 700 million shares at an exercise price of $7.142857 each, good for 10 years. He paid zilch for the warrants, so at the indicated opening price of 8.83 (vs yesterday’s close of 6.99) BH has already recouped $1.2 billion of his $5 billion (on paper, anyway.)
Looking at it another way, if BAC recovers to 14.28 or more, he’s essentially got his preferreds for free. He can reap the $300 million in annual dividends on essentially a zero investment going forward. Pretty healthy IRR, wouldn’t you say?
Why would BAC offer Warren & Co such a sweet deal? It had no choice. Warren, who from all accounts is a sweetheart of a guy, knows a desperate borrower when he sees one. And, this settles that pesky question as to how desperate BAC really is.
Terrible news for the shorts — 131 million shares worth.
INITIAL POST: 9:20 AM
Initial claims of 417K versus expectations of 400K. The futures promptly dropped 5 points, but are now spiking on news of Berkshire Hathaway’s $5 billion capital infusion into BofA.