Bank of America (NYSE: BAC) over-promising, under-delivering CEO Brian Moynihan uttered some words that could have been lifted right out of an investor's nightmare during a conference call hosted by Bruce Berkowitz and Fairholme Capital earlier this month. He told investors on the call that essentially his entire net worth is in Bank of America (NYSE: BAC) stock. For most market participants, if this thought occurred to them in a dream, it would be more than enough to cause them to wake up in cold sweats.
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Unfortunately, for Mr. Moynihan, it is his reality. Based on his statements, we can infer that his net worth is becoming more modest with each passing day. And you thought you had it bad? Granted, Moynihan is a rich banker, which you probably aren't, but he may not stay too rich for much longer based on BAC's plunging stock price. While it is great that he is showing such confidence in the company that he runs, it may end up costing him dearly.
Moynihan made the comment after an analyst asked him and his management team why no one was buying stock at the current cheap levels. In response, he pointed out that there are blackout restrictions and other reasons why top management has not been purchasing BAC shares in recent months and then added that pretty much his entire net worth was linked to the performance of the stock. While his answer was less than satisfying, maybe the real reason they aren't buying is because they don't have any money left!
Moynihan, if nothing else, always projects confidence in a Bank of America turnaround, which always seems to be just around the corner according to the executive, and if he really has sunk essentially his entire fortune into BAC, that confidence is biting him right now. Tuesday's trading session is just another typical one for the stock. Let's see, as of this writing, the Dow is up a mere 200 points. Should be a good day for BAC, no? I mean, even a shipwrecked fishing boat gets a little lift when the tide is rising, right?
Today, that reasoning would be incorrect. Bank of America shares put in a new 52-week low at $6.01 this morning and are trading down 2.65% at $6.25 at last check - and that is with the Dow up 200. In sum, investors should probably avoid this name like the plague. They said it was a value at $14. It wasn't. They said it was a screaming value at $10, and it wasn't. It was the deal of the century at $8. No, unfortunately it wasn't. Bank of America is not a value, it is a falling knife and it is starting to look more and more like it is going to be a redux of 2008 for the financial sector.
(To see how France is looking to Warren Buffett, click here.)
As for Mr. Moynihan's net worth, he might get saved by his own board of directors soon. You see, if they fire him, he will be able to divest his entire stake in the hemorrhaging bank. Hopefully, for the sake of his net worth, the board will act while Mr. Moynihan's shares can still fetch a few bucks apiece. At this point, a lifestyle of early tee times and hobnobbing at the country club has to seem vastly preferable to overseeing the debacle at Bank of America
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