Warren Buffet – ‘Wells Fargo to Experience Unusually Large Losses’ & BofA May Cut Dividend

Posted on May 8th, 2008 in Mr Mortgage's Personal Opinions/Research

This post is for the stock market participants out there.

This did not make the big news circuit and quite frankly, with all the other news swirling, I forgot about it. The reason why I am bringing it up is because I have been reporting on Wells Heloc and Subprime exposure for almost a year and have been ridiculed to death by the Buffet cheerleaders. (see links below to other Wells reports)

Now, Buffet is taking my side. Last weekend at the Berkshire meeting, he said:

2:38 pm:Buffett says Wells Fargo (in which he has a stake) will have larger than usual losses, but that won’t be the end of the world and he’ll keep owning it over the next 5-10 years. “I would predict that Wells will be earning a lot more money ten years from now than it is now.” It wouldn’t matter to him if Wells Fargo was delisted for three years and he could just watch the business. He doesn’t feel that way about every bank, of course.

2:40 pm:Munger says, “What your seeing now is justice.” Banks that were stupid and overreached deserve to suffer. Buffett notes that justice is coming from the shareholders, but also affecting shareholders who didn’t really know what was going on.

So, it should be obvious now that Wells Fargo isn’t what management portray it to be. They did their fair-share of dirty lending as one of the leaders in Subprime, Alt-A and Home Equity. As a matter of fact, they still hold $84 BILLION in Home Equity Loans worth a small fraction of a dollar.

Those of us in the mortgage industry have known this for years. It still amazes me how everyone on Wall Street and the bank itself, can be in such denial. Now, the truth is coming out and as a shareholder, you should know.

In addition to the above, I was told by someone actually at the meeting that the words ‘near-term’ were also used in association with the ‘losses’ so big Wells Fargo news maybe coming sooner than you think.

A second story making the the rounds this week, but much more under-the-covers, is that BofA will cut its dividend in the next week or so. This is only a rumor but from very credible sources. Warren Buffet did not say this. -Best Mr Mortgage

Mr Mortgage Exposes Wells Fargo’s Toxic Waste

Home Equity Loans – A Big Bank Killer

Home Equity Delinquencies Surge – S&P, BofA and Fitch Concur

32 Responses to “Warren Buffet – ‘Wells Fargo to Experience Unusually Large Losses’ & BofA May Cut Dividend”

  1. […] Read the rest of this great post here […]

  2. I have a sub-prime mortgage from Americas Servicing Company, owned by Wells Fargo. I requested a modification over 2 months ago. I have never missed or been late on a payment and I have lived in my home for 24 years. I was denied the modification because they said I could not offord a lower interest rate!! I turly believe they do not desire any modifications. They are quite happy collecting my higher payments. I’m not sure what the hidden agenda is, but I’m pretty sure someone is planning something.

  3. mod’s are trick…you have to be able to make the payment or they won’t do it. It is essentially loan processing. You have to give them a present and proposed that makes sence for the borrower and bank. Modifying a loan for a borrower who cannot afford any payment is futile for the bank. I am starting an on-line mod service soon. Stay tuned. It will be an online do-it-yourself kit. You may want to call a professional at this point. http://www.getgreencredit.com is one of our advertisers. Tell them Mr Mortgage sent you. They do a good job.

  4. Nice work mr. mtg.

    The entire ponzi scheme held together by bernanke paulsen realtwhores HBers appraisors and the shady banksters will come tumbling down soon.

    It’s time for house prices to tumble down to affordable levels (historical rental equiv. & incomes), not these artificailly high phoney prices that still persist.

  5. Mr. Buffet is only one of a few people in the market who are telling the truth right now. He also warned of lower future profits.

  6. Bank of America will really have to cut their dividend if they acquire Countrywide. 😀
    I shorted Countrywide at least 8 times, but I’m scared to short BoA.

    The question is if the rumor of BAC already “priced in”.

    I shouldn’t be bitter since my portfolio is the largest it has ever been each day this week. I have an annualized return rate of 21.5% this year. It’s unrealistic to keep this up all year especially since I have a day job, but I’ll try.

  7. After hours AIG lost two times more than expected, is selling 12.5B in common shares and it’s downgraded by S&P and Fitch.

    All other banks trading down AH because of this.

  8. Article out on DJ about BAC. These guys moved Level II over to Level III just to hide it!

    The Charlotte-based banking giant said it transferred $4.4 billion of commercial paper into Level 3 during the first quarter due to a lack of liquidity in the market.

    During the three months ended March 31, the company also transferred $2 billion of auction rate securities into Level 3, of which $1.5 billion were auction rate securities backed by student loans.

  9. If BAC lowers their dividend next week you are the hero
    of the financial world. If not you are just a talking head.
    I personally hope for the first. But let’s see.
    🙂

  10. BAC is run by a complete moron. Ken Lewis is more afraid of *climate change* than he is of subprime lending. I kid you not.

    Of course I am short this one too. I do fear a five point bounce in the stock should they back out of CFC – as they rightfully should. Hopefully the stock will drop substantially before they pull out, I can cover, and then whack the poop out of any such bounce.

    Mr. M,

    I read the other day that BAC had $116 million in HELOCs mostly from 2005-2006 which seemed high to me. But now I can’t find the link. Have you heard the same?

    I’ll probably never forget walking into a BAC branch in Charlotte a few years ago – I merely glanced at the posted mortgage rates from afar and some effeminate loan officer came skipping barreling up to me and screamed, “Do you need a mortgage? Do you need a home equity loan????”

  11. bofa and chase have the most helocs at over $100bb and then comes Wells at $84mm. If you look down a few of my posts, the most recent one regarding helocs has a pdf lin to a fitch report. check it out.

  12. Boss, what do you think of Congress 300B bail out? Will it be effective to the house market? Should we go ahead buy house?

    Besides, how about the recent Mortgage rate drop?

  13. no comment on the $300 bil bailout yet. I want to wait to see more info spew out about it. Remember it involves banks writing down balances up to 20%, which in the grand scheme of things will not be enough to save the typical subprime borrower. Not only not enough in terms of principal reduction but alos new monthly payment from fha. Chances are their payments will RISE. What about the alt-a crisis just starting now. 20% on a pay option reduction is nothing and their payments will increase dramaitcally.

    On recent the mortgage rate drop, we will see how long spreads stay in. We have had this happen on several occasions over the past year only to get wacked when the capital markets spiral out of control yet again.

  14. Thank you. I do believe this BILL will cause super inflation. However, just wonder if it brings chance to buy property to offset inflation.

  15. Warren Buffett seems farely indifferent to the whole stuff. He has been behaving strangely the last few weeks. And then we learn that he shorted some puts on the market. Not a particular intelligent move.My theory is that he knows the situation is far worse. But he cannot admit it and probably wants to sell some shares. So he says as usual, that the problems are temporary and he intends to hold them for the long term and everything is fine. Meanwhile he is probably selling. I am really tired of hearing all this bull that everything is just fine and that the crisis has ended. Mega dilutions are going on . One analyst Das, floated the number of 700 billion of dilutions in the banking sector. There is one big dilution per day lately. Yesterday Citigroup again with 2 billion and AIG with 12,5 billion. Everything is soo funny. On the same day Paulson announces officially, well, almost, that everything is finished.

  16. feng, super inflation is occurring right now, in oil and commodities. Oil’s up 25% in 3 months. That’s 100% inflation per year. Is that super enough?

    And housing will experience super inflation, too, as soon as we witness capitulation.

    What’s your rush? If you’re short on time, deal with that at a shrink’s office; but don’t put out anxiety where cool, rational heads are required.

    First capitulation, then the eye of the storm, just to make sure there’s nobody interested, and then, for those who have a pre-defined strategy, it will be Monopoly with positive cash-flow to boot. When it’s breakeven and positive, then it’s time; until then, it’s too early.

    Gold followed this same glide path from its 1980 high. When it was in the mid-two’s and low threes, nobody wanted it. Now, it’s in the nine’s, and some of think that’s cheap at that number.

    So, drop the anxiety, go smoke a cigar, drink sherry, and wait for the crushing blows to RE price coming in during 2010; only then, get up from your lounge chair and start your serious power grab (if you have anything of value left with which to trade for RE at that time.)

  17. Marc Arthur, this time is like the 1870’s in the US; that was the time when the US railroads were bankrupting.

    What happened to them, then, is happening to the IB’s now. This will continue until every sucker who believes the IB’s are the centers of power get their fill of bonds, convertibles, preferreds, and then find themselves flushed into common and then into collector certificates.

    There’s not one shred of a reason why this should not reoccur. The IB’s now are as sexy as the RR’s were then. They’re the status symbols and centers of economic power, so it has been. And they’ll suffer the same outcome as the RR’s.

    With this understanding, your path to fortune is mappable.

  18. My posting at calculatedrisk.blogspot.com…reposted here:

    Wells Fargo, aka Buffets Bankruptcy.
    Buffet has been wrong many times in the recent past; and WF is the albatross that will wake up his mom & pop shareholders to the fact that they have not bought a piece of sainthood, and it’s now time to clean their clocks, too.

    Criminey, I’ve said ever since 2005 that Buffet would wear the triple albatross necklace with his stake in Wells Fargo. Over at the housingbubbleblog.com, those folks have pointed out for years that WF was one of the largest sub-prime and Alt-A mortgage generators.

    And what did WF say? “Oh, we’re doing great; don’t look at us.”

    The curtain is now pulled back. Hello spectre of Christmas Now. Remember the line, “Fear ignorance most”??

    For those who believed in Santa Buffet, this WF position (and plenty of others in their portfolio of pretty’s) stinks from rotting bird flesh.

    It is already too late to say “Look!”. For those who refused and continue to do so, there is and will be a steep price to pay. Oh, but Buffet will rescue you later? Nodda chance as the entire economy is moving south and his most recent purchase from the Pritzkers, and his unloading of silver point to a guy who should be emeritus, and fast.

    Here’s the news…
    http://mrmortgage.ml-implode.com…y-cut-dividend/

    Warren Buffet – ‘Wells Fargo to Experience Unusually Large Losses’ & BofA May Cut Dividend

    Posted on May 8th, 2008 in Mr Mortgage’s Personal Opinions/Research

    [Check out the article; you may decide that fading Buffet is a very smart play; but there are many much stupider prophets who deserve to be shorted along with or first.]

  19. Authier, my apologies on your name misspelling.

  20. I am surprised how complacent people are. In Canada, the whole freakin banking system went almost kaput, because of commercial paper related to what else!, american real estate. And you know what ? When you speak to the ordinary Joe, he thinks you are demeted or a alien from planet Mars. He doesn’t know what you talking about and thinks you are sour grapes.

    35 billion frozen, litterally paralyzed the banking system for a couple of weeks. The funds by the way are frozen until 2017 !!!!!!! What a joke ! Holders will get maybe if they are lucky lucky, 30 to 40 cents on the dollar, but in 2017!

  21. Pas de problème. It’s OK. Typing errors are my specialty.

  22. I have to agree with Authier… Buffet is hedging his positions.

    If he says otherwise, the markets may go into a turmoil again, seeing that he always gets quoted on MSM.

    There should be another leg down for stocks soon and movement up for commodities DESPITE the “strengthening” of the dollar.

  23. Right on the Money Marc Authier, I agree totally with your posts. Especially regarding the “everything is fine” crap. I hear this stuff on CNBC and think these people should be strung out in the town square!

    As far as the ordinary Joe, they don’t want to know – I have been called doom and gloom, etc. Whatever, good for them – when I can sell my gold to heat my house (funny if it didn’t seem so real!?), I wonder if they will want to come by for a little warmth? No one likes a buzz kill, and all these sheep who have been driving their SUVs, and living off their Helocs, are too afraid to admit to themselves that their little party may be over. Party like it’s 1999 kids!

    Yup everythings fine, go spend your stimulus check! “It’s a great time to buy a house”, “it’s only a slow down”….bla, bla, bla!

    Thanks everyone, I enjoy reading your posts, and Mr. Mortgage all the best and thanks for some reality!

  24. thanks anneleise. after reading up through this thread, everyone nailed it. just get the message out guys because what you are seeing happeninbg is the first of many large fleecing’s of america. first, in the free money real estate pump itself by the investment banks, second in the massive devaluation wave going across the country and last in the massive bailouts that out grandkids will pay for if we are not careful.

  25. No, thank you 🙂

    Would love to get the word out, they think I am nuts. I was warning on inflation, oil, etc. in August, you would think I was Osama Bin Laden. I am not a major gold bug, I am not hoarding food in a bunker for “end of oil” or any of that,just holdin on to my cash (as devalued as it may be) to stay as whole as possible through this mess. Honestly, I don’t want to see people get screwed, but I have learned to just keep my mouth shut, and keep up with all the info I can get my hands on. A big shock could be on the way, and sadly I think 80% of america has no clue, anyway, have a nice weekend all….lol ;oD

  26. Buffet is a long term investor. He is looking at Wells in 10 years, not two. Most of his investments have taken 7 years or longer to return spectacular gains. Wells, like BOA, is positioned to gain considerable market share in the next few years regardless of the near term pain.

  27. “Buffet is a long term investor”

    I used to think that way about the WFC business, until they told me they shitcan the entire mortgage operation in MD and I know what happened.

  28. No strenghthening in the dollar today and oil at 126$. Iran made a promise this week of a price of 200$. Warren this time is lying.

  29. Response to Renterfornow –

    So true, including appraisers who either willfully inflated values or were not competent (or both). Afterall, what’s to fear? – a rising market will cover me!

    I’ve reviewed many, many appraisals; too numerous I don’t even know how many. Lots of them are outright fraud; like the one in NYC, a purchase money deal where the appraiser “popped” the 3 comparable sales prices reported in his appraisal up by $100K each in order to support subject property’s sale price! And he thinks nobody is going to check his data?! I did, and all 3 sales closed exactly $100K less than what he reported! What an audaciuous fool!

    I look forward to many, many appraisers across the country losing their licenses for such skullduggery!

  30. Loan mods require professional assistance or you will get the blowoff. Try Foreclosure Justice LLC at http://www.justdontwalkaway.com They are staffed by lawyers CPA’s and other professionals.

  31. I read similar article also named BofA May Cut Dividend, and it was completely different. Personally, I agree with you more, because this article makes a little bit more sense for me

  32. […] Of all the banks, it seems that Wells Fargo is the most solid right now, and I keep my checking accounts with them for everyday banking. However, Wells is the country’s 2nd largest mortgage lender in the U.S., and Warren Buffet says they could experience “unusually large losses”. […]

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