How Truly Long-Term Investors Should Approach Bank Of America

In the 2013 letter to shareholders of Berkshire Hathaway, Warren Buffett noted this: “It is important for you to realize that Bank of America is, in effect, our fifth largest equity investment and one we value highly…We can buy 700 million shares of Bank of America at any time prior to September 2021…We are likely to purchase the shares just before expiration of our option.” Even though Buffett’s terms on the deal are much, much better than what any investor could get by going online, typing in the ticker symbol BAC, and clicking the purchase button, the fact that Buffett values the position highly and will likely make Bank of America such a meaningful portion of the Berkshire Hathaway investment portfolio seven years from now indicates positive sentiment about the long-term future of the bank.

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When Dividends Are Used As A Don’t Look Behind The Curtain Technique

This week, I’ve been working my way through Forrest McDonald’s 1962 book Insull about Samuel Insull, the man who worked as secretary and financial manager under Thomas Edison but also was associated with large wealth destruction that resulted from centralizing electricity—one of his famous techniques was helping companies create large amounts of new issuances in stock to bring new shareholders, saying “if everybody owns the company, nobody owns the company.”

His lack of concern about regulated monopolistic powers meant that he frequently gave advice on how corporate management teams could avoid being hassled by shareholders, and he recommended annual but modest dividend increases and the issuance of new debt or bonds to fund the necessary improvements to ensure permanent job safety—as long as the new management has a new project to tout to shareholders, and if the annual cash payout grows, you can put together a nice career without being called out.

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