Friday, May 9, 2008

Warren Buffet - 'Wells Fargo to Experience Unusually Large Losses' & BofA May Cut Dividend

From Mr. Mortgage:

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


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