BAC

I read some research on BAC [Bank of America] that was published on Barron's Online. Punk Ziegel & Co. wrote that BAC has a large investment in China Construction Bank with the option to increase it to 19.9%. Under the new accounting rules, they will be able to write it UP in Q4. This gain will flow directly to the bank's equity and increase its capital ratios quite a bit. The total increase is ... $35 billion [sic]. BAC's market cap is less than $200 billion now. So this is huge and that capital can be used to increase loans and earnings power in the future.

Combined with the pain inflicted on the non-bank loan markets, such as CDOs, SIVs, and mortgage companies and other structures that let non-banks s compete with banks, I think BAC's earnings power in the future is really a lot more than today's excessively bearish mindset puts it.

So I am thinking of buying more BAC. I have a lot but have about 17% left to add to the big banks from the "Plan" amount (100%). Either JPM or BAC will get it. JPM is the smallest position of the "four horsemen" in my big fins holdings [BAC, WB, C, JPM]. So I have some real thinking to do.

WSJ story says Russian oil production growth is slowing very much. No surprise. Oil demand is growing and has to ration the relatively fixed supply. Oil demand elasticity is well known to be quite small - it's "inelastic". This means to reduce desired demand just 1% it takes a multiple % move in oil prices. Since oil/energy demand is highly correlated to economic growth, oil prices are going up over time. For example, if economic growth would naturally increase oil demand by 1%, oil prices must increase a lot to cut that demand to 0% as no more supply is available.

This is why oil prices are high. It's not fear or speculators. If those were causing high prices, lots of oil would be moving into storage or OPEC could not sell all it desires. But OPEC is selling every barrel. Boone is correct.

Stocks:
Nothing has changed. Beefer actions can make Ms. Market dance anything they wish short term. Buy good stocks & groups on dips. There have been some good dips in oils and miners and deep water drillers. Take a look if you don't own them.

PS: Per yesterday's late day comment, I bought more C around 34.50

PPS: per the comment posted, on this AM's dip I bought more BAC, WB and JPM. Around 15 I'll add to YRCW.