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Bruce Berkowitz - Sep 16, 2011 on WealthTrack

September 17, 2011 | About:

I was looking forward to this interview all week. Berkowitz on Wealthtrack defending his "all in" bet on financials.


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Rating: 4.0/5 (24 votes)


Jonmonsea premium member - 6 years ago
How does pro-rata redemption work when it comes to taxes? Not that has any positions in the money, but if he sells Client X's portfolio, thus making a capital gain (or loss), does that tax situation not affect current shareholders, even if their shares are not sold? Are all mutual funds able to liquidate positions pro-rata?
Downwardog - 6 years ago    Report SPAM

Great Interview.
Brianbook premium member - 6 years ago
Is now the time to get greedy?
Blue Cove Partners
Blue Cove Partners - 6 years ago    Report SPAM

I really hope Bruce is correct in his assessment of the investment opportunities he mentioned. However, I am concerned that he may have gone against his fundamental principles this time. He also strikes me as being rather nervous on this interview. If / when Greece and other PIIGS countries start to default, it will create a liquidity crisis large enough to through any valuation analysis of financial institutions out of the window, irrespective of how thorough the analysis is, because financial institutions are inherently leveraged, which makes their equity base subject to the magnified effect of asset value on their balance sheets. When the market perceives a financial instituion or a group of interconnected financial institution as as being undercapitalised, then the valuation and expected return of such instituion(s) may become a binary outcome, the equity holders risk being significantly diluted or wiped out in a recapitalisation process implemented in the worst capital market environment. Therefore the value of a financial institution is so dependent on exogenous factors such as liquidity, government policies, leverage cycle etc., it makes the valuation exercise almost redundant in this environment. Therefore, I fail to see how Bruce could understand what the value of BAC is because it is dependent on so many moving parts. He may very well come out a winner in this huge bet, but from risk management perspective he has not been prudent enough to his investors.

Any different views would be very welcomed.

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