Taking stock: Merrill Lynch

By Malcolm Berko

Dear Mr. Berko:
I have $40,000 to gamble on a bank stock, and my broker thinks Bank of America Merrill Lynch at $18 is a “dynamite” stock that can double in three to five years. He thinks the stock could return to the high $40s where it traded in the early months of 2008. He wants me to buy 2,000 shares and said he will only charge me $300 in commissions. What are your thoughts on Bank of America Merrill Lynch, or do you have any other recommendations? Meanwhile, what is all this noise about new banking rules and laws? Will this affect the future potential of bank stock investing? Please answer as soon as you can.

L.L., Bethlehem, Pa.

Dear L.L.:
During the last decade, it has become evident that we can’t trust the executives who steer the courses of America’s biggest corporations to put the public good ahead of profits. Not profits earned in the normal course of conducting business, but profits made possible by a greed so heinous and vile that the Devil herself would smile in awe. We can’t trust the thugs at Big Oil and Big Pharma, the hoodlums at our property/casualty or health insurance companies, or the villains at our banks and brokerage firms. Their cupidity crippled the consumer, and their greed disemboweled the economy. And because we can’t trust Corporate America, Congress is cobbling a new regulatory agency under the Department of the Treasury to ensure that every American is treated fairly. Isn’t it nice to have parents again? But no matter what Congress does to rein corporate excesses, it will have less effect than the advent of another fly to a slaughterhouse.

Bank of America Merrill Lynch ... yeeeechh! A consumer rating poll by MSN-Money recently placed Bank of America Merrill Lynch in its Hall of Shame. While revenues and earnings of BAC ($18.03) should improve, its culture of avarice, greed and disdain for the common good still festers like putrid yellow pus seeping from a rank, over-ripe boil. And you must know if you place all your eggs in a BAC basket and slip, you are very likely to get scrambled. While I think BAC has fair-to-middling upside potential, a wiser gamble would be to purchase a portfolio of eight different low-priced bank issues that have also fallen far from grace.
I suggest a portfolio of the following. Each is in a recovery mode and could double its price in two to three years: CITIGROUP (C — $4.18) is as evil as Lucifer herself. This global financial services company has a good franchise. SYNOVUS FINANCIAL (SNV — $3.45) has a solid franchise in Tennessee, Florida, Georgia, Alabama and South Carolina. HUNTINGTON BANKSHARES (HBAN — $5.40) has 600 offices in Ohio, Kentucky, Indiana, Michigan, and West Virginia. MARSHALL & ILSLEY (MI — $8.08) conducts its banking business in Wisconsin, Arizona, Florida, Illinois, Minnesota, Missouri, Oklahoma and Nevada. FIRST COMMONWEALTH FINANCIAL (FCF — $6.72) operates 114 branches in Pennsylvania. PACIFIC CAPITAL BANCORP (PCBC — 1.81) has 48 offices in California. KEYCORP (KEY — $8.01) has more than 1,000 branches across the northern U.S. And POPULAR, INC. (BPOP — $2.91) has 300 branches in Puerto Rico.

One thousand shares of each bank will run $39,000, plus $72 in commission if purchase through Charlie Schwab. But if you want to straddle both sides of the fence, buy 500 shares of each of the above, plus 1,000 shares of BAC, and let’s see which does better.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate Web site at www.creators.com. © 2010 Creators Syndicate Inc.