16 January 2009: Bank of America needs a second rescue
Bank of America received an extra $20 billion in government bailout money plus a guarantee against losses on a huge pool of troubled assets. The trigger was Merrill Lynch, which it had agreed to buy in a weekend deal in September 2008 and which turned out to be hemorrhaging money. The shares slumped. Buying a rival in a panic can look heroic on Monday and look like a liability by January.
The lesson: Deals struck in a hurry during a crisis often hide losses that only appear after the ink is dry.
What it meant for investors
$1,000 in Bank of America at the start of 2010 → $3,333 today, vs $6,071 in the S&P 500.
We start the clock at the start of 2010, the first year in our price data after the event. That is 3.3 times the money, but $2,738 less than a plain index fund made over the same years.
What Bank of America teaches: Acquisitions made at the top of a cycle can haunt shareholders for decades; buying a competitor cheaply in a panic is not the same as buying it well.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 2010 | $15.00 | $3,333 | $6,071 |
| 2012 | $6.00 | $8,333 | $5,312 |
| 2015 | $18.00 | $2,778 | $3,301 |
green = beat the S&P 500 · red = lost money
What if you bought Bank of America? Every starting year and the full story →
More Bank of America history
- 25 August 2011: Buffett invests $5 billion in Bank of America
- 14 October 2008: Washington buys stakes in the big banks
Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
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