Suspicious: Buffett's Mysterious BofA Exit Raises Eyebrows After UBS Sues for $200mln

Well folks, it’s becoming more and more evident that Warren Buffet doesn’t sell a large portion of his stock holdings for no apparent reason. In a suspicious sequence of events over the last month or so, Buffet once again leveraged some kind of crystal ball to shed approximately 19.2 million Bank of America shares for $779 million between July 30th and August 1st. This makes Buffett’s selling of BofA stock a total of 90.4 million since July 17th… wow. 

(Source: Reuters) 

Yet, while we all (including me) figured it was just some take profit initiative, considering Bank of America experienced a rally peak of 82% since last October (up 5.34% YTD) -  the timeline of this sell-off has got more perfect timing than a Swiss watch, considering Bank of America has just been served a fat lawsuit from UBS. 

(Source: Reuters) 

According to reports, UBS is acting like that girlfriend that has that scary, yet impressive memory as it’s throwing a $200 million lawsuit at Bank of America, claiming that BofA refused to cover legal costs related to the pre-2008 financial crisis mortgage mess. Keep in mind, UBS kind of got itself in this mess as they bundled mortgages from Countrywide Financial into securities before Bank of America acquired them in 2008. 

(Source: Giphy) 

However, in the fine print of their dealings, Countrywide agreed to indemnify UBS against claims that these mortgages were underwritten poorly or fraudulently. Whereas, fast forward to today, UBS has had to fork out some serious cash—$885 million in a 2013 settlement with the U.S. Federal Housing Finance Agency, and another confidential settlement in 2016 with the Federal Home Loan Bank of San Francisco. 

(Source: AP) 

So now despite countless rounds of "pretty please" and "we had a deal," Bank of America has allegedly failed to hold up its end of the bargain as they have refused to pony up around $53 million in legal costs. Understandably, this has UBS pissed and now they are “sue” happy. 

(Source: Giphy) 

Now with that said, do I have sympathy for UBS? Hell no. I’m not going to go on a tangent here, but in plain English, every single bank (except JPM, maybe) played stupid games with Mortgage Backed Securities, and now years later they are still winning stupid prizes due to their ignorance and greed. (Tangent over, thank you for coming to my Ted Talk). 

(Source: Giphy) 

But alas, while UBS is definitely dealing with the short end of the stick here, when it comes to BofA, this lawsuit is about as frustrating as finding out you’ve got a termite infestation right after you’ve just renovated your house. The legal costs and potential damages could seriously dent their bottom line even more, especially since their latest earnings showed a -18.1% year-over year- decline EPS. 

(Source: Reuters) 

Now, combining that with the bad press of this lawsuit with the potential for more skeletons to come tumbling out of the closet, BofA officially has a recipe for uncertain price action from this point forward. 

Which again, is why the timing of Buffet's massive selling on Bank of America shares, just before the lawsuit went public, raises more eyebrows than a Botox convention. 

(Source: Giphy) 

Now let me be clear, in no way am I saying he knew this was coming, but I’m definitely not saying he didn’t. All I’m saying is that the Oracle of Omaha didn’t get his nickname by accident…

And the fact that he was unloading shares faster than a kid wrapping Christmas presents over a 12 day span while selling more than $3.8 billion worth of his BofA shares, it doesn’t take a rocket scientist to start getting “sus” (See: My Gen Z cousin’s favorite slang word). Of course, to some, the timing may just be a coincidence, but let’s be honest here, in the world of finance aka Wall Street, coincidences are about as real as the tooth fairy. 

(Source: Giphy)

So in the end, while Buffet may have gotten away unscathed, more banks could feel the ripple effects of this recent lawsuit. If BofA gets hit hard, investor confidence could waver, leading to broader market jitters. It’s like when my wife is yelling at my kids, it’s only a matter of time before I’m next on her hit list… 

And when it comes to this lawsuit, it’s only a matter of time before the next bank in the investor's portfolio gets slapped. So with that said, stay safe out there folks, this week is already setting up to be more wild than Mr. Beasts “grooming” accusations. 

(Source: Sportskeeda) 

P.S. If Buffett's timing tells us anything, what does his dumping of $75.5 billion Apple shares say for Apple's future? Something to ponder on, that's forsure. 

Stocks.News holds positions in Apple as mentioned in the article.