Whatever their motivation, their hawkish comments helped create the last great opportunity to buy government bonds before their yields plunged and prices soared: The 10-year Treasury note yield reached its high for the year June 16, at 4.27%. Its yield late Tuesday: 2.08%.
The German government's 10-year note yield hit its 2008 high June 19, at 4.68%. Its yield Tuesday: 2.95%.
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Now who should know better on the dividend, the market or me? Bank of America Corp. Chief Executive Ken Lewis insisted in spring and early summer that the company would maintain its cash dividend payment, even as many other banks were slashing their payouts amid worsening loan losses.
The market believed otherwise: With BofA's annual dividend at $2.56 a share and the stock at $22.06 on July 9, the dividend yield was 11.6% -- a sure sign that investors didn't expect the payout level to be sustained.
But Lewis wouldn't cave. "Given our view of things, we do not expect to cut the dividend, nor do we expect to have to raise capital," he said in an interview July 9. "We get investors and analysts calling us saying, 'You've got to cut your dividend because the market is saying you should cut your dividend.' We've reminded them that the market over the short term is not always right."
Not always, but certainly this time it was: Bank of America hacked the dividend by 50% on Oct. 6, with Lewis citing the "most difficult times for financial institutions that I have experienced in my 39 years in banking."
The stock closed Tuesday at $13.24 a share.
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Most ironic news release of the year: The Reserve Fund, the nation's first money market mutual fund, positively gushed about itself in a July news release, insisting that its parent firm was "the world's most experienced money fund manager, expertly qualified to help you address ongoing challenges in the market as well as help address questions your clients may have around the soundness, safety, and security of their cash."
Less than two months later the fund became only the second in history to "break the buck," or the standard $1 money fund share price, as investors fled after the firm disclosed losses on Lehman Bros. IOUs.
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Great sell signals in financial stock history:
* July 15: Wachovia Corp., with its stock down as much as 20% in a matter of hours, declared itself "a fundamentally strong and stable company on solid footing." A crippled Wachovia has since agreed to be swallowed by Wells Fargo & Co.
