Report: U.S. Considers Further Steps for Citi
Submitted by
CalculatedRisk on Tue, 03/10/2009 - 4:56am (150 comments)
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This comment thread has been HALO-IZED by CRbot.
http://realize.org/cr/halokit.php?halourl=http://www.haloscan.com/comments/calculatedrisk/569449799183916935
The bair truth will solve this.
BUARRRGGHHARGHHHHHHHHHHHHHH!
Bucky seems to have fallen out of bed this morning.
Utter bilge. I am not going to have their confidence restored by such shell games. I want to see criminals prosecuted. I want to see the laws apply to rich and poor alike, equally and fairly.
BWAHAHAHAHAHA! Zombies everywhere....
"Banking regulators and Treasury officials called Citigroup executives over the weekend"
I wish they would call one of us, instead.
Maybe they could post a comment here as a question for the group. I recommend this handle: "Oops... What do we do now?"
They need a 12-step program which ends at the graveside.
C
An end at the guillotine would be better. Disposal of remains is optional.
Oops, I accidentally leaked this letter.
Pandit's 'ole pump and dump scheme might allow some long people to get a little more of their money back before they go to zero!
So, if Citi is making so d#%*! much money, why do they need more of mine and when will they start paying back what they already owe me & my fellow taxpayers?
Exactly
On Citigroup's "leak" (reposted from end of last thread - CR's new post may support the 2nd scenario, break-up is happening):
the NYT reports the leak claims operating profits of $8 Billion . . . before special charges. Special charges are things like writedowns, which cover things like losses on bad loans....
Assuming there will be big writedowns, I see two outcomes:
1) This "leak" was an attempt to pump the market and allegations will fly that it was manipulation of the stock price, delusional management, etc, all more grim add-ons for Citi's deathbed experience.
2) This "leak" could also be part of pre-auction display of Citi's lovely appendages. Yes, there will be big writedowns because Citi as a whole is a blackhole, but many of the components of Citi are profitable and have franchise value. These profit figures attest to that. If this is the case, then it is all part of the break-up of Citi.
The other alternative is that there won't be big writedowns. I'll believe that when I see it, and maybe not even then. If this is the case, then I won't know what to think about what is going down at Citi.
see NYT article at:
In a Switch, Citigroup Lifts Stocks - NY Times
2) This "leak" could also be part of pre-auction display of Citi's lovely appendages. Yes, there will be big writedowns because Citi as a whole is a blackhole, but many of the components of Citi are profitable and have franchise value. These profit figures attest to that. If this is the case, then it is all part of the break-up of Citi.
Sign me up for this scenario.
The only way Citi gets bids is if the operating units show they can cash flow at some price greater than zero... Citi might be bleeding red ink now but if those losses are primarily due to 'sunken cost' then if said costs were wiped out [say the new buyer bought well below the current valuation] it might make sense to buy it.
I am sure Citi would prefer that somebody wiped out those sunken costs for them and they get to keep the scrubbed entity - that would be sweet for Citi equity & mgmt - but even a complete cynic like me thinks that's unlikely.
BTW - similar things are happening in mfg right now - talked with a buddy last night and asked him straight up... "if an unburdened company ran 'process x'... even with these 'deflated cost inputs & prices'... would they be cash flow positives & profitable? And if so what NPV would that cash flow command?" I told him THAT was the value of a company to buy... or conversely the maximum sunken cost 'we' could support if 'we' were to launch an enterprise like that. The thing is most of the competition is so heavily levered up their sunken cost & overhead is WAY higher... an unlevered start-up or firm exiting BK has a real advantage cost wise.
My guess is we'll see something similar in financials - with Citi being blown apart & reassembled at a much lower leverage multiple and cost basis. We taxpayers will eat the difference I fear in an effort to 'move it along'.
I am aware that people at the Fed, the Treasury, the FDIC and the OCC will have become used to working on weekends now, but I cannot imagine that they do so without a good reason. I hope I'm wrong, but the first thought that crossed my mind was "would the stress tests have shown some flaws in Citi's models, to the extent that their capital base is gone?"... Again, I sincerely hope I'm wrong...
There are two separate and distinct economies. One produces real goods and uses self liquidating credit. The other produces inflation via perpetual non-self liquidating credit - new debt refinances old debt.
Bernanke views the non-self liquidating eCONomy to be the most important. The non-self liquidating eCONomy is based upon theft via inflation. The ponzi eCONomy that Bernanke is trying so desperately to save benefits a small minority at the expense of the majority.
Thou shall not steal!
"Thou shall not steal!"
[except from the helpless]
Writing down $1.1T of Tier 3, maybe? To where? Zero?
Kaboom!
C
@ Counterpointer: I understand that even a fraction of that amount would wipe out their capital base...
I accidentally leaked this editorial
I'm watching Bernanke speaking to the CFR.
No questions on naked derivatives. WTF! The biggest sham in history and not one question.
The bair witch project.
C
"I accidentally leaked this editorial"
I accidentally leaked after I read it!
Dow\t6,666.60\t+119.55\t+1.83%
"U.S. Considers Further Steps for Citi"
I think they should stop the tap dance numbers and go straight for the mosh pit.
"financial services firm was profitable during the first two months of the year and called its capital position "strong.""
Yes, we've heard that before. So you'll be padlocking the doors over the coming weekend then?
Nostrovia,
Wait - this can't be true. I have been reliably informed that European banks are in infinitely worse shape than American ones, that Eastern Europe is the catastrophe of the week, and that the EU and euro is toast - without baked beans for breakfast.
Not that the above isn't true, mind you, just that the big news is supposed to be about anything else but America=FAIL.
I just leaked a little into my mouth after reading it.
This is for Citi:
"So long and thanks for all the fish
So sad that it should come to this
We tried to warn you all but oh dear?
You may not share our intellect
Which might explain your disrespect
For all the natural wonders that
grow around you
So long, so long and thanks
for all the fish
The world's about to be destroyed
There's no point getting all annoyed
Lie back and let the planet dissolve
Despite those nets of tuna fleets
We thought that most of you were sweet
Especially tiny tots and your
pregnant women
So long, so long, so long, so long, so long
So long, so long, so long, so long, so long
So long, so long and thanks
for all the fish
(yeah)
So long and thanks for all the fish
So sad that it should come to this
We tried to warn you all but oh dear?
(oh dear)
Despite those nets of tuna fleets
We thought that most of you were sweet
Especially tiny tots and your
pregnant women
So long, so long, so long, so long, so long
So long, so long, so long, so long, so long
So long, so long and thanks
for all the fish"
I think C is already in the barber's chair and Pandit is re-privatization mode....
Let's see.. markets are skyrocketing on the basis of a leaked memo saying one bank will make a profit before writedowns. Grasping at straws much?
So they have the best quarter in a long time and they're so far under water they'll never see top of the ocean of red ink again. Please just break it up before we all bleed to death saving the bank to big to fail.
jo6pac
The race to the bottom continues
Oh should I run out and buy stock today we're on the road to recovery right. >:o
SHAKE AND BAKE!
As much as I distrust the banking system, I don't think Citi is lying. I believe that if you cut out loan loss provisions, they are very profitable. I think they always have been and will continue to be so.
I think, excluding loan losses, all the major banks are profitable too. This is why the gov't is trying to keep them alive long enough for them to write off their bad loans.
The plan is to loan them enough money to get by and then have them pay back the gov't. This process will likely take years or decades to complete. I would prefer they go bankrupt and write everything off quickly so they can be restored to health quickly, but doing this is very risky.
Charlie drinkin the Kool-Aid huh
Hi charlie,
First off just think likewise that I'm not lying (could be "Hi charlie" is written with ill intent)[I insist that it is not, no matter how gratuitous these electrons are.] Do you figure that "if you cut out loan loss provisions" is a tad too large an "if"? Do you feel that tons of new business is flowing in to offset this...unfortunate circumstance of "loan losses"? It should be clear now "all the major banks are profitable" any time other than deflationary times when there are pesky "loan losses". But if it isn't, maybe one more quarter will do it...not "years or decades" of incremental support to a "healthy" position.
Funny how desperate the market is for news like this. Everybody is in denial.
You wonder how the market will react to nationalization? Look what happens with the hint of a rumor of a possibility that Citi may survive.
Elrod, could you be mistaken (not exactly in denial...possibly deluded or like me, forgetful) about this "Everybody is in denial."? Are you suggesting that small investors are piling in now, emptying their mattresses to buy Citi? Or are you a hard-nosed cynic like me who thinks the small investor has already gone the way of the passenger pigeon? How do you account for the massive volatility recently if you don't invoke large players with insider knowledge? (the small investors are channeling, calmo, you are just outa the loop!) Can we have the details on the volume trades please? Not for you pipsqueaks.
So look what happens with a hint...pump & dump, by desperate large players.
LOL. C +21% so far.
Some days, the bair gets you.
"You don't come here for the hunting, do you?"
Obama will be speaking on education today.
Told you to buy yesterday..
Oh and you fools!
Yves at Naked Capitalism has a nother brilliant dissection of WSJ reporting on Citi:
see: Citi and Federal Government in New Non-Rescue Rescue Talks « naked capitalism
And, to see what real reporting looks like - you know, the kind based on investigation and analysis that uses a brain - see this report in the McClatchey papers (the same chain that didn't buy GWB's WMD in Iraq crap but asked questions about the evidence:
Regulatory reports show 5 biggest banks face huge losses
America's five largest banks, which already have received $145 billion in taxpayer bailout dollars, still face potentially catastrophic losses from exotic investments if economic conditions substantially worsen, their latest financial reports show.
Citibank, Bank of America, HSBC Bank USA, Wells Fargo Bank and J.P. Morgan Chase reported that their "current" net loss risks from derivatives — insurance-like bets tied to a loan or other underlying asset — surged to $587 billion as of Dec. 31. Buried in end-of-the-year regulatory reports that McClatchy has reviewed, the figures reflect a jump of 49 percent in just 90 days.
Regulatory reports show 5 big banks face huge loss risk | McClatchy
"Dow 6,666.60 +119.55 +1.83%"
Dow 6752.85 + 205
Hey Misean.
Oh you people! Get past the doom! Citi is leading us to a new boom! All is well! Get out of your naysayers hell!
The Chosen One!
The Chosen One!
Pandit is not a bandit!
He is a rainmaker!
A dollar shaker!
Pandit is the Chosen Ones disciple!
C +26%
Wow yahoo headline
"Wall Street Rebounds Smartly on Citi News- AP" Since when is it ok to call wall street smart??
Since they are so "strong" now, they won't need any more money and, in fact, they want to pay the government back, right?
No, wait... they actually want more help.
These guys are really playing Bernanke and Geithner for fools, I think.
Cmon, Elmo... I wanna be tickled!
S&P 700 again.. happy times!
Prognostication du jour - SPX +6.6% at the close.
Federal Reserve Chairman Ben S. Bernanke urged a sweeping overhaul of U.S. financial regulations in an effort to smooth out the boom-and-bust cycles in financial markets.
Bernanke Urges Rules Overhaul to Stem Risk Build-Ups (Update5) - Bloomberg.com
Benny getting rid of the FED and your little band of misfit merry makers would go a long way toward your goal.
"Bucky seems to have fallen out of bed this morning."
I've noticed a pretty consistent trend over the past couple weeks:
Dow up -> oil up, dollar down
Down down -> oil down, dollar up
The magnitude of each seems related to the magnitude of what the Dow is doing.
You're new at this aren't you?
They're skyin' 'em, Boss.
DOW 8,000.... before noon!
Eric, dow 8000 before gold 1200.
Bottom line: a couple of months of a little positive cash flow for Citi has no impact whatsoever on the value of on the value of the mortgage backed securities and CDOs that Citi is holding. The value of those "toxic" assets is determined by what is going on in the real economy, and Citi a little bit of cash flow ain't gonna overcome their toxicity. When the market moves on REAL news, then we will have a sustainable rally. Until then, all we're gonna get is bear rallies.
Hmm...
The major source of the profits that the banks have been generating for the last few years has been from the generation and sale of Asset Backed Securities. ABS's appear to exploit an infinite loop in the loan regulation process, which essentially allows banks to escape reserve regulation and generate as many loans as they can find borrowers for. Over time this has the same effect on the rest of the financial system, as woodworm does on antique furniture.
So if Citi is really as profitable as they say, then the question is where is the money coming from. (Really, that's been the question all along hasn't it?). If they're still managing to issue ABS's then that's your answer.
Are they? I don't know where you go to find that stuff out. Quick googling suggests there have been at least two major ABS issues so far this year - probably more.
'tis not over, 'til it's over.
-- w
"...having our best quarter-to-date performance since the third quarter of 2007" - Pandit
Woo-hoooooo!!!!
Sobriety test:
Dmitry Orlov: Social Collapse Best Practices
FORA.tv - Dmitry Orlov: Social Collapse Best Practices
Knurd!
Pandit is not a bandit!
He is a rainmaker!
A dollar shaker
so funny
Yes, the following is investment advice.
You do not want to be in a market that can move 4% in 20 minutes. Up or down it doesn't matter. The numbers you see crawling across your screen have nothing to do with economy or industry or even investing in the strictest sense.
Oh, and for perspective. A 4% bounce in the S&P returns the average to levels not seen for... well not seen for 22 trading hours(last Thursday).
Yea, though I walk through the Citi of Death
I will fear no Timmy
For Pandit art with me
Thy TARP and thy staff
They comfort me
This is too, too much (from Bloomberg) -
'Citigroup jumped 23 percent after Chief Executive Officer Vikram Pandit wrote in an internal memorandum that the bank, which received $45 billion in government rescue funds, said it’s having the best quarter since 2007.'
Just hand every single American their share of 45 billion, and see how their quarterly results look.
This is starting to get absurd.
Debt may not equal success, but at least in the world of the Citi, getting a cool 45 billion dollars is enough to make the bottom line look good.
Days like this don't happen except in bear markets.
Or days like this happen at market bottoms if you look at the "Bad Bears" chart. But based on history, we've got several months to go before even thinking of a real bottom.
In any case "C" won't lead us out of it.
Is this a "bear market rally"? Or is this "bargain hunting"? The oracles of the business reporting world will tell us.
"The banks' [the top 5-banks] credit-default swap holdings, with face values in the trillions of dollars, are "a ticking time bomb, and how bad it gets is going to depend on how bad the economy gets," said Christopher Whalen, a managing director of Institutional Risk Analytics, a company that grades banks on their degree of loss risk from complex investments.
As for Pandit's boosterism this morning, then if Citi reports a loss next month, then he should be hauled away in chains.
C up - that makes 5B shareholders happy.
Mother of all short squeezes.
C: $1.31.
How much did the taxpayer pay again?
Gold sportin' an 8 handle. The platinum gap having doubled in a week.
Watch the transports. Nowhere near the rabid relief response of other indexes.
I think I'll close my FAS..done
Man, those GE March $7.5 calls I bought at $0.39. Currently going for $1.39
A shame that I got nervous and sold them early...
Man, those GE March $7.5 calls I bought at $0.39. Currently going for $1.39
-Gav
I have done a lot of stupid things lately. Such as not buying FAS yesterday when everything pointed to a bounce today. Or not buying GE on the panic fall last week.
Why am I imagining all those quotes being read by Bagdad Bob? Call me skeptical...
Last rites?
Andrew says:
“Why am I imagining all those quotes being read by Bagdad Bob? Call me skeptical...
Why? I thought most people called you Andy?
Gav those calls will pass 2.25 today
Banking regulators and Treasury officials called Citigroup executives over the weekend
I hope they were able to get some decent wine for the meeting.
....."transitional Tuesday"?
I bought a bunch of April SKF puts last Friday at $250/$260 to hedge for a bounce. So I'm not complaining too much. But it's a shame I didn't get paid off for my GE position.
I'm wondering whether this rally will have legs. I hope so, so I can profit whenever it resumes the inevitable decline.
The market has swung too far in the wrong direction. Our economy is more than banks and financials. Bottom is in, up up and away.
Thats crap citi just reported thier best 3 days in 6 weeks. They do not need a bailout,.
Char says:
Today, 10:45:37 AM
“The market has swung too far in the wrong direction. Our economy is more than banks and financials. Bottom is in, up up and away.
Also cheeseburger stands and advertising agencies. Seems very sustainable.
b-b-but Citi has been profitable lately. Pandit said so.
Market rallying on the news!
I could make a business profitable with a lot of gov't cash, too.
Did you see it...on CNBC ? They were discussing whether or not this is a real rally or a bear market rally... Erin and Mark were pushing that it is a real rally and then one of the guys from Squawk Box said no way that this was just a bear market rally... Mark got visibly upset and Erin reminded him they were "on"... they have such agendas... I dont know much but I think they are pushing this rally to get some people out before it totally bottoms.
yes mark H wants to sell his Shitt E
I hope this makes it to youtube. Mark Haines has been doing this a long time, I have a hard time believing he doesn't know when he's on the air.
Bombay became Mumbai--Pandit becomes Bandit.
Pandit the Bandit?... a bit late on that small piece of cleverness... see YouTube - What's Wrong with America? Saving Scum like Indian Beggar Pandit & Citibank by Uncle Sugar. Revolt!
been there, done that and pumped out the vid mash-up
Pandit becomes Bandit? a rapier like wit at work there, been in YouTube for a time now... check out YouTube - At Citigroup Robert Rubin & Pandit Never Sleep in Turning Your Cash into Trash
From the ashes we rise like a phoenix. Up up and away!
The fundamentals of Citigroup are strong.
As in it is fun for Citi to go to the gov and get fundamental support from the gov (who? that body that governs us...redistributing wealth somewhat so that not all roads are private) that is too big too be representative.
link
Hong Kong stock commentator in tears at HSBC plunge\t
Mar 10 08:39 AM US/Eastern
A veteran Hong Kong stock commentator burst into tears during a live television broadcast as she saw HSBC's shares plunge dramatically seconds before the end of Monday's trading.
Agnes Wu's comments on the recent volatility of the banking giant's Hong Kong-listed shares trailed off as she saw its price slump to 33 Hong Kong dollars (4.23 US) after a last-minute sell order, a clip on Cable News showed.
The order almost doubled the size of Monday's fall for shares in HSBC, which ended down 24.1 percent, its largest one-day fall on the Hong Kong bourse.
Wu and the anchor of the show were both wide-eyed and they shouted out the closing price in surprise. She was unable to continue talking and shook her head for a few seconds.
The normally tough commentator then started to sob and said: "It's a heart-wrecking fall."
She then wiped her right eye, but remained silent until the live show ended.
Wu later told The Standard newspaper she does not hold shares in the financial heavyweight. She explained she could not help bursting into tears because she felt it was unfair for big players to bully small investors.
She said HSBC's share plunge was the result of short-sellers who wanted to drive down the price and snap up shares after the bank completes a 17.8 billion US dollar rights issue, according to the newspaper.
OMFG it is to laugh. Hold onto that happy thought, little lamb.
Anyway, our Generic Financials Tits have orgasms during rallies. Sorry for the overly-long quote, I thought people would appreciate the humor.
Hey Pandit; If you give me $45 billion I can "show" a profit as well.
UTC laying off 11,600, spending 750mil to save a billion. http://embed.mibbit.com/url/4Enj69
UTC laying off 11,600, spending 750mil to save a billion. http://embed.mibbit.com/url/4Enj69
That lowers their costs a billion every year going forward as well... show me another 'investment' they could make that would breakeven in as little as nine months?
Every single wage slave out there need to keep that in mind as business spirals down... we are all disposable and every organization will need to lower it's base operating cost - typically the only way to that fast is via RIF.
So is that Pandit with a P or should it be a B?
Wholesale inventory buildup, not falling as fast as sales: http://embed.mibbit.com/url/QVOQ8z
Wow, such bitterness here. Waaaah, Citi says they have a profit for Jan and Feb! We can't bitch that they're a black hole today!
JUST A TOTALLY HEALTHY, NORMAL RALLY HERE PEOPLE
SEE THE ECONOMY DECIDED TO RECOVER TODAY
IT WAS ON THE CALENDAR
NOW IS A GREAT TIME TO BUY DOW 36000 IN 2010 GET IN BEFORE YOU'RE PRICED OUT
This is the rally your idiot relatives will be talking about at easter supper!
JUST A TOTALLY HEALTHY, NORMAL RALLY HERE PEOPLE
SEE THE ECONOMY DECIDED TO RECOVER TODAY
IT WAS ON THE CALENDAR
NOW IS A GREAT TIME TO BUY DOW 36000 IN 2010 GET IN BEFORE YOU'RE PRICED OUT
This is the rally your idiot relatives will be talking about at easter supper!
Delta cutting 10% on international routes, poised for more layoffs: http://embed.mibbit.com/url/A1LzHv
Finally, we've found a bottom. I'm all in now. 10,000 -- 900 and 2,000 here we come. Hold on tight, we're blasting off.
Forcefully keeping the TOO-BIG-TO-FAIL model alive so it can come back to terrorize the citizenry again. Definition of zombie. Never ending horror show.
Rob Dawg says:
Today, 10:56:55 AM
Hey Pandit; If you give me $45 billion I can "show" a profit as well.
Agreed with Rob Dawg. It would be problematic if they couldn't manufacture a profit at this point, with accounting standards and regulatory oversight having devolved into Calvinball, and with the Federal Regulators keeping a constant flow of cash going in the back door.
Indeed, with all these months since the crisis, they've no doubt got a sophisticated tarponomic infrastructure set up to obtain and apportion looting proceeds internally. That will quickly displace real business operations by parasitic simplification / Gresham's Law.
The problem with Citi isn't that it's unprofitable, but that it's now a perfectly adapted creature of the tarponomic age, and that is a context that will not long endure.
All this discussion of Citi's "profitability" is ignoring the fact that even Pandit is only saying that they're profitable if you ignore their losses!
Even the most moribund bank can cash flow right up to the point of death. Ignoring capital adequacy and relying on a cash flow analysis means waiting for the bank run to start before you step in.
an unlevered start-up or firm exiting BK has a real advantage cost wise.
Underwater homeowners are realizing the same thing. Without the cramdown option, walking away = the only way to deleverage.
He who walks away first, walks away best!
This entire waltz is all about dragging out the asset price collapse so that inflation can catch up and over-run.
Every single wage slave out there need to keep that in mind as business spirals down... we are all disposable and every organization will need to lower it's base operating cost - typically the only way to that fast is via RIF.
But, but, but.....if a recovery is imminent, which is what we're being told, then intelligent management would be preparing to take advantage of the upswing, which is just around the corner. If they lay off their staff now, they won't be able to hire people back in time to take advantage of the upswing.
Every single wage slave out there need to keep that in mind as business spirals down... we are all disposable and every organization will need to lower it's base operating cost - typically the only way to that fast is via RIF.
But, but, but.....if a recovery is imminent, which is what we're being told, then intelligent management would be preparing to take advantage of the upswing, which is just around the corner. If they lay off their staff now, they won't be able to hire people back in time to take advantage of the upswing.
LOL - you forgot the [/snark] tag.
I see two models:
(1) Big lay offs then try to hold the line at where they think the recovery will come in at. This is for companies that think it is difficult to retrain or find certain skill sets... so it is cheaper to carry some over even if the demand doesn't justify it. Your skills better be high if you expect to be held over.
(2) Big lay offs followed by even more big lay offs with each new leg down because the firms think that even if there is a recovery [someday, somewhere over the rainbow]... they will be able to hire at a lower wage basis than they pay now... i.e. get rid of all the 30 & 40 somethings and replace with real hungry 20 somethings that will work for nothing [note the now 50 & 60 somethings were let go long ago when they were 40 somethings!!!]. There are always a bajillion newbies to be found at next to nothing. I think that is the model my wife's employer is following, regrettably.
Anonymous says:
Today, 11:01:33 AM
Wow, such bitterness here. Waaaah, Citi says they have a profit for Jan and Feb! We can't bitch that they're a black hole today!
Feel free to go all-in.
I don't doubt that it's a good economic decision on UTC's part, but that doesn't mean that it's a good decision for everyone else.
Oh shut up .. and buy!
You fools!
Citi is dying at the speed of c. This is just noise before the final collapse. Check out GloomBoom.com for insight on the current economic crisis.
There's talk of Cisco and Google replaceing GM and Citi in the Dow:
http://www.bestsyndication.com/?q=20090309_google_may_be_added_to_Dow_gold_silver_prices.htm
I don't see how they can do this. With a share price of $300, Google would dominate the Dow
I don't see how they can do this. With a share price of $300, Google would dominate the Dow
LOL... no chance Google is 'over-priced' and readying for a cliff dive? I mean it's business model is rock solid and time tested, right?
Short sellers everywhere should rejoice that decision... that one is a cliff dive waiting to happen.
And then there is volatility - GOOG has one bad earnings report and the DOW crashes... smart move guys.
"Citi executives said they haven't detected signs of corporate clients or trading partners withdrawing their business ..."
Buwahahahaha! They've talked to counsel about that before speaking? Really, I can't imagine this being possible. Citi's problems have been well-publicized for a long time. They have laid off a lot of employees, some of whom are taking accounts with them. Their CDS costs are high, as are their bond yields.
Maybe they mean no large corporate clients have left this week.
Comrade Byzantine_Ruins says: Today, 8:10:47 AM
What Byz says. Not just this but on the overnight thread. Worthwhile reading.
There's talk of Google and Cisco replacing GM and Citi in the Dow:
http://www.bestsyndication.com/?q=20090309_google_may_be_added_to_Dow_gold_silver_prices.htm
I don't see how they can do this. With a share price of $300, Google would dominate the index
Drfly writes:
"My guess is we'll see something similar in financials - with Citi being blown apart & reassembled at a much lower leverage multiple and cost basis. We taxpayers will eat the difference I fear in an effort to 'move it along'."
Dryfly - In cost terms, doesn't that more or less describe the outcome of an FDIC (or earlier RTC) takeover/restructuring/sale? Healthy parts are sold off quickly for better prices while sickly portions are disposed of more slowly at varying degrees of loss (and occasional profit)?
If that is what is going down, it is stealth pre-privatization, and in cost terms about the best that could be hoped for in a very shitty situation. Of course, the additional $30 Billion to AIG needs to be facotred in, since that is not about AIG but the counterparties....., so the costs are greater than meets the eye than if one only looked at Citi.
Still, when selecting from a menu that includes bad, worse, much worse, and radioactive, I think choosing the option that is "worse" is not so bad. I wish we could just have "bad," but then if I had my wishes all of history would have been different, too.
We get to make bad choices, but not under conditions of our own choosing.
P.S. and, Dry Fly, thanks for sharing the story about manufacturing. Watching for new or hived-off firms without the sunk costs of old leverage will be very interesting.
I suspect that the issue of old leverage will get cleverly rolled into the broader issue of "legacy costs," wrapping bad loans and pension and health care and union contracts together. It will be interesting to see if managements that drove their companies into the ground get away with this. On the other side, management isn't responsible for everything - e.g., in Autoland everyone is hurting, including relatively well-managed companies with good products. They all over-expanded....but that doesn't explain away the particular failings of GM and Chrysler.
I suspect that the issue of old leverage will get cleverly rolled into the broader issue of "legacy costs," wrapping bad loans and pension and health care and union contracts together. - JS
Short answer 'yes' - they will all be rolled up and 'dispatched'. And the companies coming out 'scrubbed' will be much better able to 'price down' and drive the others with similar initial legacy cost into the same BK/pre-privatization rabbit hole... if we learned anything from watching the airlines march into BK one after the other... if oligopolies have similar legacy cost & compete in the same market - they all have to go through BK if one gets scrubbed in BK - just a matter of time.
The banks need more deregulation, tax cuts, and 60x leveraging power to get them out of this mess.
"Finally, we've found a bottom. I'm all in now."
.......cheeze.....even after a 250+ run-up we're still only at 6800 and the closet is still full of monsters, demons, and boogie-men....
I'm hearing more and more that the United States is the laughing stock of every other country on the planet except for Zimbabwe. Does anyone have anything about what the other countries are saying about us?
UTC laying off 11,600
They Were Expendable
They Were Expendable (1945). The movie was directed by John Ford and starred Robert Montgomery, John Wayne, and Donna Reed.
Triple MortgagePig forming.
ever since this new comment system (which) doesn't work on my PC at work (IExplorer), I'm so much more productive!
that's the only rally i see.
Either the triple mortgage-pig, or the enigmatic fainting-goat market
Pandit: Citi operating at profit through February- AP
This is pure insanity.
DataPortability: Chris Saad’s Personal Launching Pad, Have Your Steak and Eat it Too | The Drama 2.0 Show
“Social widget provider” JS-Kit just raised $3.6 million in funding and a small portion of that appears headed to Saad’s bank account. ... While I personally wouldn’t rely on an advisory position with a “social widget provider” to pay the bills long-term, thanks to the friendly fools over at Altos Ventures, there should be enough money to keep everyone happy for a little bit longer."
Primitive urges
whisper in the cubicle-
the call of the wild
New Thread: Used Vehicle Wholesale Prices Rebound
http://www.calculatedriskblog.com/2009/03/used-vehicle-wholesale-prices-rebound.html ( 0 comments ...You could be FIRST! )
I also post comments to an irc channel as they appear on haloscan. Click for a web irc interface: Mibbit IRC client widget (Or join the irc server directly: irc.realize.org:9996 #calculatedrisk)
CRbot would like to take this time to have some words.
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Please, for the love of your immortal God of mortals, can we keep the comment and layout changes to a minimum? I'm tired of whipping the code janitor, and may have to escalate to electroshock. If that's not possible, could you possibly give CRbot a 'heads up'?
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CRbot: Like the terminator, I'm back. Again.
The unkindest cut of all:
Boston's real-life 'Cheers' bartender is laid off
Yahoo! 404 - Page Not Found
Where is Johnny Marijuana Seed?
I recall when the CEO of Enron got up at a meeting and told everyone that everything was great, remember that? I do.
When is the Treasuries auction again? 2?
How in the bloody fark can a company call itself profitable after borrowing so much money from the government (or anyone for that matter)?
I predict dow 5500 by year's end
That's when I buy back in
:-$
So, with the uptick rule, the DOW is "properly" valued at about 6900. Without the uptick rule, the DOW is "properly" valued at about 6500. Why bother?
Isn't leaking a memo like this to juice your stock price totally illegal?
I believe that this memo would only constitute illegal market manipulation if it turned out that the contents of the memo were untrue.
bear rally was over due, getting it today, who knows, could last for 10-20% rise. one never knows. what is strange about this bear mkt though is that the rallies are so short of sharp. not like the good old days when they took a few months to build....we see them in days now. anyone gonna try to catch some more of it and get long for a few days/weeks? i'm not sure yet, so i'm going to sit for now.
dryfly says:Today, 8:09:04 AM
dryfly, you don't get enough credit around here but thank you.
I always look forward to your posts, please don't give up on the CR commenting system.
CR, thank you for providing this forum.
Dead thread, I know. I am hoping at least one of them will read this and know how much they are appreciated.
-AnonyMiss
The next Citi bailout is coming. Recall just prior to the last Citi bailout, Asian Citi staff massively dumped their Citi stock options, nearly forcing their employer's share price below the buck. Pandit is pre-empting another similar shorting by their own employees and Citi's $500b depositors in Asia before the coming bailout. Perhaps also that Citi's stress test is not going too well, hence the talks of another massive cash injection from Uncle Sam. :-$