This week all the bad news gets out there, next week we'll rebound. This really is the peak of anxiety and bearishness from which we turn around and never look back again. A moment to behold for all the bears.
So, it seems to me, a lurker, that the market... uhh... "move" this morning is in response to the inflation numbers. Isn't the real reason because the companies in the index may have to pay more to the employees? As in raise wages?
And on top of this lovely news, shareholders must wonder how much of a dilution hit they'll eat with this $10 Billion capital infusion + the erosion of their Net Interest Margain from paying something like a 9-10% coupon on the convertible.
I tell ya, a few more bailouts like this and we'll be doing an autopsy.
tj & the bear, perhaps I should post Bove's picture (next to Whitney). Bove was the guy that argued very recently that Citi would not cut their dividend.
"This week all the bad news gets out there, next week we'll rebound. This really is the peak of anxiety and bearishness from which we turn around and never look back again. A moment to behold for all the bears."
I wish you were somebody notable, 'cause that would make a great pre-crash quote for the ages .
Not long ago, I recall Bove adamantly stating that the dividend was safe. Hence the egg on his face and questions.
Again, the earnings of financials are very, very opaque. Just think of the sheer size of the level 2 and level 3 assets. No doubt these are marked agressively. Is this done to generate higher bonuses????
Throw in the assumptions about loan performance, future interest rates, recovery rates, etc. and it just a shot in the dark. Analysts' opinions are WAGs.
Off their promo rates?
Really?
So that check I just cashed at 3.9 till I pay it off didn't exist?
BTW my oversized fixed jumbo is with Citi too. Howls of derisive laughter.
I can hardly wait to see what the next quarter delivers. They seem to be setting up for the next shock, rather than preaching the O-Joe all is contained mantra.
I other words, citi common should now be repriced to pay more than the 9% their new preferred is getting. So the only quesiton is how long before the stock is once again a single digit stock. Another $18 off the share price is necessary for that trick.
The Prince is most likely seriously P.O. by management.
I can hardly wait for the next couple of quarters of misery to play out.
I think Bove was using a "legacy" view of Citi's profitability and minimal capital needs. There is some serious rethinking of the business model that is going on here.
Oh, and in response to the comments on the earlier Citi thread, I would suggest you stick with the Meredith Whitney headshot. Mine isn't going to turn many heads.
JamesRaven, maybe the market is just concerned they will not get the 50bps. Does this mornings inflation report mean we will only get 25bps? I think all the slobbering about 50-75bps and MSM frothing about gold is a little intense right now. I expect the market and gold may fall as people start thinking about the true prospects for the next FED cut.
I don't see this as the worst of the bad news or the 'bottom' for financials. There are a lot of dividend stock investors who were lulled into thinking their sector would be a comfy way to ride out a brief bumpy slowdown. Although many are long-term holders, I expect more dumping of this group for a while.
C-SPAN on Feb. 7, will televise Rep. Henry Waxman's grilling of Angelo Mozilo, Charles Prince and Stanley O'Neal.
The chairman of the House Committee on Oversight and Government Reform plans to take on the two former CEOs and the soon departing chief "implicated" in the subprime mortgage collapse at a hearing on their multimillion dollar severance packages.
"A moment to behold for bears":
$42.9 bil of ABS CDO Super Senor before $14.3 bil write-off leaving $29.3 bil. Of that total, 42% is 2006 and 2007 vintages.
Add $8 bil of other gross exposure.
It's not going to be over for awhile.
Could Citi merge with Deutsche Bank? Several years ago this rumor existed and this time DB could really get some US traction at a much lower price than previously.
"JamesRaven, also...how do you raise wages when unemployment is going up?"
Ahh, not actually RAISE wages, but the fear is that they MAY have to raise wages, meaning that the employees they want to keep may be seen by other employers as worth more, and everybody knows that keeping productivity growing and wages flat or declining is the little profit engine that could.
O-Joe: When it doesn't register that more is to come even when Crittendon is TELLING you more is to come, then you are officially BLINDED by your book. Best of luck.
Team Grizzly: All this carnage, and MBIA/AMBAC daisy cutters yet to detonate.
Team Gold: agree with w. uncertainty about size of rate cut hitting GLD today. Just a little profit taking. 50bp minimum still coming.
This is going to get worse, a lot worse. Friends are getting laid off in construction and banking (Los Angeles). Citi and BofA are toast. Greenspan will be hanged.
From the 8k:, Continuing sales of non-core assets. Recently, the company sold
shares in Redecard and an ownership interest in Nikko Cordials Simplex
Investment Advisors. In addition, the company is continuing to reduce its
Consumer-based holdings of mortgage-backed securities, and other assets held in
its Securities and Banking business. Overall, in the fourth quarter, the
company reduced its GAAP assets by approximately $176 billion, representing
approximately 7.4% of its balance sheet.
Assuming only the settlement of the private offering and the completion of the
Nikko Cordial transaction, scheduled for later this month, on a pro forma basis
for the fourth quarter, Citis Tier One capital ratio would be approximately
8.2%
$40b in Super senior CDO exposure which:Citis CDO Super Senior sub-prime direct exposures are not subject to valuation
based on observable transactions. i.e., Level 3.
Way more writedowns coming, the bank is in survival mode.
don't mind OJoe anymore. with that kind of talk my theory is he's some $6/h shill of the hedge funds, banks, or gubmnt who doesn't even own any stock or he may be a hedge fund manager who's very underwater.
Although O-Joe is certainly wrong with his blindly optimistic view, he may be proven right short term. This market just doesn't want to look in the mirror. It seems to rebound even on bad news. And maybe, just maybe, we may get a surprise cut before the Fed meeting or a larger than anticipated cut at the meeting. Of course the upside swings don't go as high as before and the downside lows keep getting lower. I think that describes a bear market. But nevertheless, O-Joe will have a few more laughs before he finally cries himself to sleep.
Way more writedowns coming, the bank is in survival mode.
Alec | 01.15.08 - 1:09 pm | #
The talking heads on CNBC were bitching about this earlier today - saying this announcement wasn't a kitchen sink toss - not even close - and that's why the market is having such a tantrum. They want it over, they want it over NOW.
13,240 homes sold. Down 45.3% from last year. Lowest monthly total going back to 1988 when Dataquick records start. Previous low was 17,272 in 1990.
Median prices down 13.3% for Socal. Down 17.8% in San Bernadino (worst). Down 10.3% in Orange County (best).
Money quote from the press release:
"It looks like anybody who can, is waiting this thing out. Which of course means that the activity we are seeing right now is largely stressed and atypical. Today's numbers form a lousy basis for trending and forecasting. We're in the midst of turbulence and we won't know what really has been going on until things have settled down and we can look back," said Marshall Prentice, DataQuick president.
The talking heads on CNBC were bitching about this earlier today - saying this announcement wasn't a kitchen sink toss - not even close - and that's why the market is having such a tantrum. They want it over, they want it over NOW.
Although gold is overdue for a correction, it's reacting more to economic weakness than interest rates. In fact, the interest rates (and dollar dive) are just indicators of exactly that weakness. Notice that gold didn't care that much last month when the cut was only 25bps.
O-Joe's track record (that I could find quickly with a google search):
"Hello Bears,
I would be very cautious proclaining a new bear market. I've heard that last July, November, this February and July, but these were only short stops on the way to new ATHs. Also, this Friday in the COT report the small traders (can you say "dumb money"; at least in this market) is record short the market. Like I said before, it is beyond my understanding how not to be bullish on the stock market, nonwithstanding normal, small corrections.
When this post was made the Dow was at 13,522, the S&P was at 1,500 and the NASDAQ was at 2,725. So in less than 3 months O-Joe is down 7+% on the S&P and Dow and 10+% on the NASDAQ. On an annualized basis thats awful.
O-Joe should take the George Castanza approach and just do the exact opposite of what his instincts tell him to do. It worked out for George and I bet it would work out for O-Joe....
All I do is wait for either a bearish extreme in the market or the IBD follow thru day to invest my funds. My leading indicator pinpoints the turnaround to next Monday, but it's rarely exact to the day. So I'm just patient.
If things were so bad, the TED spread would not have declined rather dramatically over the last weeks to 90 basis points. The TED spread is down 134 basis points in just over one month and is at its lowest level since August of last year. As well, the 30-day asset backed commercial paper yield is plunging another 26 basis points to 4.10%. This is down 223 basis points since September of last year and is now at the lowest level since November 2005. Once the current selling panic in the stock market is over, we'll turn around 180 degrees and never look back again. Gold will plunge and the US$ raise meaningfully and for years to come.
I agree with Bove... they just wrote down the value of the company as far into the future as they can see. At this point they had no choice, of course, but this does guarantee that somebody will be held to account - beyond just a former CEO.
You cannot hold larger capital reserves than competitors or they will thrive while you whither - until the big 'event'. However, you won't still be in business when that next event comes along.
The failure here is system-wide.
When this post was made the Dow was at 13,522, the S&P was at 1,500 and the NASDAQ was at 2,725. So in less than 3 months O-Joe is down 7+% on the S&P and Dow and 10+% on the NASDAQ. On an annualized basis thats awful.
Once every 6 years you will have to allow for a 10% decline in the market averages I guess. Then again, after such a lunge the chances are even better for a lasting rallye.
Does anyone else find it...curious... that the pension fund for New Jersey state employees ponied up capital for both Merrill Lynch and Citi? I guess it has nothing to do with the fact that Corzine (ex-head of Goldman)is governor. Maybe ponies for all the retirees?
Does anyone else find it...curious... that the pension fund for New Jersey state employees ponied up capital for both Merrill Lynch and Citi? Well if these two top-notch firms were to suffer too much, then they may begin to layoff even more employees. You can bet a good number of them probably live in the NJ area. That money to the firms will come back, and the tax revenue from their employees is safe too.
O-Joe -
The TED spread is an absolutely meaningless indicator for the stock market and economy. It has spiked about 4-5 times in the past 25 years and only once was it immediately followed by a huge sell off in stocks (1987) - and it appears to have limited correlation to economic growth. Also, the avg TED spread range is about 10-50bps so we're still well above the average range which may not be bad news, but certainly isnt good news.
If you truly believe what you say you should short gold related stocks (and other commodities), mortgage your house to the max and use the proceeds from your mortgage along with all of your other liquidity to buy 1 and 2 year out of the money calls on the S&P and QQQQ. If you're right you will make a fortune.
I thought people were saying that Citi's problems were "priced in" to the stock. Why did it go down another 8 percent today? I'm confused.
John Stark | 01.15.08 - 2:18 pm | #
Because they really didn't throw in the kitchen sink... old pans, lotsa bent flatware and a broken colander... but the kitchen sink (more losses yet to report) is still out there.
hey its my birthday and another lease signed today.
yippee.
over all though, we're retrenching. design fees down but still good, construction jobs vanishing, brokerage commissions poooooof!
the best arm of the business, the real part of the business, the development side is right on track. but its a bitch on liquidity and the liquidity comes from our income lines of business.
so for us, slash overhead, take less space, cut costs, and keep people who make money.
yin and yang for sure.
i had at one point bought Citi a while back for the juicy dividend.
good thing i sold it.
in B school they said cutting your dividend was the worst thing you could do.
I read this and to me it seemed like pure fear...margin selling.
Assuming this or that, they may or may not meet the ratio requirements
Are they shopping their CRE yet?
Barley
Looking at the 8k about the private placement, since November Citi has raised $27b in capital and now after it's all said and done their cap ratio will be %8.2, their T1 ratio in Q3 was %7.32.
The write down was enough to give the impression that everything's all right with their Cap ratios, now they have another 2 months to raise more than they need to write off.
So rinse, repeat for Citi when it comes down to diluting and writedowns until the well runs dry, then it will just be writedowns.
... My leading indicator pinpoints the turnaround to next Monday, but it's rarely exact to the day. So I'm just patient.
...we'll turn around 180 degrees and never look back again. Gold will plunge and the US$ raise meaningfully and for years to come.
O-Joe
Optimistic Joe
A "turnaround shortly" isn't a bad prediction to make - given usual market behavior. But to say "we'll never look back again" is a crazy prediction to make - again based on usual market behavior.
After the div cut, C is now yielding 4.8%, 50 bp higher than a 30 year treasury. Wall St is crying, I'm buying. Check your history books, buying stocks immediately after a div cut is a good strategy.
You can get this data for much, not all, of the U.S. The home sale transaction data is public record in most states, and both the sale amount and the loan amounts are usually recorded (although what is recorded varies by county).
So you could go to each county recorder's office and look it up. Or, if you're a company of any size at all you buy the data from companies that aggregate & clean the data from all these county offices for you (this is how Dataquick makes it's money). This data is the primary way you homeowners out there end up on marketing lists to receive endless mortgage refinance offers in the mail, even after you opt-out of credit-based marketing offers.
I got to play with this data in my last job --- but to get at what I suspect you're really asking --- it's not really available anywhere for free.
interestingly. the leverage ratio at citi is now at 4% after this round of writedowns. perhaps new management would have liked for this to be the "kitchen sink" event, but it looks like the write-downs were constrained because they did not want the leverage ratio to fall below 4%. hence, there will be more writedowns to come after new capital is infused. if anyone knows the tangible equity ratio now, please post. it is probably nearing 3%.
Dick Bove is an idiot for asking that question, and I know if he were working for me I would fire his ass (I am a DOR). The real question is not why cut the dividend by 40%, it is why was it NOT cut 99% (leave a nominal dividend to allow those portfolio managers who are required to hold dividend paying stocks to be in C). Retained "earnings" is C's cheapest source of capital. Frankly BB and the rest of the regulators should be flat out telling just about every bank to quasi eliminate their dividends.
Looks like I have a new pet peeve. It makes me crazy when people say utilize instead of use. Now I can add when people say normalized instead of normal. Grrrr.
interestingly. the leverage ratio at citi is now at 4% after this round of writedowns. perhaps new management would have liked for this to be the "kitchen sink" event, but it looks like the write-downs were constrained because they did not want the leverage ratio to fall below 4%. hence, there will be more writedowns to come after new capital is infused. if anyone knows the tangible equity ratio now, please post. it is probably nearing 3%.
SurferDude | 01.15.08 - 5:46 pm
I'm confused; winding leverage down is good, while Tier 1 ratio is going lower is bad, innit?
I agree with more writedowns as new capital comes in. In the CDO supersnazzy paper, they could write down another $20b easy.
Question for CR: where are the bodies buried when it comes to the pier loans? I saw that on corporate loan assets had risen by $20b or so and their total assets have gone up $300b YoY.
In addition,
Brokerage recievables are up 29% YoY(though down sequentially 18% by $12b)
Trading account assets are up 37%YOY(yet down sequentially 7.5% by $43b)
Investments are down 21% YoY(10.5% sequentially by $25b)
Geez, the numbers didn't really pop out unti I got to read them.
They've sold $80b in assets and raised another $27b in capital in the last 90 days and yet their Tier 1 ratio went up 1.5% instead of 10-1%, with another $20b minimum in writedowns to come.
While Citi is talking about layoffs, I, as a job hunter in risk and fraud prevention, am finding a large number of postings at various levels for risk management and analyst positions with Citi for various business lines, including mortgage, consumer cards, and e-commerce.
Looks like they want to bring in a whole new crew to watch these lines.
Hmmm...sounds like they had their "Credit Crunch" with capital reserve fortification for breakfast this morning!
Crittenden sounds halfway reasonable, whereas Bove sounds like a kid who just had his lollipop taken away.
This week all the bad news gets out there, next week we'll rebound. This really is the peak of anxiety and bearishness from which we turn around and never look back again. A moment to behold for all the bears.
O-Joe
So, it seems to me, a lurker, that the market... uhh... "move" this morning is in response to the inflation numbers. Isn't the real reason because the companies in the index may have to pay more to the employees? As in raise wages?
And on top of this lovely news, shareholders must wonder how much of a dilution hit they'll eat with this $10 Billion capital infusion + the erosion of their Net Interest Margain from paying something like a 9-10% coupon on the convertible.
I tell ya, a few more bailouts like this and we'll be doing an autopsy.
tj & the bear, perhaps I should post Bove's picture (next to Whitney). Bove was the guy that argued very recently that Citi would not cut their dividend.
Best Wishes.
Getting rid of promotional balance credit cards?
Is that constitutional?
"This week all the bad news gets out there, next week we'll rebound. This really is the peak of anxiety and bearishness from which we turn around and never look back again. A moment to behold for all the bears."
I wish you were somebody notable, 'cause that would make a great pre-crash quote for the ages
.
Not long ago, I recall Bove adamantly stating that the dividend was safe. Hence the egg on his face and questions.
Again, the earnings of financials are very, very opaque. Just think of the sheer size of the level 2 and level 3 assets. No doubt these are marked agressively. Is this done to generate higher bonuses????
Throw in the assumptions about loan performance, future interest rates, recovery rates, etc. and it just a shot in the dark. Analysts' opinions are WAGs.
perhaps I should post Bove's picture (next to Whitney)
Sure, beauty and the beast.
O-Joe - How many times will you say the same thing? You are starting to sound like Kudlow!
Correct on the Bove comment CR! I wish Bubblevision would remind their viewers of this. Instead its "this is the bottom...."
Off their promo rates?
Really?
So that check I just cashed at 3.9 till I pay it off didn't exist?
BTW my oversized fixed jumbo is with Citi too. Howls of derisive laughter.
I can hardly wait to see what the next quarter delivers. They seem to be setting up for the next shock, rather than preaching the O-Joe all is contained mantra.
I other words, citi common should now be repriced to pay more than the 9% their new preferred is getting. So the only quesiton is how long before the stock is once again a single digit stock. Another $18 off the share price is necessary for that trick.
The Prince is most likely seriously P.O. by management.
I can hardly wait for the next couple of quarters of misery to play out.
Good luck O-Joe!
Someday this war's gonna end...
I think Bove was using a "legacy" view of Citi's profitability and minimal capital needs. There is some serious rethinking of the business model that is going on here.
Oh, and in response to the comments on the earlier Citi thread, I would suggest you stick with the Meredith Whitney headshot. Mine isn't going to turn many heads.
JamesRaven, maybe the market is just concerned they will not get the 50bps. Does this mornings inflation report mean we will only get 25bps? I think all the slobbering about 50-75bps and MSM frothing about gold is a little intense right now. I expect the market and gold may fall as people start thinking about the true prospects for the next FED cut.
O Joe,
I hate to be the one to tell you this. But what's going to really make the market tank in Feb is the bad news about employment.
You really think all these layoffs are going to be felt this week, huh? Fast-acting economy.
I don't see this as the worst of the bad news or the 'bottom' for financials. There are a lot of dividend stock investors who were lulled into thinking their sector would be a comfy way to ride out a brief bumpy slowdown. Although many are long-term holders, I expect more dumping of this group for a while.
MW's hubby is some WWF champion. watch out!
O Joe moment #376...'cause see, now it's really all priced in...really
So when the next shock hits, are we going to hear who could have foreseen this? or we saw this coming?
JamesRaven, also...how do you raise wages when unemployment is going up?
C-SPAN on Feb. 7, will televise Rep. Henry Waxman's grilling of Angelo Mozilo, Charles Prince and Stanley O'Neal.
The chairman of the House Committee on Oversight and Government Reform plans to take on the two former CEOs and the soon departing chief "implicated" in the subprime mortgage collapse at a hearing on their multimillion dollar severance packages.
"just give you a little bit more color around that."
RED
"A moment to behold for bears":
$42.9 bil of ABS CDO Super Senor before $14.3 bil write-off leaving $29.3 bil. Of that total, 42% is 2006 and 2007 vintages.
Add $8 bil of other gross exposure.
It's not going to be over for awhile.
Could Citi merge with Deutsche Bank? Several years ago this rumor existed and this time DB could really get some US traction at a much lower price than previously.
"JamesRaven, also...how do you raise wages when unemployment is going up?"
Ahh, not actually RAISE wages, but the fear is that they MAY have to raise wages, meaning that the employees they want to keep may be seen by other employers as worth more, and everybody knows that keeping productivity growing and wages flat or declining is the little profit engine that could.
O-Joe: When it doesn't register that more is to come even when Crittendon is TELLING you more is to come, then you are officially BLINDED by your book. Best of luck.
Team Grizzly: All this carnage, and MBIA/AMBAC daisy cutters yet to detonate.
Team Gold: agree with w. uncertainty about size of rate cut hitting GLD today. Just a little profit taking. 50bp minimum still coming.
This is going to get worse, a lot worse. Friends are getting laid off in construction and banking (Los Angeles). Citi and BofA are toast. Greenspan will be hanged.
Og
There is some serious rethinking of the business model that is going on here.
could be an interesting reality T.V. series pitting various members of the financial sector fighting over leftover consumers
It's like Jeffrey Skilling is CEO of the entire United States now.
CEO President...they just didn't say which CEO...
Some good news from Citi: Hugs are at a 52-week high!
Citi - Home
Jeff Skilling is, his name is GW!
Did you see him singing and dance with his family friends, the Saudis. Disgusting!
Mr. Crittenden; lama from Calculated Risk here. If a cute analyst knew what was going on at your company, why didn't you?
From the 8k:,
Continuing sales of non-core assets. Recently, the company sold
shares in Redecard and an ownership interest in Nikko Cordials Simplex
Investment Advisors. In addition, the company is continuing to reduce its
Consumer-based holdings of mortgage-backed securities, and other assets held in
its Securities and Banking business. Overall, in the fourth quarter, the
company reduced its GAAP assets by approximately $176 billion, representing
approximately 7.4% of its balance sheet.
Assuming only the settlement of the private offering and the completion of the
Nikko Cordial transaction, scheduled for later this month, on a pro forma basis
for the fourth quarter, Citis Tier One capital ratio would be approximately
8.2%
$40b in Super senior CDO exposure which:Citis CDO Super Senior sub-prime direct exposures are not subject to valuation
based on observable transactions. i.e., Level 3.
Way more writedowns coming, the bank is in survival mode.
Some of the Citibank Crushing Credit Crisis Cash Call is coming from the Weill family foundation; talk about buying when there's blood on the floor!
don't mind OJoe anymore. with that kind of talk my theory is he's some $6/h shill of the hedge funds, banks, or gubmnt who doesn't even own any stock or he may be a hedge fund manager who's very underwater.
Greenspan will be hanged.
No, no, no... this is all because of that damnable Berlin Wall.
We should have never let that thing get torn down.
So, it seems to me, a lurker, that the market... uhh... "move" this morning is in response to the inflation numbers.
The bond market is typically most sensitive to inflation numbers and it rallied sharply this morning.
Seriously, why do you guys take OJoe's comments so seriously? Personally I think it is just sarcasm =)
Some good news from Citi: Hugs are at a 52-week high!
Here is the PDF. If this doesn't scream out recession, I don't know what does.
CR
if ur out there...is there anyway to find an update on the ARM reset graphs from CS or BAC?
idoc, Yes, I'm still here. I'll see if I can find a new chart.
Best Wishes.
Sprint to lay off thousands, after laying off 5,000 last year.
And awaaaaayyyy we go!
Sprint said to be planning layoffs
Seriously, why do you guys take OJoe's comments so seriously? Personally I think it is just sarcasm =)
Ryan | 01.15.08 - 1:15 pm | #
Maybe he'll disappear when the writer's strike is over and Colbert Nation comes back to life... I hope not - we'd miss you O-Joe.
Although O-Joe is certainly wrong with his blindly optimistic view, he may be proven right short term. This market just doesn't want to look in the mirror. It seems to rebound even on bad news. And maybe, just maybe, we may get a surprise cut before the Fed meeting or a larger than anticipated cut at the meeting. Of course the upside swings don't go as high as before and the downside lows keep getting lower. I think that describes a bear market. But nevertheless, O-Joe will have a few more laughs before he finally cries himself to sleep.
Way more writedowns coming, the bank is in survival mode.
Alec | 01.15.08 - 1:09 pm | #
The talking heads on CNBC were bitching about this earlier today - saying this announcement wasn't a kitchen sink toss - not even close - and that's why the market is having such a tantrum. They want it over, they want it over NOW.
Ya well...
CR,
Dataquick has their numbers out for Southern California and they're, as expected, surprising.
DQNews - DataQuick Real Estate Headlines and Statistics
Highlights:
Money quote from the press release:
"It looks like anybody who can, is waiting this thing out. Which of course means that the activity we are seeing right now is largely stressed and atypical. Today's numbers form a lousy basis for trending and forecasting. We're in the midst of turbulence and we won't know what really has been going on until things have settled down and we can look back," said Marshall Prentice, DataQuick president.
The talking heads on CNBC were bitching about this earlier today - saying this announcement wasn't a kitchen sink toss - not even close - and that's why the market is having such a tantrum. They want it over, they want it over NOW.
they say that, but in Jack N's famous words...
"You want the truth? You can't HANDLE the truth!"
I hope not - we'd miss you O-Joe.
I like O-Joe, but then I liked Doomster too.
I guess that's because I didn't have to screen the comments.
also:
regarding charlie Gasparino...
I don't know much about him... but thus far almost every one of his rumors has turned out to be correct in the last few months.
seems like a connected guy to me, regardless of his scruples (or lack thereof)
w,
Although gold is overdue for a correction, it's reacting more to economic weakness than interest rates. In fact, the interest rates (and dollar dive) are just indicators of exactly that weakness. Notice that gold didn't care that much last month when the cut was only 25bps.
O-Joe's track record (that I could find quickly with a google search):
"Hello Bears,
I would be very cautious proclaining a new bear market. I've heard that last July, November, this February and July, but these were only short stops on the way to new ATHs. Also, this Friday in the COT report the small traders (can you say "dumb money"; at least in this market) is record short the market. Like I said before, it is beyond my understanding how not to be bullish on the stock market, nonwithstanding normal, small corrections.
O-Joe
Optimistic Joe | Homepage | 10.21.07 - 9:52 pm |"
When this post was made the Dow was at 13,522, the S&P was at 1,500 and the NASDAQ was at 2,725. So in less than 3 months O-Joe is down 7+% on the S&P and Dow and 10+% on the NASDAQ. On an annualized basis thats awful.
O-Joe should take the George Castanza approach and just do the exact opposite of what his instincts tell him to do. It worked out for George and I bet it would work out for O-Joe....
For a longggg time, bears had to listen to the bulls smugly asking, "You've been calling for this crash for how many years now?".
I predict we'll be asking bulls (like O-Joe) a similar question two years from now about bottom-calling.
Quite some attention here. Wow.
All I do is wait for either a bearish extreme in the market or the IBD follow thru day to invest my funds. My leading indicator pinpoints the turnaround to next Monday, but it's rarely exact to the day. So I'm just patient.
If things were so bad, the TED spread would not have declined rather dramatically over the last weeks to 90 basis points. The TED spread is down 134 basis points in just over one month and is at its lowest level since August of last year. As well, the 30-day asset backed commercial paper yield is plunging another 26 basis points to 4.10%. This is down 223 basis points since September of last year and is now at the lowest level since November 2005. Once the current selling panic in the stock market is over, we'll turn around 180 degrees and never look back again. Gold will plunge and the US$ raise meaningfully and for years to come.
O-Joe
I just love how he pauses to call him Dick.
I agree with Bove... they just wrote down the value of the company as far into the future as they can see. At this point they had no choice, of course, but this does guarantee that somebody will be held to account - beyond just a former CEO.
You cannot hold larger capital reserves than competitors or they will thrive while you whither - until the big 'event'. However, you won't still be in business when that next event comes along.
The failure here is system-wide.
When this post was made the Dow was at 13,522, the S&P was at 1,500 and the NASDAQ was at 2,725. So in less than 3 months O-Joe is down 7+% on the S&P and Dow and 10+% on the NASDAQ. On an annualized basis thats awful.
Once every 6 years you will have to allow for a 10% decline in the market averages I guess. Then again, after such a lunge the chances are even better for a lasting rallye.
O-Joe
His post above settles it beyond doubt: O-Joe is a bone-dry satirist.
Does anyone else find it...curious... that the pension fund for New Jersey state employees ponied up capital for both Merrill Lynch and Citi? I guess it has nothing to do with the fact that Corzine (ex-head of Goldman)is governor. Maybe ponies for all the retirees?
Haha, New Jersey pension fund is full of fools. Investing in Citi and ML. Haha. If they had any brains they would invest in RE like we do it in Cali.
Does anyone else find it...curious... that the pension fund for New Jersey state employees ponied up capital for both Merrill Lynch and Citi? Well if these two top-notch firms were to suffer too much, then they may begin to layoff even more employees. You can bet a good number of them probably live in the NJ area. That money to the firms will come back, and the tax revenue from their employees is safe too.
O-Joe, Are you retired?
So that check I just cashed at 3.9 till I pay it off didn't exist?
I was going to do that too but the offer was on my primary spending card and I didn't want to shoot for 6%+ (to cover taxes) on borrowed money.
Plus the ROI on this deals isn't that hot given the monthly hassles. BofA's 0% for a year, though, that I can justify.
I still have a 2.9% offer from 2004 paying off slowly.
"Way more writedowns coming, the bank is in survival mode.
Alec | 01.15.08 - 1:09 pm"
I read this and to me it seemed like pure fear...margin selling.
Assuming this or that, they may or may not meet the ratio requirements
Are they shopping their CRE yet?
O-Joe -
The TED spread is an absolutely meaningless indicator for the stock market and economy. It has spiked about 4-5 times in the past 25 years and only once was it immediately followed by a huge sell off in stocks (1987) - and it appears to have limited correlation to economic growth. Also, the avg TED spread range is about 10-50bps so we're still well above the average range which may not be bad news, but certainly isnt good news.
If you truly believe what you say you should short gold related stocks (and other commodities), mortgage your house to the max and use the proceeds from your mortgage along with all of your other liquidity to buy 1 and 2 year out of the money calls on the S&P and QQQQ. If you're right you will make a fortune.
I thought people were saying that Citi's problems were "priced in" to the stock. Why did it go down another 8 percent today? I'm confused.
I thought people were saying that Citi's problems were "priced in" to the stock. Why did it go down another 8 percent today? I'm confused.
John Stark | 01.15.08 - 2:18 pm | #
Because they really didn't throw in the kitchen sink... old pans, lotsa bent flatware and a broken colander... but the kitchen sink (more losses yet to report) is still out there.
If I could figure out who had >90% LTV purchase money mortgages in the last three years, I could figure out who NOT to give a credit card to.
Is that level detail available in any systematic manner?
hey its my birthday and another lease signed today.
yippee.
over all though, we're retrenching. design fees down but still good, construction jobs vanishing, brokerage commissions poooooof!
the best arm of the business, the real part of the business, the development side is right on track. but its a bitch on liquidity and the liquidity comes from our income lines of business.
so for us, slash overhead, take less space, cut costs, and keep people who make money.
yin and yang for sure.
i had at one point bought Citi a while back for the juicy dividend.
good thing i sold it.
in B school they said cutting your dividend was the worst thing you could do.
whoops
I read this and to me it seemed like pure fear...margin selling.
Assuming this or that, they may or may not meet the ratio requirements
Are they shopping their CRE yet?
Barley
Looking at the 8k about the private placement, since November Citi has raised $27b in capital and now after it's all said and done their cap ratio will be %8.2, their T1 ratio in Q3 was %7.32.
The write down was enough to give the impression that everything's all right with their Cap ratios, now they have another 2 months to raise more than they need to write off.
So rinse, repeat for Citi when it comes down to diluting and writedowns until the well runs dry, then it will just be writedowns.
... My leading indicator pinpoints the turnaround to next Monday, but it's rarely exact to the day. So I'm just patient.
...we'll turn around 180 degrees and never look back again. Gold will plunge and the US$ raise meaningfully and for years to come.
O-Joe
Optimistic Joe
A "turnaround shortly" isn't a bad prediction to make - given usual market behavior. But to say "we'll never look back again" is a crazy prediction to make - again based on usual market behavior.
-K
Happy B-day dc1000
Glad to see you recognize the environment we are all operating in.
Things have changed a lot since we last talked about what would happen a couple of years ago
After the div cut, C is now yielding 4.8%, 50 bp higher than a 30 year treasury. Wall St is crying, I'm buying. Check your history books, buying stocks immediately after a div cut is a good strategy.
Anon, O-Joe also interprets the stars and human skull features to arrive at his forecasts. Pay him no mind.
Worker ---
You can get this data for much, not all, of the U.S. The home sale transaction data is public record in most states, and both the sale amount and the loan amounts are usually recorded (although what is recorded varies by county).
So you could go to each county recorder's office and look it up. Or, if you're a company of any size at all you buy the data from companies that aggregate & clean the data from all these county offices for you (this is how Dataquick makes it's money). This data is the primary way you homeowners out there end up on marketing lists to receive endless mortgage refinance offers in the mail, even after you opt-out of credit-based marketing offers.
I got to play with this data in my last job --- but to get at what I suspect you're really asking --- it's not really available anywhere for free.
interestingly. the leverage ratio at citi is now at 4% after this round of writedowns. perhaps new management would have liked for this to be the "kitchen sink" event, but it looks like the write-downs were constrained because they did not want the leverage ratio to fall below 4%. hence, there will be more writedowns to come after new capital is infused. if anyone knows the tangible equity ratio now, please post. it is probably nearing 3%.
Dick Bove is an idiot for asking that question, and I know if he were working for me I would fire his ass (I am a DOR). The real question is not why cut the dividend by 40%, it is why was it NOT cut 99% (leave a nominal dividend to allow those portfolio managers who are required to hold dividend paying stocks to be in C). Retained "earnings" is C's cheapest source of capital. Frankly BB and the rest of the regulators should be flat out telling just about every bank to quasi eliminate their dividends.
Looks like I have a new pet peeve. It makes me crazy when people say utilize instead of use. Now I can add when people say normalized instead of normal. Grrrr.
interestingly. the leverage ratio at citi is now at 4% after this round of writedowns. perhaps new management would have liked for this to be the "kitchen sink" event, but it looks like the write-downs were constrained because they did not want the leverage ratio to fall below 4%. hence, there will be more writedowns to come after new capital is infused. if anyone knows the tangible equity ratio now, please post. it is probably nearing 3%.
SurferDude | 01.15.08 - 5:46 pm
I'm confused; winding leverage down is good, while Tier 1 ratio is going lower is bad, innit?
I agree with more writedowns as new capital comes in. In the CDO supersnazzy paper, they could write down another $20b easy.
Question for CR: where are the bodies buried when it comes to the pier loans? I saw that on corporate loan assets had risen by $20b or so and their total assets have gone up $300b YoY.
In addition,
Brokerage recievables are up 29% YoY(though down sequentially 18% by $12b)
Trading account assets are up 37%YOY(yet down sequentially 7.5% by $43b)
Investments are down 21% YoY(10.5% sequentially by $25b)
The fact they couldn't afford to throw in the kitchen sink is a huge negative.
I'll be interested to see if MER is more successful. Thain had more time and seems to be more decisive.
Geez, the numbers didn't really pop out unti I got to read them.
They've sold $80b in assets and raised another $27b in capital in the last 90 days and yet their Tier 1 ratio went up 1.5% instead of 10-1%, with another $20b minimum in writedowns to come.
Interesting;
While Citi is talking about layoffs, I, as a job hunter in risk and fraud prevention, am finding a large number of postings at various levels for risk management and analyst positions with Citi for various business lines, including mortgage, consumer cards, and e-commerce.
Looks like they want to bring in a whole new crew to watch these lines.
Not only is Calculated Risk the best source for information about this entire mess, the comedy is priceless.
Tanta comedy is best. Commenting comedy is close behind. Schadenfreude available here daily. For free.
"Hugs at a 52-week high" That sucker's going on my office door tomorrow.
Dirk van Dijk said: "Retained 'earnings' is C's cheapest source of capital."
Um, I don't think this is true. If you cut dividends drastically, the cost of raising large sums (from Alwaleed etc) increases commensurately.