My gut tells me this is not the floor because people don’t feel C will pull off a TARP repayment before capital markets close for the year and thus haven’t priced this move in. I may be wrong but that is keeping me from doing anything. The 3.50 range would change that opinion but that’s based on technicals and not fundamentals (ie. what price would a dilusion of that size equate to in stock price). On a big pullback I’d be looking at a lot of the Jan. 11 $5 strikes (they are so cheap and could easily double if the stock moves up). Not willing to take that trade yet though.
Ask and ye shall receive…
Calling me out…. Ha… just kidding. Need to see how this prices out today - could go down to 3.30 range. The one positive for C that I don’t know if it’s priced in or not but think not is a 30 billion (I think it was that number) benefit with a deferred tax asset (IRS said with gov selling a position it normally would but not in this case affect this asset). Bottom line if I understand correctly this helps C’s Tier 1 capital before the offering. Regardless, the trade I am looking at (more investment) is a 2012 2.50/5.00 bull spread. Costs less than a dollar and gives you plenty of time to be profitable (the trade is profitable around 3.45). I think we have time on our side to enter any C trade though - especially with news like Dubai asking to get our of a common buy they are on the hook for, end of year, when will gov sell, etc.
Sound like someone with no convictions here but the more I look at this trade the less I’m interested.
Last night I shared with Chartguy that .gov wants the secondary prices above their price of $3.25. So somewhere between $3.56 and $3.25. Today, I’ve heard $3.30 on CNBC. We won’t know until tonight.
Treasury Said to Be Backing Away From Immediate Sale of Citigroup Stake
Two days after Citigroup moved to untangle itself from
Washington, the Treasury reversed course Wednesday and backed
away from plans to sell a portion of its stake in the banking
giant, according to a person briefed on the situation.
The decision came after Citigroup badly misread the financial
markets on Wednesday and struggled to sell new stock to pay
back its bailout funds. The new stock is expected to be
priced at $3.15 a share—below the $3.25 price at which the
government assumed its one-third stake in Citigroup.
If the US government owns a third of C @3.25 why would the average Joe or oil sheik buy C at any price?
What makes you think they *ARE?*
Anyone that sleeps with the Leper Sisters, should most definately expect to get a bad outcome.
There are so many WONDERFUL opportunities, that are not being IV’ed by Gub’ment weekly, why would you play around with the “sisters?”
If C wasn’t wired into the NWO lifesupport pumps, it would six feet under right now, the ONLY thing going for it, is it OWNS the Fed, not the other way around.
Treasury Said to Be Backing Away From Immediate Sale of Citigroup Stake
Two days after Citigroup moved to untangle itself from
Washington, the Treasury reversed course Wednesday and backed
away from plans to sell a portion of its stake in the banking
giant, according to a person briefed on the situation.
The decision came after Citigroup badly misread the financial
markets on Wednesday and struggled to sell new stock to pay
back its bailout funds. The new stock is expected to be
priced at $3.15 a share—below the $3.25 price at which the
government assumed its one-third stake in Citigroup.
If the US government owns a third of C @3.25 why would the average Joe or oil sheik buy C at any price?
And WILL:
Back to bed!
Forgive my literalism and inability to grasp your figure of speech but you said that you wanted to hear only from smart people, a thing that disqualifies intellectually marginalized people like myself. Nevertheless, since all the smart guys are off doing smart things like whittling a duck or puzzling out the mysteries of the universe, the only people left are the average and the fools. Mindful of my place and humility, I can only speak on behalf of the fools* but if you don’t mind my saying so, I speak well.
You asked why would Joe Average Ordinary Guy or anybody want to own stock in a company that is partially owned by the government. The answer to your question is simple: for the same reasons that Joe Average Ordinary Guy or anybody else would want to own stock in any company: for fun and profit! With that said I would like to drone on about the virtues of C but the bottom line is that C doesn’t need to excel, it only needs to survive into a middling performance to double its market cap over the next thirty-six months. Because there is a certain class of visionaries (fools all) that do not need to find exceptionalism in order to be convinced of a company’s potential, there will always be a place for the average and below on Wall Street. We call them value investors.
Now you know what one fool thinks.
* Unfortunately, many people with a high intelligence actually turn out to be poor thinkers. They get caught in the ‘intelligence trap’, of which there are many aspects. For example, a highly intelligent person may take up a view on a subject and then defend that view (through choice of premises and perception) very ably. The better someone is able to defend a view, the less inclined is that person actually to explore the subject. So the highly intelligent person can get trapped by intelligence, together with our usual sense of logic that you cannot be more right than right, into one point of view. The less intelligent person is less sure of his or her rightness and therefore more free to explore the subject and other points of view.
A highly intelligent person usually grows up with a sense of that intellectual superiority and needs to be seen to be ‘right’ and ‘clever’. Such a person is less willing to risk creative and constructive ideas, because such ideas may take a time to show their worth or to get accepted. Highly intelligent people are often attracted to the quick pay-off of negativity. If you attack someone else’s ideas or thinking, there can be an immediate achievement together with a useful sense of superiority. In intellectual terms attack is also cheap and easy because the attacker can always choose the frame of reference.
A good comment from over on MarketWatch’s comments on C.
Under Pandit & Parsons, two BS artists that rose to the top thru “smart-PR” and with zero knowledge of capital markets… Citi has nowhere to go but down.. They had a great deal with Geithner..but they chose to issue stock like so much worthless paper, diluting shareholders ad nauseum, then plan to follow up with a 10 for 1 reverse to mop up all those shares they issued… and then restart the process by issuing even more stock.. A-la-Bernanke.. their own printing press ...
I’ll post this in the C thread though it could go in intraday…
First, kudos to Tan. He nailed it with his post back on Dec 10, IMO.
The taxpayer has the (not so) happy prospect of seeing the dollar debased and taxes raised for some extended period of time into the future. Shareholders are getting diluted in all of the TBTFs. And anyone who thinks bondholders will escape unscathed probably needs to review the GM and C* sagas. There is no way this ends well, although I am enjoying this little diversion of the last 8 months immensely and I hope it continues. As long as the party is going and the punchbowl is full I am definitely not leaving.
Back to C…
Anyone who thinks the C secondary was 17x oversubscribed and, by extension, underpriced should think about the possible reasons why .gov has decided not to sell its stake at this time. While you are at it, please let me know why C is strong enough to pay back the TRAP (not a typo) but has to price the secondary below .gov’s cost basis. The only plausible answers are not pretty and require you to ignore the headlines about demand for the offering, etc.
We have officially entered Oz, and as long as no one looks behind the curtain we can all continue to follow the yellow brick road. But pack provisions, the road might not be as smooth as you have been led to believe.
* Edit: That was the old C—before Daimler bought Chrysler and before Citibank took over the symbol. Sorry for the confusion. I guess I’m dating myself.
I’ll post this in the C thread though it could go in intraday…
First, kudos to Tan. He nailed it with his post back on Dec 10, IMO.
The taxpayer has the (not so) happy prospect of seeing the dollar debased and taxes raised for some extended period of time into the future. Shareholders are getting diluted in all of the TBTFs. And anyone who thinks bondholders will escape unscathed probably needs to review the GM and C* sagas. There is no way this ends well, although I am enjoying this little diversion of the last 8 months immensely and I hope it continues. As long as the party is going and the punchbowl is full I am definitely not leaving.
Back to C…
Anyone who thinks the C secondary was 17x oversubscribed and, by extension, underpriced should think about the possible reasons why .gov has decided not to sell its stake at this time. While you are at it, please let me know why C is strong enough to pay back the TRAP (not a typo) but has to price the secondary below .gov’s cost basis. The only plausible answers are not pretty and require you to ignore the headlines about demand for the offering, etc.
We have officially entered Oz, and as long as no one looks behind the curtain we can all continue to follow the yellow brick road. But pack provisions, the road might not be as smooth as you have been led to believe.
* Edit: That was the old C—before Daimler bought Chrysler and before Citibank took over the symbol. Sorry for the confusion. I guess I’m dating myself.
The primary reason is obvious: .gov would lose money if it sold its stake for less than the $3.25 conversion price. Envision the political fallout if .gov lost more money from backstopping C! As you stated Monday, a 17-20% dilution mathematically from around $3.90ish puts us at around $3.15 (FWIW, Chartguy called it on Skype and I pushed back pointing out that .gov wouldn’t allow the secondary to be priced below the preferred conversion price of $3.25—Tim was right and I was wrong). At any-rate, C needs to either move forward and make some money or fall further before I move in. For now, I’m holding and option writing against my existing position.
We have officially entered Oz, and as long as no one looks behind the curtain we can all continue to follow the yellow brick road. But pack provisions, the road might not be as smooth as you have been led to believe.
First of all, thank you for the compliment, I don’t get many of those on THIS board.
Look, I have been dealing with banks professionally since 1971. I have seen 80% of them screw up, over and over, till they ultimately died. I lived through the S&L crisis and saw 2/3rds of them go belly up, I just paid off my last remaining 30 year mortgage last fall on an investment property. In that 30 years { never refinanced it } it was shuffled off EIGHT TIMES, as the various companies went BK or closed up shop, including one 24 month hiatus with the Feds, when they couldn’t even determine who actually OWNED the paper.
Banks are beneath contempt { the biggies } they will rape you, lie to you, cheat you, and spindle you, every single time, they are street pimps in pinstripes.
Anyone, repeat ANYONE that is gullible enough to actually BELIEVE the nonsense they report as REAL NUMBERS, is deserving of what happens to them.
It is one giant shell game, where they KNOW that the PRIVATE CORPORATION, owned by 13 families, called the {lie} FEDERAL {lie} RESERVE, will allow their insiders to reap the bordello profits, and when the ultimate crows come looking to roost, hand off the losses to the little schmuck in Peoria with two kids one dog, and a salaried job, in the form of transfer taxes.
Call me jaded, call me cynical, but you can CALL ME RIGHT, when it really happens to you.
Peripherally related to C, but likely to have a broader impact on financials (especially those of the European variety):
The Financial Times references today a Credit Suisse report that suggests implementation of the latest Basel proposals may be more aggressive—and more costly—than originally forecast.
“According to back of an envelope calculations by Credit Suisse, the European banking sector as a whole will have an aggregate funding requirement of €1,100bn.” (emphasis provided in the original)
The Basel Committee has published its latest thoughts on capital and liquidity. We are still digesting the main implications of this, but at first read it looks pretty punitive on the sector. In particular, the new definitions of common equity tier 1 appear to take a very hardline with the majority of deferred tax assets, insurance equity capital, excess expected losses, unrealised debt losses, minority interests and pension fund liabilities being deducted. Other supervisory deductions will get a 1250% risk weight on these proposals. The calculation of counterparty credit risk also seems to be changing markedly. The liquidity document seems less surprising with the broad thrust being an increase in Government bond holdings and a reduction in short-term wholesale funding which we have written about extensively before.
Overall, we believe this is negative for the European banks sector. Timeline for implementation isn’t until 2012, with grandfathering arrangements thereafter, but the market is likely to look through this and penalise banks which rely heavily on DTA, pension fund add backs, and financial subsidiary capital in our view.
Potentially of greater import to C and it’s stateside bretheren are the capital requirements that, if implemented in the US, could prove similarly expensive and, err, interesting.
Do you think there will be any “camel Jockeys” there?
Oddly enough, the former CJ’s have become so rich, idle and lazy, they now use almost exclusively young Indian boys to right in races FOR THEM.
However, they apparently value the Camels highly enough to actually stage beauty contests for them! I wonder if they have a swimsuit segment for the connoisseurs?
Wells Fargo (WFC) and Citigroup ( C) repaid a total of $45B ($25B and $20B respectively) and exited TARP, giving them more say over employee compensation and dividends. The pair were the last two major banks left in TARP; most of their peers repaid the U.S. in June. The Treasury still holds warrants to buy 110M shares in Wells Fargo. The paybacks bring the total amount of repaid TARP funds to $118B. Treasury now estimates total bank repayments could reach $175B by the end of 2010, cutting total taxpayer exposure to banks by almost three-quarters from the peak.
Last evening runedge shared with me a radio interview with Bove. Bove is a bull and shares his reasons for his bullish outlook stating that the banks don’t need to issue new loans to become profitable because the reversal of provisional losses will quintuple earnings. Anyway Bove has some interesting things to say over the ten minute interview.
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