Citigroup Inc - Love/Hate Relationship
I thought Citigroup Inc (C) w as cheap at $46 and $42 a share, little did I know they’d get cheaper. I went long 90 shares of this bad boy in our retirement accounts because C is a darn good company overall with a healthy dividend yield (6.53%). I figured that the subprime mess will cause bumps in the road but not drastically affect C. I guess I was wrong, I’m still long and wracked with agony! 
November 12th, 2007 at 8:56 am
If you are investing in individual stocks and want to know what areas to steer clear of, there is no better info source that I know of than Gary Kaultbaum’s radio show Investor’s Edge. He podcasts all of his shows here: http://www.businesstalkradio.net/weekday_host/Archives/gk.shtml.
He has been preaching for quite some time to stay out of anything associated with Real Estate, Mortgages, Banking, etc. (way before you hear anything negative from the mainstream business media). He is pretty entertaining, too.
November 12th, 2007 at 10:31 am
Shane: Thanks for the tip. I’m a big believer in buying unloved but good companies. Sometimes my timing is off though and I’m planning on holding C till I retire at 65.
November 12th, 2007 at 12:03 pm
[...] Disclaimer « Citigroup Inc - Love/Hate Relationship [...]
November 12th, 2007 at 10:01 pm
Hold on man … you will sure mint money … trust me.
November 13th, 2007 at 5:44 am
Thanks for the vote of confidence tetw!
November 13th, 2007 at 11:04 am
I bought at $34 and am prepared for the stock to see mid-twenties, in which case I’d triple my position. While the pundits would have us believe the entire population of the US is headed for foreclosure, I saw a stat that 85% of subprime loans are current. The world is not coming to an end, but it sure as heck is correcting.
I sense that Rubin will try to get John Thain to replace Prince, and that he will make a lot of the painful decisions that Prince (who was loathe to dismantle what Sandy Weill built) could or would not. I’ll bet a post-Thanksgiving John Thain announcement will put C back at $42.
November 13th, 2007 at 11:15 am
flan8tive: I’m with you. C is an awesome company IMHO and I couldn’t resist buying it on the cheap, too bad it’ll get cheaper before it gets expensiver!
November 15th, 2007 at 11:03 am
Well, I was either half right or half wrong…I called the man and the job, but I got the company wrong. Pandit, Reed, Willumstead, or maybe Gert Boyle from Columbia Sportswear.
November 15th, 2007 at 11:06 am
I have to give you partial credit on that flan8tive!
November 18th, 2007 at 1:57 pm
[...] a longterm betting man so my money is looking for beaten up financial companies like Citigroup (C) (long already) and maybe Merrill Lynch [...]
November 21st, 2007 at 4:15 pm
Who would’ve thought C would be staring $29 in the face today? I keep thinking that everyone who Rubin has asked to run Citi must not be checking their voice mail…they need an announcement and a plan soon or they will be putting fresh pencils in Sandy’s office.
Who wants to guess when the knife stops falling?
November 22nd, 2007 at 7:58 am
flan8tive thinks mid 20’s. I’m going to agree with him on that one, I’ll pick up a few more shares when it breaks 30 and goes lower.
November 27th, 2007 at 4:34 am
Really good and really interesting post. I expect (and other readers maybe :)) new useful posts from you!
Good luck and successes in blogging!
November 27th, 2007 at 5:49 am
[...] touched a 5 year low yesterday and we’ll be seeing C in the low 20’s for sure as one smart commenter predicted on this site. As the news breaks about C’s “not on the balance sheet” [...]
November 27th, 2007 at 5:51 am
HeavyGod, thanks for the kind words.
November 27th, 2007 at 4:05 pm
News: Citigroup to sell $7.5 billion stake to Abu Dhabi
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20071127&id=7856829
November 30th, 2007 at 12:37 pm
Sooo….Either the knife came to rest on a ledge on the way down or got stuck in a dead cat. Some interesting things going on out there. The most interetsing article of late may well be the WSJ piece on 11/28. How do you spell “relief”?
“D-I-M-O-N”.
January 8th, 2008 at 3:00 pm
Looks like the dead cat rolled off the ledge. Pandit needs to sheet in and get his crew on the rails. Where is the leadership the stockholders are paying for?
January 9th, 2008 at 4:49 pm
Ah stupid C, I was so off on my timing on that one. I’m still a buyer but after it found a bottom.
The bottom will come after the write off everything, which I thought they did when Pandit came on board. What’s this additional 12 Billion for?
January 23rd, 2008 at 9:09 am
23.80 pre-market.
For some reason I keep thinking of scenes from Das Boot.
If it goes below $20 is that crush depth or the time to buy?
January 23rd, 2008 at 5:59 pm
flan8tive: I have no idea, this one position is killing me.
March 1st, 2008 at 6:36 am
hi tom
Ahh! good old citigroup.The things that can be said about it and the last ten years of it’s doing buisness. IN MY OPINION all i can say is anyone that wanted to short any company from over seas would probably park his money in a hedge fund, or citigroup type banking firm. A high roller with a huge account with about 5.00 security per share shorted could bear raid his/her way into some good cash.Then the bubble bursts companies go bankrupt. You don’t have to pay taxes on the money made on companies that go bankrupt,and since these companies are mostly small otc’s or pink sheet they’re easy to kill off.So the mass slaughter takes down 10,000 small companies who cares right.Well maybe the economists might be slightly concerned,because 80% of employment comes from small to medium size companies. (thank god they are’nt all public because they would’ve been killed off too).The method used to kill off companies is called “Naked Shorting”.You see in 1929 there was something called stock watering in fact there were many so called pools set up just for that reason. Stock watering then ment the same as naked short selling today,pools then can be compared to hedge funds today.Remember those $45.00 dot coms just vanished into thin air? What a naked shorters dream, a real work of art.OK i admit i lost some money,and i’m not crying over spilled milk,but i still get a bad taste in my mouth when i hear that we are supposed to feel sorry for these same banks that intensionally burst the bubble,and profitted from it.But more importantly how do get our economy back.
Having said all that lets say some companies were not killed off and are’nt about to be killed off because they have scailed down overhead and have sufficiant revenue to survive.Now how to close the short possition without getting into a short squeeze.
It’s called FTD (fail to deliver) shorted stock settlement maybe .05 -.15 per share to cancel it off the books.
Now with the sub-prime hitting this could be quite an interesting year of weeding out some of these crooks and watch them turn on each other.
If you look back sometime in the middle of 2007 there was an article that stated that citigroup converted 140 billion( that’s with a B) of assets to pay off debt,that’s before the sub-prime concerns hit the wires,and before it started to write down it’s losses.
But if you think of sub-prime problem ,that is selling of debt instruments and only 15%
of them might cause a bank run and you have insurance.Whats the problem?Afterall you are insured and then you have traunches set up.Though some traunch members might want out ,they wouldn’t make a bank run theyr’e all buddies.Then throw in that every december there is a big bonus given out to the tune of 30 to 45 billion to middle management and higher ups in most of these banks. HMMM Conspiricy theorists would think there is something fishy going on. I THINKS MAYBE SOMEONE TURNED ON THE LIGHTS AT THE PARTY AND CAUGHT EVERYONE BUT NAKED WITH THEIR SHORTS AROUND THEIR ANKLES AND TOLD EVERYONE THAT THE PARTY IS OVER.
“IT’S TIME TO SETTLE UP BOYS” and i love it
P.S. Naked shorting is the wall street banking industries dirty little secret that noone will talk about. like an abortion on account of rape that a familly won’t talk about. BUT IN THIS CASE THE SMALL INVESTER WAS THE ONE RAPED.
March 1st, 2008 at 8:51 am
DC: Naked shorting works really well in markets that are orderly. In fact I test traded my option volatility model by naked shorting and it worked out well. The problem is that the naked shorters calculate their odds using a standard distribution which hides a lot of unknown risk. When the markets do go bad, and they do more often than we’d like to believe, everyone gets caught with their pants down.
No one cares for risk when the party is in full swing, they care about it when things go bad but readily forget again when a new party starts.
Human nature, learn it and profit from it.
March 3rd, 2008 at 10:49 pm
Ouch…
I know, hindsight is 20/20…
But I have to ask…
Does anyone use stops?
Does buying more, if you were wrong, make a right?
Cordially,
-Digital Dude-
March 4th, 2008 at 5:30 am
DD: Stops are great but if I’m investing for the very long term, like my plan is for C, then it doesn’t make sense for me. We can argue for days over this but my long term investing strategy is vastly different than my short term strategies.
March 4th, 2008 at 9:13 am
….which begs the question: Is Citi being managed for the long or short term and is management playing a shell game with sacred cows and focusing on Powerpoint presentations or actually re-molding this massive entity to speak to the reality on the ground?
I’ve yet to “triple my position” as mentioned earlier….we blew right through $25. If it can hold $23 until after the shareholder meeting then maybe.
At least I own NUE under $50….that’s how Citi should be managed.
March 5th, 2008 at 1:25 pm
My point is that even a long term investment plan needs an exit strategy.
Can NN and AI help us to identify such an exit strategy?
Good luck to you on this investment!
Cordially,
-Digital Dude-
March 6th, 2008 at 6:41 am
DD: yes, a trend NN/AI model can help you determine if the overall trend is coming to an end so you can exit gracefully.
March 6th, 2008 at 1:19 pm
hi tom
here is a little paste from another board about naked short selling in small companies that are about to be killed off. THERE COULD BE ALOT OF FTD’S TO SETTLE FOR THE
WALL STREET MOB!
PASTE FROM CMKI BOARD
It’s amazing how the word “naked” can liven up a discussion. Take naked short selling, for instance. The addition of this saucy little word turns the mundane act of borrowing and selling shares of stock in hopes of buying them back later at a lower price into a raging controversy fraught with conspiracy, secret identities, public recriminations, foreign intrigue, sports team owners, and now some of the top regulators in the land.
How can one word cause so much trouble? While legal short sellers must borrow the shares they sell, naked short sellers sell shares of stock they haven’t borrowed, have no intention of borrowing, and that may not even exist. Not surprisingly, this activity is illegal and has been since the Securities and Exchange Act of 1934. But for a number of reasons, regulators have overlooked it in the past.
In response to a rising tide of complaints, however, the SEC recently introduced Regulation SHO, which went into effect Jan. 3. The idea was to put a stop to, or at least help control, abusive short selling practices. Unfortunately, the result of the SEC’s effort so far has arguably been to turn rampant abuse into a spectator sport by simply providing a list of stocks being most abused. and doing little else.
Intrigue in the sock drawer
How bad is the problem? Listen to this story: On Feb. 3, a man named Robert Simpson filed a Schedule 13-D with the SEC describing his purchase of 1,158,209 shares of Global Links Corp. (OTCBB: GLKCE), “constituting 100 percent of the issued and outstanding common stock of the Issuer.” As described in a story that ran on FinancialWire on March 4, Simpson stuck every single share of the company in his sock drawer — and then watched as 60 million shares traded hands over the next two days.
In other words, every single outstanding share of the company somehow changed hands nearly 60 times in the course of two days, despite the fact that the company’s entire float was located in Simpson’s sock drawer. In fact, even as recently as last Friday, 930,872 shares of Global Links still traded hands. If Simpson’s claim that he owns all shares is accurate, that is a staggering number of phantom shares being traded around by naked short sellers.
http://www.fool.com/investing/high-growth/2005/03/24/the-naked-truth-on-illegal-shorting.aspx
- - - - -
March 6th, 2008 at 1:35 pm
forgot to say that you can’t have much of an economy with these kind of practices running rampant. With most of labor intensive jobs going to other countries we have to retool,reedgucate the entire work force into a productive “New Economy” mind set,and that’s not going to be easy. As much as most cronies in washington hate to say it, but this time this has to start from the ground up ,not the trickle down BS, With the small companies taking the lead.THAT’S IF THEY’RE ARE EVER ALLOWED TO EXIST.
March 6th, 2008 at 2:45 pm
see tom
I”m the perfect example of a blue collar guy trying to learn how to comunicate via the internet by learning how to type. typo’s all over the place. should read
THAT’S IF THEY ARE EVER ALLOWED TO EXIST! ha,ha >but it”s not funny when it comes to the economy.
March 7th, 2008 at 5:41 am
DC: I’m glad that you’re communicating and thank you for the comments. You’ve give me something to think about.
March 17th, 2008 at 9:42 am
My last C stop is GTC at $18. I thought it would blow through that at the open; if it holds in the mid to high teens, I have to think it is buy time…C is vastly oversold at this point, in my humble opinion.
If Lehman tanks and Citi holds $16-$17, I am going back in.
Anybody think another Fed cut will make much difference?
March 17th, 2008 at 12:52 pm
Rumor has it Bear Sterns had 9 billion of assets but over 300 billion in liabilities.
I thimk they got a little carried away with their buisness model,and started getting a little to creative in their writing deals. Thinking that if they can insure and or hedge them then that by itself would give them value.Ouch bad thinking.If they couldn’t put an asset value on all that creative stuff then it probably wasn’t worth much.But the biggest problem is how much of these deals are floating around in the finantial world and how will they be unwound, and how descretely, so as to not cause a domino effect.
VERY INTERESTING TIMES AHEAD!
March 17th, 2008 at 8:35 pm
a paste from another board implying that Bear Stearns had to take the fall so that J.P Morgan wouldn’t. SOUNDS INTERESTING AND POSSIBLE (what a can of worms)
Bear Bailout, and What It Really Means
http://www. thesanitycheck.com/ BobsSanityCheckBlog/tabid/56/EntryID/690/Default.aspx
——————————————————————————–
So, why did the nation’s central bank approve a bailout for a non-member, non-bank? Curiouser and curiouser…
——————————————————————————–
UPDATE 3/16: BEAR TO BE BOUGHT BY JP MORGAN FOR COUPLE BUCKS PER SHARE, FURTHER VALIDATING THE SPECULATION THAT JP MORGAN WANTS BEAR OUT OF SCRUTINY BY ANYONE ELSE. THEY KNOW WHAT THEIR EXPOSURE IS, AND THEY BASICALLY ARE UNWILLING TO PAY MORE THAN A TOKEN TO OWN BEAR - AND BEAR IS HAPPY TO GET THAT TOKEN. HOW MUCH SCARIER DOES THIS NEED TO GET?
——————————–
So, the government has stepped in and orchestrated a bailout of a for-profit broker/investment bank that is not a member of the Fed, nor a bank - and yet the Fed is now acting as though they are. This sort of brings us full circle to where we were several years ago, when I predicted that the dangerous risks and illegal behavior of the Wall Street predators gets passed off to the taxpayer, at a level that makes the S&L crisis look like jaywalking.
And here we are.
But what is significant is not so much that, but that JP Morgan is in the mix. Why is that significant? Because JP Morgan does a lot of clearing for Bear, which means that the massive NSS exposure Bear has would then likely take down JP Morgan, in a heartbeat, as it became obvious that Morgan’s assets were also dwarfed by off balance sheet liabilities (if I’m right, which I believe I am). Because if BS went onto the auction block, then potential buyers would get a good look at all its assets and liabilities, which would then give visibility to JP Morgan’s exposure, which I’m guessing is considerable.
You think a $500 billion or so drop in asset value is bad? Try what I’m guessing could be multiples of that number in off balance sheet liabilities arising from massive counterfeiting of securities, spanning decades. How would you like that to come out? Nope, best to bring in the government, circle the wagons, and prop up a for-profit player who got caught with vapor assets.
In the real world, if you take outsized risks, you get slammed when you lose. On Wall Street, you pocket billions in bonuses every year, even as you’re aware that your paper is worthless crap, and then call in the cavalry when you get caught - because you are too important to fail.
This is the first of the events I predicted, as to how this plays out. The cover-up continues, any discussion of the actual crimes gets sidetracked by arguments about the importance of stability in the financial markets. and the next 3 generations get to pay for the cover-up.
Here’s an idea that will never be discussed in the mainstream press: If you and I have to work for the next decades to pay for the Bears of the world, how about now that we are sponsoring them, we get a look at how our newly-subsidized wunderkind have run their business, specifically, what are the level of fails, ex clearing fails, repo-agreement fails, etc.? Mary pointed out correctly in the last blogs’ comments that we still were never told what the size of the Refco fails were - that just sort of got swept under the rug. Hey, if you can kill all the companies shorted, problem solved, right? But now that we are footing the bill for Bear’s mismanagement or larceny, how about we get some scrutiny of what it is we’re sponsoring?
That will never happen. JP Morgan can’t afford it. The political system can’t afford it. The financial system can’t afford it. Pat Byrne and I have been talking systemic meltdown arising out of this sort of arrogant trampling of the 1934 Act for years, and here we start seeing it, in slow motion.
You think lying about what your paper is worth sucks? How about carrying a liability that is so large that there isn’t enough money in the system to cover all the counterfeited stock?
Which is why the country will now have its standard of living reduced by a significant amount, to protect the criminals who operate the system. That’s how it played in 1929 - we got a paper tiger regulator created to appease the outrage of a country, run by one of the biggest crooks of the era as his personal retribution machine, and the rest of the population got the dust bowl. History has a way of repeating.
Kiss any value of the dollar goodbye as the printing presses go into maximum overdrive. Kiss confidence in the markets goodbye. Kiss the housing values of the nation goodbye. Start scouting good locations for soup kitchens and public works projects, because that’s where this is headed now that the country pays the chit for the worst offenders, just as it did in the S&L crisis. Not surprisingly, many of the guys now running the system made fortunes stuffing junk down the S&L throats, and trading on inside info, lo, 20 years or so ago. So they know the trick - when the jig is up, foist it off on the country, keep the bonuses, and buy assets for pennies on the dollar.
Why is JP Morgan bailing out Bear with the Fed? Because the cancer Bear has is rotting Morgan, and it can’t afford the size of the decay to be known, or tomorrow morning, there won’t be any market.
March 17th, 2008 at 11:23 pm
“You think a $500 billion or so drop in asset value is bad? Try what I’m guessing could be multiples of that number in off balance sheet liabilities arising from massive counterfeiting of securities, spanning decades. How would you like that to come out?”
Paul Farrell guesstimated the number here, “Derivatives the New ‘Ticking Bomb,’” Buffett and Gross warn: $516 trillion bubble is a disaster waiting to happen,
http://www.financialarmageddon.com/2008/03/not-plain-vanil.html
“In the real world, if you take outsized risks, you get slammed when you lose. On Wall Street, you pocket billions in bonuses every year, even as you’re aware that your paper is worthless crap, and then call in the cavalry when you get caught - because you are too important to fail.”
This reminds me of this article, “Finance is Even More a Scam Than We Previously Admitted”
http://longorshortcapital.com/finance-is-even-more-a-scam-than-we-previously-admitted.htm
Several weeks ago, we came out and admitted that finance is a scam. It sounded like we were coming clean, but we admit, we held back a little that we didn’t share. In fact, finance is way more a scam than we admitted.
Citigroup (NYSE: C) (among other banks including BofA (NYSE: BAC) and JP Morgan (NYSE: JPM)) is creating a “super conduit”, essentially a $100 billion backstop for structured investment vehicles (SIV) to add a bid into a bidless market, a market which is 25% comprised of Citigroup SIVs. When the short term loans issued by SIVs to fund their purchase of riskier loan assets comes due, this super conduit will buy the short term paper if the existing holder decides not to roll their existing exposure. The solution to the SIV problem is….a bigger SIV…errr we mean a “conduit” to make sure things are “orderly-like, see”! Citigroup, with the coordination of the US Treasury, will be bailing itself out from having to put these assets onto their balance sheets….and charging a fee for the privilege!
We amend our previous admission to reflect the following: “Finance is really a scam where banks and large international financial firms, all of which are incrementally better and more prestigious than your firm, get together with the collusive glue of the central government, and indemnify themselves from ever having to bring a mistake onto their balance sheets, much less be held accountable for a mistake in any meaningful way.”
Also, I never see Hillary or Obama talk in any detail about this.
March 18th, 2008 at 4:50 am
Acella: Did you get stopped out? It looks like C hit $17.99 as a low
DC: Yeah I was pretty shocked to see the utter collapse of Bear Stearns but it goes to show you what can happen without a gold standard.
March 18th, 2008 at 5:13 am
(I’ve a comment snagged by Akismet above, you can delete this one after that..)
March 18th, 2008 at 7:52 am
@ Tom:
Yup. Triggered seconds before I called in to drop the stop another dollar down.
March 20th, 2008 at 1:01 pm
I could never gronk the idea of overbought or oversold…
It seems to me that all new/fresh highs or lows are…
The indicators that I have looked at which purport overbought/sold conditions do not seem to consider things like outstanding shares and float.
Maybe this is another area where AI and NNs can give us an edge
Cordially,
-Digital Dude-
March 21st, 2008 at 5:15 am
DD: I hardly ever use technical indicators these days, I just use my NN models to find BUY/SELL opportunities.
June 28th, 2008 at 9:36 pm
Goodness gracious this has become interesting. In the hiatus, I managed to get filled on an LEH position at 21.35, rode it up and stopped out at 22.47.
To answer a pp, heck yes, I use stops. Laddered with the last line of defense high enough to cover my trading costs. Simple strategy for a simple mind. Although I wished I held tough on NUE instead of stopping out
Still afraid to bulk up on C, although this has to be the trough, no? Just curious, who here has the lowest cost average on C?
July 1st, 2008 at 7:29 am
accella: my cost average is around $35, lol.
July 1st, 2008 at 7:41 am
Tom, if C keeps getting more bad news and keeps going down, is there a price that you would sell at, or would you ride it all the way to 0?
July 1st, 2008 at 7:58 am
Shane: Good question. My position is C is relatively tiny compared to my overall investments. I own about 300 shares of C and I would ride it lower till $1, then I’ll sell. Chances are the US gov’t will bail C out before then or some Saudia Bank will buy C up completely.
July 3rd, 2008 at 1:25 pm
Tom,
WTF… You would fly it into the dirt? OMG…
Wow, is that what your NN and AI say to do?
Maybe I should stick with fundamental and technical analysis only and not add NN and AI after all.
Cordially,
- Digital Dude -
PS - Can you say stop? You are training your own wet work AI to do the wrong thing here…