I have no special insight into Citigroup (C) other than noting:

-Its been a huge round trip from 1995 to 2006 peak and back

-It traded 750 million shares today

-It gave up a quarter of its value. It trades like its going to go to zero.

Is Citi TBTF (too big to fail) ?  Are its liabilities that much greater than imagined? Can it be zeroed (like WAMU), and its assets and accounts divided between JPM and BofA ?

Prince Alwaleed has now (almost) gone roundtrip on his 1991 purchase — 17 years and nothing very little to show for it. (Not adjusted for splits — anyone know how many splits this has been thru since 91?)

Looks like Citi was around $2.50 when he made his buys, so the stock has a ways to go — but not far. Plus, he has reloaded a couple of times now, he may very well be underwater.

Category: Credit, Derivatives, Markets, Short Selling

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

33 Responses to “Is Citi about to WAMU ?”

  1. USB will buy them from the FDIC.

  2. Mannwich says:

    I think without another major sucker, I mean investor, it’s going to zero and the feds should let it go to zero. Enough is enough.

    An a related note: MER trading at just under $8. Think BAC has at least a little buyer’s remorse at this point?

  3. Steve Barry says:

    WAMU is now a verb…cool.

    I will NEVER forget Alwaleed on CNBC about 5 years ago…direct quote…”I will NEVER sell Citigroup.” Ooops.

    When I spoke to a managing director of C this weekend about potential partners, the name Goldman came up, FWIW.

    The stadium naming curse strikes again…figures the Mets would have the biggest blowup of all…Citi Field.

  4. matt says:

    “Is Citi TBTF (too big to fail) ?”

    No company is too big to fail. They can always be liquidated (and if the government feels that it must intervene, then it should do so only to the extent that it expedites the liquidation) or reorganized depending on the specific circumstances.

    But, I think I know what you mean by TBTF. I assume it means the flunkies at the government think that a failure would send us all back into caves, hunting with spears and using stone tools. Yes, Citi is one of those, especially with the foreign capital.

  5. duncanst says:

    As of June 2008, Citigroup had $2.1 trillion in assets and $40 trillion in derivatives (mostly SWAPS, forwards and options). That’s only 5% in reserve which would maybe be OK with good loans, but with these crap derivatives they are going down. I expect them to be bailed out by the Govt or taken over by someone (but who?). Bank of America is is the same boat ($1.7 trillion in assets and $41 trillion in derivatives) and JP Morgan is in worse shape ($1.8 trillion in assets and $99 trillion in derivatives). This is such a huge problem, not even the Govt’s fiat money can fix it.

  6. AGG says:

    Years ago Jubak suggested buying depressed (2 dollars or less) stocks from corporations that had been at $50 or more as simulated calls with less risk. If you’ve got a bunch to speculate with, you could make several times your investment in a few weeks. You’d have to be very nimble though.

  7. KJ Foehr says:

    Yes, I believe C’s liabilities ARE much greater than we imagined, but with the government backstopping it, how can it fail?

    I gave up shorting individual banks in favor of SKF a few months ago, but I would have bet more heavily against BAC. I figured Countrywide would do them in before C ever failed.

    It does kind of sound as if they are doomed. But my question is, with all the help from the Fed and the Treasury, how is it still possible for one of these big banks to fail? Or is failure really possible?

    Something big and bad appears to STILL be happening in the credit markets, and I think that is what is driving equities lower now, but I have no clue what it is. SKF is higher than ever before, and I thought the banks (and other important financials) had been made failsafe due to the bailouts. So what is wrong with them now?

    Sorry for being repetitious – just thinking out loud, and due to my ignorance I have too many questions and no answers for them.

  8. rdsherman says:

    Dollars to doughnuts the money the Treasury loaned to an anonymous bank (first reported by Blooomberg and carried here) was to Citi. Any takers?

  9. Simon says:

    Whats this going to do to the feds balance sheet?

  10. gloppie says:

    I remember sometimes in the eighties, I was part of the crew on a Corporate “event” in Brussels for CITI, I think it was when they acquired or merged with some Belgian banks. I remember the atmosphere of sheer gluttony that permeated everything and everybody. Not a cool crowd. I guess that is what banking was/is about.

  11. alex_sebastian says:

    Wow. Citi gone too? I honestly can’t see it. Interesting mention above of a merger with Goldman…

    I think Mr Nassem Taleb’s insights are even more important than ever here. He says that optimization in the financial system will lead to consolidation, and consolidation leaves the system inherently more unstable. Those were very prescient words, and it will be interesting how the industry does long term after this enormous bout of consolidation.

    I would also like to say that if Citi can go, I think BoA easily could too. Who is going to be left to pick up the pieces?

  12. Simon says:

    The small amount surplus cash from the sale of our house in 2006 is starting to look like a reasonable amount of money. I wonder what it will buy in a years time…

  13. Steve Barry says:

    Floyd Norris 2 years ago on Banks Naming Ballparks…

    http://www.nytimes.com/2006/11/15/business/15place.html

  14. lars1nyc:
    That article is funny. Peter Wallison is quoted in the article. He works for a wingnut think tank. He says C is too big to fail and that the government will keep it alive no matter the cost. He also says that C is wrong for wanting to ban short selling. Sounds to me like C is toast, it is just a matter of finding someone to buy it. I guess it is good they didn’t buy Wachovia after all.

  15. snoopy says:

    Anyone else like the recent action in GLD ?

  16. Steve Barry says:

    Snoopy,

    I am watching gold closely. While it will likely outperform the market, I don’t see it doing well in the debt crash that is yet to come. The internals do look good…the commercial traders are very long gold, meaning speculators are not. When I feel the debt crash is done, I think the beaten down, loathed mining stocks are a big winner.

  17. Theodore D. says:

    Calvin and Lars1nyc,

    AEI is a big CONSERVATIVE think tank. I am not sure the article actually gave Wallison’s opinion on what he would like to see happen, just his thoughts on the matter. With everyone talking about GM and the auto industry it seems like people have forgotten that if certain banks fail the world is going to end.

    I don’t know much, but I am only really scared if JPM fails. I am actually scared about getting a job too.

    ON a side note, what is the best way to get some Gold? Anyone have any insight. I am looking to turn about 10 k into bullion, maybe more. Any help would be great. Thanks.

  18. wawaweewa says:

    I always find it funny when the media (particularly today, of course; I don’t mean this blog) mention that the ‘prince” is a savvy investor. LULZ

    The ‘prince” is neither savvy. Nor is he an investor.

    The prince……..is an inside trader.

    The Saudi “royal family” is only in power because they are allowed to stay in power. Just like they were allowed to take power in Arabia. This money that the prince ahs made from his “savvy investing” is a payoff….crumbs……for the “royal family” being good lackeys and obedient to certain entities within the US.

    I am almost certain that “the prince” was “encouraged” to invest in Citi today( and make it very publicly known I might add) in order to show “confidence” in Citi. I mean, that’s what we were told today.
    ‘ This shows confidence in Citi’. lol

  19. hpov2000 says:

    Theodore D,

    Kitco (kitco.com) is showing availability of various gold coins/bars. For past few months they had no physical gold coins (except 400 Oz bar) available for sale.

  20. Coruscation says:

    Splits:

    13-Mar-87 [2:1],
    01-Mar-93 [3:2],
    30-Aug-93 [4:3],
    28-May-96 [3:2],
    25-Nov-96 [4:3],
    20-Nov-97 [3:2],
    01-Jun-99 [3:2],
    28-Aug-00 [4:3]

    (see caption on Y! chart
    http://finance.yahoo.com/q/bc?s=C&t=my
    )

  21. johnny cash says:

    The Treasury will put a shot gun to Citi to merge with Godlman or Morgan by Monday.

    Next big disaster will be Berkshire Hathaway.

  22. insaneclownposse says:

    I think you need better quotes on the home page.

    Last thing I want to see right now is a worn-out Buffet quote about being greedy. People have been fearful for the last six months….. unless you bought yesterday you’ve had your ass handed to you. Being a contrarian hasn’t worked very well during this bear.

  23. insaneclownposse says:

    folks are right, this site needs a preview function for comments. Previous post should read “People have been fearful for the last six months, but unless you bought yesterday, you’ve had your ass handed to you.”

    my apologies

  24. alent1234 says:

    The good prince sold all his Citi stock back in 2005 or 2006. i saw the interview after he sold it, but can’t remember when. i bet he’s buying the same shares now he sold a few years ago at a nice discount

  25. greenie says:

    Big surprise that the board is meeting to cut the company up for some sort of fire sale of the assets. I think the FDIC will pull a WAMU on the deposit part of the company…Maybe GS will get their deposit base at a nice discount..better than buying the whole messed up company and their bad paper too..

  26. wunsacon says:

    >> folks are right, this site needs a preview function for comments.

    I’m looking forward to a preview function for my trades.

  27. Jim C says:

    C0ruscation – that chart is adjusted for the splits…so he is up about 100% in 17 years or so. Not great. however, his dividends have probably totalled over $10/share since then, so still looks like he did well on his $2.50ish stock purchase.

  28. vdhinaka says:

    Who is next to WAMU? Citadel?

  29. Chris Whalen says:

    Citi won’t do a WaMu. After the WaMu resolution, when the parent company debt and equity holders got torched, the central banks called the Treasury and the Fed and basically said WTF are you doing? Thus we had open bank assistance with the Wachovia sale.

    C could go to zero today or next week. All that means that Uncle must get off his duff and put COMMON EQUIY into banks under TARP II. M. El Arian said it well on CNBC today. Citi as a bank is fine, but as a PUBLIC EQUITY investment, it is toast, crap, muerto, kaput. That is the legacy of fair value accounting, where all complex financial institutions are insolvent.

    If price=value, then all large banks in the US are insolvent and all public shareholders of these banks are toast. Thanks again to the FASB and Chris Cox for implementing FVA last year.

  30. super_trooper says:

    down another 20%. Citi won’t last longer than next week. There’ll be frantic activity this weekend. ‘ll give it until next week. Can anybody afford buying it or will the gov have to step in?

  31. super_trooper says:

    The $25 billion for auto companies will look like small change. Why even bother estimating the fed budget deficit. Heck of a job.

  32. super_trooper says:

    why would the gov put COMMON EQUIY into banks under TARP II. Just take over the whole company, by force, fight it out in the course later if needed. There should be just 1 single shareholder if the gov puts in money at this point. Screw the previous shareholders. That’s the Swedish model and it worked well. The government was very aggressive, took over Nordbanken put the bad debt in a separate holding company and sold Nordbanken (now Nordea) a few years later. Rapid action is needed, now. Paulsen doesn’t know what he’s facing nor what he’s doing.