Citigroup claims to have been profitable January and February '09

[Frozen Sooner]

Nice gains by financials on that announcement, fueling a nice rally today.

Possible light at the end of the tunnel for the DJIA, though it may just be an oncoming train.

[hgarmorer]

Hell the amount the DOD pays for them to run their travel program, they should be doing ok.

[VeeJay]

Good! I have been painfully hurting that the Citi executives may have to forego a quarterly bonus!

[Vaevictis]

If Citi has a profit this quarter, their team just might deserve one.

[JohnnyMack]

If Citi has a profit this quarter, their team just might deserve one.

They turn a profit this quarter and they deserve blowjobs from Victoria's Secret models while on board their new G5s.

[Frozen Sooner]

Good! I have been painfully hurting that the Citi executives may have to forego a quarterly bonus!

Veej, the possible failure of Citigroup has been one of the big things dragging down the market. If they get things turned around, it's a fairly major surprise and reason to believe that we may get out of this thing.

[SanJoaquinSooner]

Citibank holds my mortgage and I've paid on time every month. Glad to have helped.:)

[olevetonahill]

Its a ****ing Miracle
The feds Give em 48 Billion and they Turn it into a 8 billion Profit .:cool:

[JLEW1818]

man i hear all these billions and trillions being talked about, it almost seems like its fake money.... just imagine having a billion dollars... wow

[Crucifax Autumn]

It's good to know someone was in the black those 2 months!

The rest of us poor bastards were selling azz for food!

[tommieharris91]

man i hear all these billions and trillions being talked about, it almost seems like its fake money.... just imagine having a billion dollars... wow

That's because they're being bailed out with fake money.

[Ike]

bet a lot of people are kicking themselves for buying that Jr. Bacon Cheesburger at wendys instead of a share of Citi stock....


well, probably not.

[Crucifax Autumn]

yeah...not!

[texas bandman]

Citibank holds my mortgage and I've paid on time every month. Glad to have helped.:)

Me too.....so we know they hold at leat two good loans. :D

[Chuck Bao]

I had really high hopes after yesterday's amazing market rally, lead by the financials.

I have no comment on the Citigroup announcement of profits in the first two months of this year.

I have repeatedly been one of the skeptics here and I’m sure I’d be one of the worst hurt personally if I’m right and one of the happiest people alive to admit that I’m wrong. I have nothing to gain or lose from posting here whether I’m right or wrong, since I’m 100% sure nobody here invests in the Thai stock market, directly anyway. Besides, I hold no license to recommend stocks in the US.

But seriously, the market rally petering out in one day, what does that tell you? The lack of follow-through buying is pretty indicative of continuing overall market skepticism at best and a bear market trap at worst.

I have also repeatedly said do not trust Wall Street and the market indices. There is a lot of liquidity and that liquidity is waiting on the sidelines for short-term trading opportunities, technical rebounds and range trading. As long as this short term money is quick to lock in profits, the upside is limited.

I’ve mentioned previously about my job and how appalled I am to seeing my sector analysts feeling pressure to recommend stocks based on the latest news flows to cater to this short-term money, rather than base recommendations on longer term fundamental values. There is near open warfare in my office with some of the market strategists trying to justify short-term market trades on recovery projections six-nine months down the road. That is what they do. They can’t just say technical rebound. They have to justify it. But at the end of the day, our reputations are on the line and I still believe that our recommendations should mean something and that something should remain focused on people who are putting their hard-earned life savings into the market. My sector analysts are fighting back and I’m siding with them for now.

Back on point, the key push factor, in my opinion, is if large private investment groups are willing to take large equity stakes in financials at this time. That would really be the light at the end of the tunnel for the financials and the overall market and economy.

If you are looking for value, wait for the big guys to weigh in. With this strategy, you may not get the bottom. But, if the big guys are right, there should still be plenty of upside.

[Frozen Sooner]

Another big day for the financials today. At last check the financials were up 9%. Looks like they may suspend mark-to-market on performing loans, which would prompt another big jump.

Anyhow, that's three days in a row of market gains.

[NYC Poke]

Good! I have been painfully hurting that the Citi executives may have to forego a quarterly bonus!


Heh. There was an article in the NYT Style section a couple of weeks ago about the banker types, because they received no bonus this year, can't afford to send their kids to their fancy Upper East Side private schools, where tuition runs about $30,000/year for FREAKING ELEMENTARY SCHOOL. I have no sympathy.*


*Actually, I have a little sympathy. They usually receive a fairly nominal base salary and rely on their annual bonus for support. They get their bonus in January, and a lot of them start running out of money towards the end of the year and live off credit cards for the last month or two until they get their next bonus. If any of them did that this year, they're screwed. Also, they tend to work pretty hard, and relatively few of them actually caused this mess. So I have some sympathy. But not much.

[Jerk]

Another big day for the financials today. At last check the financials were up 9%. Looks like they may suspend mark-to-market on performing loans, which would prompt another big jump.

Anyhow, that's three days in a row of market gains.

I really am surprised if we're climbing out of the bottom. I really did think it would go below 5,000 (expert analysis on my part;))

You just got to wonder if inflation is coming in the next year or two.

[Frozen Sooner]

Looks like the DJIA will close up again for the fourth day in a row.

Hope this continues to the next week.

[Frozen Sooner]

Oh-also looks like Citi is going to attempt to repay their bailout money pretty quickly here.

[Chuck Bao]

With all due respect, Froze, I still believe that this is a suckers' rally and I would remain very cautious on the big banks. Going by just common sense, banks can't buck the trend of an overall poor economy. If some people are right that commercial property is the next to fall, the banking sector is sure to feel more pain ahead.

By talking about profits in the first two months, the banks have raised market expectations. And if they don't meet these high expectations, it could get really ugly.

I think the banks are still in crisis mode and doing all that they can to survive. I've seen this before with the complicity of the banking regulators. Losses by stock market investors was not the primary consideration of either the banks or the regulators during the Asian economic crisis. Survival of the banking system was deemed far more important.

So, are you saying that Citi is lending again? I mean if it is looking to disentangle itself from government bailout money at the expense of holding back new credit extension, who does that serve? Not the economy and not the banks themselves, eventually. The banks need to start lending again if the economy is to ever recover.

This is like that analyst quoted on a Market Watch article (paraphased): "it doesn't matter what economic stimulus plans the Obama government tries to implement or get the G-20 members to go along with, it won't work unless the US fixes its banking system first."

So the nuts of it is that 1) the stock market needs to rally so the banks can raise fresh capital without being nationalized or having shareholders equity severely diluted, 2) the stock market rally would essentially need to reflect the recovery in the overall economy and 3) the overall economy won't recover until the banks start lending again and have been recapitalized.

So I'm changing my tune. So what if it is a suckers' rally, go out and fill your boots with banking stocks!

[stoops the eternal pimp]

I began tinkering with the Market about a week or so ago..I bought 300 shares of Goodyear at 3.35 and 300 shares of GE at 6.87 a share..so far so good I guess..I still don't have a clue what I m doing

[Scott D]

Better take your savings and get a new refrigerator box step ;)

[tommieharris91]

I began tinkering with the Market about a week or so ago..I bought 300 shares of Goodyear at 3.35 and 300 shares of GE at 6.87 a share..so far so good I guess..I still don't have a clue what I m doing

Goodyear might have been a bad move because of their exposure to the auto industry. GE could work wonders for you, though...

[stoops the eternal pimp]

Thats why I bought that new side by side..good size box


The money I used was actually money I have been setting a side for a while just so I could play with the market and learn some on how it works..

[stoops the eternal pimp]

Goodyear might have been a bad move because of their exposure to the auto industry. GE could work wonders for you, though...

well neither choice was meant to be something longterm..I just thought I would jump on those 2...I could sell the GT now and make a little right now

[Frozen Sooner]

With all due respect, Froze, I still believe that this is a suckers' rally and I would remain very cautious on the big banks. Going by just common sense, banks can't buck the trend of an overall poor economy. If some people are right that commercial property is the next to fall, the banking sector is sure to feel more pain ahead.

By talking about profits in the first two months, the banks have raised market expectations. And if they don't meet these high expectations, it could get really ugly.

I think the banks are still in crisis mode and doing all that they can to survive. I've seen this before with the complicity of the banking regulators. Losses by stock market investors was not the primary consideration of either the banks or the regulators during the Asian economic crisis. Survival of the banking system was deemed far more important.

So, are you saying that Citi is lending again? I mean if it is looking to disentangle itself from government bailout money at the expense of holding back new credit extension, who does that serve? Not the economy and not the banks themselves, eventually. The banks need to start lending again if the economy is to ever recover.

This is like that analyst quoted on a Market Watch article (paraphased): "it doesn't matter what economic stimulus plans the Obama government tries to implement or get the G-20 members to go along with, it won't work unless the US fixes its banking system first."

So the nuts of it is that 1) the stock market needs to rally so the banks can raise fresh capital without being nationalized or having shareholders equity severely diluted, 2) the stock market rally would essentially need to reflect the recovery in the overall economy and 3) the overall economy won't recover until the banks start lending again and have been recapitalized.

So I'm changing my tune. So what if it is a suckers' rally, go out and fill your boots with banking stocks!

Notice I haven't said that this is a long-term rally. Just noting that it's there.

Relaxation of mark-to-market is the big buzz right now. Personally, I don't know of that's a good move. However, the simple fact is that the vast majority of these marked-to-market assets are performing-thus, the banks are cashflowing OK now.

The problem with M2M is that you deplete cash reserves to purchase an asset that's immediately depreciated almost immediately. That's one of the things that's locking up capital markets (along with previously discussed new accounting rules.)

Don't ask me what the solution is, I just work here.

I'm just sayin'-if the financials are reporting profits and are going to be able to pay back the government and lend again, I'm pretty happy about that.

[Chuck Bao]

Truthfully, this article makes me feel terribly uncomfortable.

I'm hating on any images of dead cats and dead cat bounces.


Citigroup's Dead Cat Bounce

Written by John Browne
Asia Sentinel
Thursday, 12 March 2009

That quarterly profit is just an illusion

This week Citigroup shocked Wall Street by announcing that the company would be profitable in the current quarter. At the same time, the Obama Administration indicated that it would be unlikely to nationalize American banks, preferring to provide low- cost funding to encourage the private sector to buy distressed assets from the banks. The two developments sparked a vigorous rally in financial stocks, which had been drifting downward for weeks, caught in what appeared to be an unending death spiral. But have the good times really returned?

On the surface at least, there are some promising points. Based on current income, and an upward trending yield curve (that will allow banks to borrow at nearly no cost from the Fed and lend to borrowers at a good profit) the banks should generate strong cash flow. But that is hardly the full story.

Write-downs in the value of toxic assets already held on bank balance sheets will continue to explode like ticking time bombs. These debts may be too large to be overcome by a positive cash flow fueled by cheap access to short-term funding. If banks were simultaneously forced to write down assets, they could be rendered insolvent from a capital balance sheet point of view.

This is the underlying problem that America and the much of the world face with their banks: banks can be trading with positive cash flow but from a technically insolvent capital position – which is illegal.

Some argue that toxic assets make up only a very small part of the total assets of the banking system. That may be so, but the real issue is the enormous size of the toxic assets in relation to both the capital of the banks and the funding ability of the government.

According to the Bank of International Settlements, the world's total of derivatives investments, including the poorly understood credit default swap (CDS) market reached some US$700 trillion at its height, or more than 20 times the world's total annual production! The US portion was about $419 trillion, or some 40 times America's annual production.

The essential problem is that these inherently risky securities were used as collateral for loans. The fall in their value resulted in massive deleveraging. Of course, not all derivatives are yet flawed, or toxic. So it can be assumed that, in the absence of a total financial collapse, only a limited number will default.

However, if a conservative assumption were made that only some two percent of derivatives fail, it would still amount to some $14 trillion. The American share would be about $8 trillion, or almost one year of GDP once that figure declines to a sustainable level. The estimated total capitalization of all U.S. banks is some $1.6 trillion. But, this amounts to only 20 percent of the potential American liability.

So far, American citizens have been forced to provide financial institutions with nearly $2 trillion in additional bailouts. This brings the total of current U.S. banking capital to some $3.6 trillion, still less than half of the potential problem, leaving a massive $4.4 trillion shortfall. In light of this, even noted bearish economist Nouriel Roubini's estimate of a $3.6 trillion shortfall appears to be too optimistic.

Of course, not all American banks are in trouble. There are a number of local and regional banks whose managements did not participate in gambling away America's financial future. Nevertheless, investors should ask themselves some hard questions. What if the government is forced to face the fact that the U.S. banking system, as a whole, is already fundamentally insolvent? What if the administration is therefore forced, despite its expressed disinclination, to nationalize the problem banks?

Most importantly, while the good banks are being separated from the bad in the FDIC's 'corral', will all American banks be forced to close? Worse still, after the forthcoming G-20 meetings, will all international banks be closed on a temporary basis, on a long bank holiday, as happened in the Great Crash? If so, what would happen to consumer confidence and the price of gold?

Citigroup says that it is profitable. At the same time, most banks are in dire straits. Until Citigroup is able to put its capital where its mouth is, investors in U.S. financials should remain cautious.

John Browne is senior market strategist – Euro Pacific Capital, Inc. of Darien, Connecticut, USA. Euro Capital publishes the free, on-line investment newsletter http://www.europac.net/newsletter/newsletter.asp