Use access key #2 to skip to page content.

goldminingXpert (29.52)

Citigroup is going down

Recs

28

June 29, 2010 – Comments (33) | RELATED TICKERS: C

Fell 7% today ... C has been outperforming the market for the past few months for reasons that escape me. While I don't understand rational people investing in any American banks during the continuing Great Housing Disaster, I particularly don't get people buying one that is heavily owned by our incompetent federal government that, you can be sure, will be happy to unload its shares at any price it can fetch over it's buy-in (which is 20% down from here).

What's wrong with C? I mean what's particularly wrong with it, compared with other banks? Several things:

1. Unlike what many ill-informed bulls have posted in the comments on C's page, C has sold off its GOOD assets, not the bad ones. C has unloaded the money-makers like the SmithBarney brokerage rather than the bad ones (the derviatives, the sub-prime exposure, the HELOC exposure etc.)

2. The leverage is absurd. The last time I took a good look at C's balance sheet, they had a negative book value. Now, somehow, it's popped up to over $5 a share. What's this tell you? A) People are marking up assets again even though houses aren't selling, defaults are rising, and unemployment is steady. There's inflation of expectations, which has caused C to make up its assets without basis. When you look at Cash vs. Debt, you see C only has a dozen or two billion dollars sitting around in excess of their debt. Cut their short-term swap lines and C is dead immediately. This won't happen as long as the government is involved ... once the government is done unloading, look out.

3. The market cap is extremely excessive. How much is C's market cap? Don't be fooled by the low share price, due to the MINDBOGGLINGLY large amount of dilution in shares, the market cap is $110B (with a billion.) To all you calling for $10 and up on C, keep in mind you are calling for markets caps of $250B and greater!!!

Newsflash: Google (a very healthy company) has a market cap of $140B. C, whose survival is in great doubt, has a cap of $110B. Point is, even if C survives, it isn't going up. It just can't. There's too many shares.

When I recommended C in 2009 (my 2 CAPS green thumbs both returned 80+ points and gave you doubles on your investment if you followed them), there was A) a much lower share count and B) a much greater chance of survival as they hadn't sold the profitable assets yet.

Outlook, a price target of $1 (market cap of $30B) is reasonable, as this values their survival chance fairly, the brand still has a reasonable amount of value if they can survive all the lousy assets they own. Of course, if the market starts to suspect C is going down, a price around 50 cents a share or so (market cap of $15B) is more likely. In the long run, I expect C to go to 0, but it'd be a interesting speculative purchase under about 75 cents.

To all you you ill-informed C longs, please score at least 230 points on the stock and capture my score leader status on the stock before calling me a moron. Thanks.

33 Comments – Post Your Own

#1) On June 29, 2010 at 4:25 PM, Superdrol (97.20) wrote:

Don't forget about their Enron style structure (i.e. Citi Holdings).

 

Citigroup is probably the most worthless financial stock out there.  People are just confused and think it is value because it is $3.00 or something like that.

Report this comment
#2) On June 29, 2010 at 4:36 PM, allstarvulture (< 20) wrote:

goldminingxpert-

With all due respect, their survival chances are 100%.  According to Elizabeth Warren, chairwoman of the congressional oversight panel for the TARP program,

"The sheer magnitude of Citigroup's operations, and the company's history of receiving extraordinary government support, has led this panel to an inescapable conclusion: The United States government will bear any burden and pay any price to ensure that Citigroup does not fail."

C may very well go to sub-$1.00 as you suggest.  But they are not going the way of Lehman.

Link to Ms. Warren's comments:

http://www.marketwatch.com/story/panel-citigroup-has-implicit-government-guarantee-2010-03-04

Report this comment
#3) On June 29, 2010 at 4:40 PM, goldminingXpert (29.52) wrote:

And TARP is guaranteed to continue past the mid-term elections? A government that won't extend unemployment benefits due to their price cannot guarantee 100% survival of any bank when our banks are widely despised by voters. Nothing is permanent in politics.

Report this comment
#4) On June 29, 2010 at 4:42 PM, grantie (< 20) wrote:

I don't claim to know much about C but I know the government and George Soros own a lot of shares.  That mean that anytime it goes up very much, they will probably dump them.  I lost money before when I believe they did that at under $5.00 and I just don 't want anything to do with this stock.

Report this comment
#5) On June 29, 2010 at 4:44 PM, Superdrol (97.20) wrote:

Citi Holdings=toxic waste kept off the balance sheet.

Report this comment
#6) On June 29, 2010 at 4:47 PM, goldminingXpert (29.52) wrote:

P.S., if you must gamble on a big US bank, US bank (like that?) ticker USB is the only to be placing your chips on.

Report this comment
#7) On June 29, 2010 at 4:48 PM, Superdrol (97.20) wrote:

George Soros also loaded up on Lehman Brothers and that worked out pretty well:

 

http://www.marketwatch.com/story/soros-buy-puts-shine-on-lehman-shares

 

There are only 2 kinds of people who own Citigroup stock:

 

1.  Confused investors who have not performed any type of fundamental analysis and are captivated by the cheap stock price (relative term).

 

2.  Confused investors who are piggybacking the 'big boys' who have not done any fundamental analysis and are wanting to get involved because the stock is cheap (relative term).

 

Report this comment
#8) On June 29, 2010 at 4:50 PM, goldminingXpert (29.52) wrote:

Citigroup, a study in lemming investing. (And you, CAPS bulls, are specifically called out by name!)

Report this comment
#9) On June 29, 2010 at 5:27 PM, allstarvulture (< 20) wrote:

And TARP is guaranteed to continue past the mid-term elections?

No.  TARP is not guaranteed to continue past mid-term elections (though I think it will).  However, I believe that the support of C in some way, shape, or form will continue. 

The government and the banks have become inextricable bedfellows.  Senators, and even the President, may say the right things into the cameras and their fists may shake wth well practiced outrage.  But, at the end of the day, I believe they'll do so with a wink and a nod.    

Report this comment
#10) On June 29, 2010 at 5:30 PM, goldminingXpert (29.52) wrote:

I hope, however vainly, that public outrage at continued bailouts will force the government to allow the big banks that should go bust to do so. I hope support for banks becomes a "toxic asset" for politicians. I'm probably wrong. C has no future without government support -- that much is certain.

Report this comment
#11) On June 29, 2010 at 6:18 PM, GenericInvestor (88.74) wrote:

when will refiners rally??? your wnr is killing me!

Report this comment
#12) On June 29, 2010 at 6:34 PM, goldminingXpert (29.52) wrote:

GenericInvestor

I have no idea. Hopefully soon. 

Report this comment
#13) On June 29, 2010 at 7:02 PM, Ineedmoney101 (67.45) wrote:

This person is a joke! I hope you don't try to short this thing cuz you'll bite the dust. The whole reason it's worth money now ::hence book value:: is because it's earnings just recently went from NEGATIVE to POSITIVE and well you can see that this would cause a shift in 'book value' to go from negative to positive. We all know that simply stated multiplying or dividing a negative and postive it's always going to end that way, and that also shows you how to manage money, you see that value go from negative to positive that's a huge difference,    UP GOES PRICE

Report this comment
#14) On June 29, 2010 at 7:28 PM, goldminingXpert (29.52) wrote:

Earning a few cents a share will magically boost your book value by more than $5 (500 cents) a share? Wow, I knew I missed something by not majoring in accounting.

Report this comment
#15) On June 29, 2010 at 7:57 PM, allstarvulture (< 20) wrote:

I hope, however vainly, that public outrage at continued bailouts will force the government to allow the big banks that should go bust to do so

I sincerely share that hope with you.  In fact I would expand it to any business enterprise, bank or otherwise.  Best of luck in all of your trading.

Report this comment
#16) On June 29, 2010 at 8:01 PM, goldminingXpert (29.52) wrote:

Best of luck in your trading as well. For what it's worth, my go-to bank stock short is WFC not C (I don't like shorting stocks under $5) but I just had to put this post up because the amount of uninformed bullishness on Citigroup here is alarming.

Report this comment
#17) On June 29, 2010 at 8:37 PM, d1davidtiming (28.96) wrote:

good post

Report this comment
#18) On June 29, 2010 at 9:16 PM, RookieQB (28.99) wrote:

I agree. Good post

Report this comment
#19) On June 29, 2010 at 9:32 PM, ChrisGraley (29.85) wrote:

I agree GMX, banks are crap. But at least for the moment, they are government supported crap.

I lost a lot of fake CAPS money, because of the banks. Thankfully I don't usually short with real money, so I avoided getting raped by the government.

When you see signals of the government moving on, then short the banks.

I think you should green thumb JPM and GS when you do short the banks though. 

Report this comment
#20) On June 29, 2010 at 11:18 PM, Momentum21 (78.72) wrote:

GMX - I like your post and appreciate the view. I have a bullish bias but the only way I buy Citi is so I can come back here in 6 months and parade around with my dirty little grin. Obviously very poor form and bad practice for making money... : )

to me Citi falls in the BP and Gold camp. While I personally don't get super excited about investing in them I really don't think it is good policy to short either of them...

But yes, I agree if I buy a US bank I want USB or PNC...best bank for the buck is STD right now...whenever I get the urge to buy C I will buy up a few more shares of STD. And the more you post on it, the more I will get the urge! ; ) 

Report this comment
#21) On June 30, 2010 at 12:37 AM, mostofall (60.49) wrote:

Maybe just maybe.....C.....is ahead of the curve.......and we're not that stupid(foolish) afterall.....just maybe

Report this comment
#22) On June 30, 2010 at 12:44 AM, mostofall (60.49) wrote:

just waiting for the next fake report

 

Report this comment
#23) On June 30, 2010 at 12:56 AM, mostofall (60.49) wrote:

my assk yer bid

Report this comment
#24) On June 30, 2010 at 8:41 AM, JakilaTheHun (99.94) wrote:

Odds that C goes bankrupt: 1%.

You're as wrong on this as you have been on Wells Fargo.  Just because you don't like Citi or the government backstop, doesn't mean the bank will fail.  For that matter, even without the government backstop, Citi is unlikely to fail since it is always able to tap the equity markets.  

Worst case scenario is that Citi would have to do yet another secondary offering and dilute the value of its shares some more. 

Report this comment
#25) On June 30, 2010 at 9:51 AM, Dow3000 (< 20) wrote:

GMX, I tend to think that the feds will bail out the big banks over and over until they can no longer borrow.  I have been guessing that the treasury market will implode when we get close to $20 trillion in "on-the-books" debt...which is maybe 2013-14.

 Considering the big banks (60% of deposits at this point?) would probably fail together if one was allowed to go down, in what scenario do you think the feds would actually have the balls to not bail them out again as long as they can still borrow?

Report this comment
#26) On June 30, 2010 at 10:45 AM, Momentum21 (78.72) wrote:

the odds of Citi being back at 5 or 6 in the next 9 months are pretty darn good I think...

Would you want to be heavy short when the government comes out and announces they are done selling? It seems that is the time big money will want back in...and that time will be here sometime this year, no?

 

Report this comment
#27) On June 30, 2010 at 10:47 AM, bothisellhigher (< 20) wrote:

I don't see GMX being wrong on Wells Fargo...I see a downtrend starting on May 18 with support penetration and a close of 30.59...June 29 close...25.93... down around 15%...his short call looks pretty good to me-and still looks good.

C needs to close above 4.03 to look even remotely interesting...which I doubt will happen soon.

Report this comment
#28) On June 30, 2010 at 12:02 PM, goldminingXpert (29.52) wrote:

A price of $6 a share would give Citigroup a larger market cap than JP Morgan. I think we can all agree that would be unreasonable.

Report this comment
#29) On June 30, 2010 at 2:28 PM, TMFJake (44.48) wrote:

I agree GMX, banks are crap. But at least for the moment, they are government supported crap.

That says it all from my perspective.

Report this comment
#30) On July 01, 2010 at 12:03 AM, Momentum21 (78.72) wrote:

A price of $6 a share would give Citigroup a larger market cap than JP Morgan. I think we can all agree that would be unreasonable.

Would this be the first time you saw a valuation that was "unreasonable"

I didn't say I was buying but I would bet you it gets to 6 before 0. 

But like I said...my bias is bullish, so part of it is Citi but more of it is the overall global economy. When people were paying $89 a share last year for one of the worlds best growth companies (AAPL) that is exactly what it was worth. If you believe we are going backwards fast there are much better shorts than Citi...pick a ticker with a debt burden and negative earnings that no politician cares about...I would say Sprint but I own that one...how about LEAP? 

Report this comment
#31) On July 01, 2010 at 12:13 AM, goldminingXpert (29.52) wrote:

 Would this be the first time you saw a valuation that was "unreasonable"

Haha, no. The market as a whole is overvalued. For that matter, JPM is overvalued. It's just that C is already so absurdly priced that to stick another $50B on their market cap just screams of foolishness. I'd give you even money on C hitting 50 cents before $6, though I'd admit the odds of reaching $6, at least for a brief moment, are probably higher than $0 (great chance of them getting taken out for pennies a la BSC.) 

There are better shorts than C (though if they do a reverse split, I'm still going to play), that said, owning C is exceptionally foolish when much less bad US banks such as US Bank are publicly traded. If USB did a 10-1 split and traded in the low single digits, it would have a gigantic inexplicable fan club too.

Report this comment
#32) On July 01, 2010 at 12:17 AM, rd80 (98.06) wrote:

A price of $6 a share would give Citigroup a larger market cap than JP Morgan.

Unless Citi starts buying shares back.  To be clear, I don't see it having the resources to do that anytime soon. But, share count is part of market cap and share count isn't a fixed number.

I think we can all agree that would be unreasonable.

It's unreasonable today, maybe not so unreasonable a couple years out.

Report this comment
#33) On July 01, 2010 at 12:19 AM, goldminingXpert (29.52) wrote:

C is probably more concerned with paying back the $743 BILLION debtload and reinstating a normal dividend rather than buying back their absurdly overpriced shares.

Report this comment

Featured Broker Partners


Advertisement