Tuesday, March 4, 2008

yes, a defense of C

gee, is dubai the ruler of our markets now? it seems so very important to america these days. dubai international's ceo recently said that the billions C recently raised from various sovereign wealth funds won’t be enough to see it through the credit problems of today.

gee, pardon me if i'm a bit skeptical. his fund is an investor in hbc, not C. his comment was also perfectly timed for the day C announced a 10% reduction in their workforce (30,000 jobs). also on the attack is mer, which predicts C will take an additional 15 billion in writedowns, leading to a loss of $1.66 a share for the first quarter. also attacking C with exquisite timing is a small hedge fund called Special Opportunities Master Fund of Florida, a fund with only 58 million in capital that is suing C and WB for technicalities involving CDO payouts - but the headline in the journal is: "Citigroup and Wachovia face Lawsuits from a Hedge Fund."

hmmmm, yes. hyenas attack in packs and the bigger the prey, the more the hyenas need to coordinate in order to bring it down. At 25, c was the wounded animal falling to the back of the pack and the smell of blood has led to an attack frenzy as they are now throwing everything but the kitchen sink at the bank to force a bottom. i'm saying c is worth more than 1x book, and that’s where 22.50 brings them to. sure, it could fall further; i just don't think it's warranted.

the forward p/e on c is about 6.5, about 1/2 the sector average, and while 15 billion sounds like a big write off, keep in mind that the company has close to 2 trillion in cash and investments. so, if we throw out the 15 billion, that's still close to 2 trillion in cash and investments along with 15 billion of mortgages that have been written to zero, as if they won’t recover a penny of value on the home. none of this should be unexpected, and it really should not be moving the markets.

long c

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