Citigroup's Decline - Not a Good Sign for the Market

Citigroup's (C) stock closed Friday at $1.50. For a comparison between this period and the debacle of 1929-1933, I offer up the following numbers:

(formerly known as National City Bank)
High of 1929: $585
Low of 1933: $16
Total Loss: 97%

High of 2006: $51.01 (adjusted price)
Low of 2009: $1.50
Total Loss: 97%

All of the losses that have occurred in one of the nation's (formerly) largest banks without a one-day decline able to trigger circuit breakers on the New York Stock Exchange. Remember, out of the $8.5 trillion that has been committed to the financial system, only $100 billion has been used to addressed failed banking institutions. So few banks have failed during this environment that we must be in the early stages of this crisis. Also, because the market is teetering on the 7000 level, I wouldn't be surprised to see a stock market crash in the coming weeks. I don't have a clue if it will happen but I wouldn't be surprised.

Sources:

• Poor's High and Low Prices, 1924-1933. Poor's Publishing Company. 1934. p.294.
• Yahoo!Finance. Citigroup. Accessed February 27, 2009

Comments

[Ricard:]

If C were to be nationalized, it may end up being a plus. Given its current state and the media attention it is receiving, no financier of high repute would ever want to work in this firm. It, and others like it, needs to be dissolved, or sold in parts to the highest bidder. Only then would our financial system begin a recovery.

Mar 01 12:28 PM

[Timster:]

it's amazing how much wealth destruction getting rid of the uptick rule and mandating mark to market accounting has done

Mar 01 12:46 PM

[Patriot Ted:]

You got that right Timster. "They" are flipping insane. The greedy bar-sinisters should be hanged.

Mar 01 01:20 PM

[EMS:]

I also wouldn't be surprised to see a major selloff, and soon. I find the drip-drip-drip of losses more painful than a wham-bam "trading-curbs-in effect" action that is certainly needed to give birth to the proverbial "new bull""

Mar 01 02:04 PM

[InnocentsAb...:]

What on earth ? Bar sinisters ? That's heraldry right ? What does that have to do with the US financial system ?

Although it is a cool term, and maybe you are just taking an advantage of opportunity to use it, albeit obscurely.


On Mar 01 01:20 PM Patriot Ted wrote:

> You got that right Timster. "They" are flipping insane. The greedy
> bar-sinisters should be hanged.

Mar 01 02:58 PM

[Realsmartguy:]

Tim has identified the two problems that brought us here. Until the rules are changed the short sellers will continue to savage the market.

Mar 01 03:59 PM

[THofler:]

Sure things are ugly at Citi & who knows where this all is going; but you've missed one big reason why shares of C got clocked last Friday (other than dilution). There was a huge arbitrage taking place.

Going long Citi preferred and shorting the common. The conversion of Citi preferred to common should net you about $0.65 per share of common. But reading the fine print on the deal suggested that the preferred conversion will be calculated near the recent market price for the preferreds, not the par value. So I'm interested to see if we might get a short squeeze on the common Monday.

Mar 01 10:06 PM

[CapNgain:]

I can't believe how many people seem to believe the BS about the uptick rule, and mark to market.

Has it occurred to anyone that perhaps these stocks are getting hammered because their fundamentals are lousy, and they're losing more money than the company is worth? Sure, the uptick rule can result in larger short term hourly fluctuations, but at the end of the day it seems to me earnings, cash flow, etc. matter far more than short interest (if short sellers unfairly drive down the price of a stock, the smart money moves in and buys value).

And, w.r.t. any mark-to-market whiners, it would be great if you could lend me money to purchase stocks with up to 50% margin. If the value of my holdings declined, and you gave me a margin call, I'd love to have a lender that I could convince to rescind the margin call based on convincing them the non-mark to market value of these stocks 5-10 years later would likely be far more than the margin amount owing today.

Mar 02 12:24 AM

[CapNgain:]

You'd probably be right if it wasn't for the CDS contracts. Would nationalization trigger a default provision, causing tons of other zombie banks to pay out cash they may not have? I'm no CDS expert, but I wonder if it isn't this complex web of derivatives forcing the US to follow the Japanese blunder of supporting zombie banks at the expense of a decade or so of economic growth - simply to avoid further destabilization of other internationl banks?


On Mar 01 12:28 PM Ricard wrote:

> If C were to be nationalized, it may end up being a plus. Given
> its current state and the media attention it is receiving, no financier
> of high repute would ever want to work in this firm. It, and others
> like it, needs to be dissolved, or sold in parts to the highest bidder.
> Only then would our financial system begin a recovery.
>

Mar 02 12:32 AM

[Mad Hedge F...:]

UUy tr So nationalize the banks already! Get it over with! Call it whatever you want: partial nationalization, temporary nationalization, socialization, liverwurst, or rutabaga. Just get it over with! This tortuous slow drip of on again, off again, stop gap measures is going to cost us more than if we executed the politically incorrect “N” word. Of course, a government takeover is the worst nightmare for many Republicans. But now that former Fed governor Alan Greenspan and many fiscal conservatives are on board, this shouldn’t amount to political suicide for Obama. The FDIC’s Sheila Bair already does this on an almost daily basis with smaller regional banks, like Washington Mutual, but for some reason the top nine “too big to fail” banks are sacrosanct. Their deposits have been effectively nationalized with government guarantees since last fall. The market is already selling us that many of these once hallowed institutions are now worthless. This is what Citigroup (C) at $1 and Bank of America (BAC) at $2 are telling us. Just wipe out the pitifully little the common shareholders have left, clean them up, and resell them in five years after the credit markets are restored. Every government that ever did this, like the UK in the eighties and Hong Kong in 1998, made a fortune. I was involved with both, and serious coin was made by the sellers and the buyers. Not to drive a stake through the hearts of these de facto “zombie” banks really would risk a Great Depression II and an “L” shaped lost decade. The markets would love decisive and surgical action like this and rocket.

Mar 02 09:35 AM