Well Thursday was all about Citigroup (C) once again so I guess I will pick up on that line again.
Just Make All the Numbers Too Big
It seems today that the best way to mask problems or hide actions is to shroud everything with numbers that are just so huge no one can really grasp what they mean. I see this with the budget, deficits, cost expectation and so on. You want to fix the budget? How do you tackle a Trillion dollar mess? This works in reverse as well. You want to gripe about 100 million in the budget, that's too small to worry about. Amazing really.
Today's post is inspired by Thursday's MUST READ article written by Macro Man. After I read his piece I could not think about anything else (financial, I had real work to do as well) the rest of the day.
Macro Man covers something that is right in front of all of us, but I can admit I never even saw the details. Here are the relevant sections, but the post has great graphs and great commentary so I would point you there before continuing on.
As you can see below, the once-mighty C has seen its share price is down some 48% from the 2008 close, so it's badly underperformed the broad market. Or has it? [see link for graph]
Sure, if you've been long since last year, you're rather out of pocket on your investment. But for the institution as a whole, it's been something of an annus mirabilis; thanks to its capital raising/share issuance, etc., C's market cap has nearly tripled this year. The company's now worth nearly $100 billion!
Betcha didn't know that. Even more remarkable is fact that Wells Fargo's (WFC) market cap is now at all time highs (at least at the close of the year.) Yes, this is the same institution that has both hands thrust deep in the stinking morass that is the California real estate market and that has employed every trick in the book to avoid fessing up.
Readers are invited to judge for themselves what, if anything, this remarkable recovery in bank market caps means for 2010. It certainly suggests that something should be changing, and it doesn't take Sherlock Holmes to deduce where Macro Man's bias lies.....
This is important.
Macro Man's numbers work led me to do some work with numbers myself. All data is supplied by Yahoo Finance (under the key statistics label for stocks).
Citigroup had 22.86 Billion shares outstanding. Does that mean anything? Is this important? Well, I don't know. I can put together some comparisons and make a guess though.
Let's start with banks so we can compare apples to apples.
A Citi sized bank is Bank of America (BAC). What kind of shares are they floating?:
BAC = 8.65 Billion shares
Maybe they are an exception? How about Wells Fargo?
WFC = 4.69 Billion shares
Ok. What about some other players like Goldman Sachs (GS)?
GS = 514 Million shares. That's MILLION not Billion.
Ok, so maybe Citi is just so big and amazing they have tons of shares out there. What about some big names?
Microsoft (MSFT) = 8.88 Billion shares
Exxon Mobil (XOM) = 4.75 Billion shares
Everyone's favorite Google (GOOG) only has 317 Million shares out there.
For the gold lovers high end estimates put all the gold ever mined at 10 Billion ounces.
Again, is this important?
The answer is it depends.
On its face this kind of crazy stock manipulation is insane. Think of it this way:
-Today C is at $3.20 a share and has a market cap of around 75 Billion (depends how you count it I know; I am just using Yahoo closing quotes).
-To return to the point at which Sovereign Wealth funds poured cash into Citi stock (back around say $30 a share) Citi market cap will have to be 750 Billion, or an entire TARP program.
-To return to the all time high of $55 a share Citi would sport a market cap of, are you sitting down, 1.29 Trillion.
XOM market cap = 324 Billion
MSFT market cap = 262 Billion
BAC market cap = 128 Billion
Now do not bother writing me and telling me about stock buy backs, warrant expirations, etc. I get it. They still cannot account for these kinds of numbers. Besides, remember when companies (think 2007) were borrowing money to buy back stock? Good luck on that loan nowadays.
And again, is this important? The answer is maybe.
If anyone really wants their money back (or to make money), then Citi is to be passed on no matter what. If, however, you want to play games and try and pretend all this works out, then by all means play C stock (50% of NYSE volume today) and ignore these numbers.
This is a joke. Citi should be broken up and the best made of the outcome. Their future is a mathematical impossibility.
This is just one on the run analysis. I think there are plenty of others out there like this one.
I think I have identified the next bubble. The next bubble is wishful thinking. You already know how bubbles end.