Action in Citigroup (C) yesterday - and then again this morning - amounts to a textbook case of premature prognostication. Here's what's going down and by down, we mean up.
It is that sort of time.
Citigroup's stock flew 1.61% yesterday (it's up another nearly 2% today) after traders learned that CEO Vikram Pandit was effectively fired. (He technically resigned, but the resignation came by Board of Director gunpoint, so let's lose the euphemism.)
Either way, the stock is up, but it shouldn't be. At this point, you should run for the exits and sell. Though never a big fan of Pandit's presence, his absence won't be an advantage for a long time, if ever.
Nevertheless, CNBC went immediately into full cheerleading mode over Pandit's demise. They trotted out bank analyst Dick Bove, who termed Citigroup a "screaming buy" in the wake of Pandit's departure, pointing to a chance of an increase in the speed of their turnaround, improvement in international and commercial banking business, as well as better cost cutting and, for good measure, dividends and buybacks.
There will also presumably be chocolate milk served in all Citigroup water fountains.
As a result of Pandit's departure, Bove called Citigroup "one of best buys out there." You might find it curious that Bove, King of the Superlatives, also said Pandit did "a phenomenally good job." So, uh, the man who presided over a stock that lost nearly 90% of its value over his tenure did a great job. But the man who follows him will do even better.
Uh, OK. About that man.
Michael Corbat is a longtime company man, which rarely bodes well when turnaround skills are needed. Corbat's latest post was as head of Citi Holdings, effectively a disposal unit of Citigroup business.
Expertise in dismantling may give hope to those who think the financial supermarket should be broken up into bodegas, but for those like Bove who are banking on transformative progress - well, Corbat has as much to prove as anyone.
In an internal memo, Corbat promised "changes." That's about as specific as he got, even as traders were bidding the stock ever higher.
Turnarounds - especially turnarounds of poorly structured companies in crazy competitive fields - are difficult…and that's putting it mildly. For each Starbucks (SBUX) that succeeds, there are 10 Hewlett Packards (HPQ), Dells (DELL), RIMMs and more. Much more. But there traders, the media and analysts went again, all but declaring an insta-turnaround at hand.
Meanwhile, earnings - from IBM (IBM) to Intel (INTC) - are swinging the wrong way. Hell hath no fury like a market waking up to the realization that earnings are actually trending worse than already lean expectations.
But tumultuous as the earnings season has been - and Pandit's tenure was - his firing is going to be even more so. The surprise news was highly unsettling to employees, no small matter. The Wall Street Journal reported that after a final Pandit conference call, executives were speechless.
You got that? Those who run the business are speechless. But traders were yelling "buy!" There's something wrong there.