Cesar Valencia

When Journalism Misses the Big Picture

Only people who truly understand an issue are able to talk and write clearly about these issues.

Citi's Continuing Woes

And how about all those toxic loans C and BofA were overpaying for with the intention to sell them back either in the PPIP or whatever legacy asset cleanup program the government engineered? Is their balance sheet even more toxic now???

Untangling the Citi Speculation

I don't want to sound mean, but who's going to untangle the mess??? What will be the cost? Who will make the money? No one understands what a CDO is made of. The tranches have been sold everywhere around the world. While in theory, there's no difference between practice and theory, in practice there is a difference. If banks could do this, they would. Problem is they purposely made these instruments as complex as they possibly could so that they could screw investors. By the way, if 68% of the loans are current, that means that every tranche except the unsubordinated AAA part of the CDO's is worthless. Not only that, but if i'm not mistaken, the banks already booked profits on all these loans as if they had been paid off. How do you deal with that. One easy way I can think of is to liquidate the banks and have the bond holders bid for the assets. This way you have price discovery and you kill the dead animals. And we will finally kill all the crap about "fire sale prices" and not having a market. There is a market, and the market is pricing all these products at what their value is, which is almost 0. If you think they are worth more, go ahead and use your money and buy them.

On Feb 23 11:08 AM The Mad Hedge Fund Trader wrote:

> There is a new proposal making the rounds for solving the financial
> crisis known as “desecuritization.” There are $1.4 trillion in CDO’s
> outstanding backed by Alt-A and subprime loans in the form of 3,700
> individual securitizations. Over 68% of the loans backing these bonds
> are current. Mark to market rules are forcing the banks to carry
> this paper on their balance sheets at 50% discount. This is where
> the $700 billion figure for the first TARP comes from. The problem
> is that mark to market is a meaningless accounting fiction when there
> is no market. If you break up these securities and place the underlying
> loans back on the banks’ balance sheets, the good mortgages can be
> valued at 100% of face, and those behind in their payments can be
> discounted to maybe 70% because they are still secured by the value
> of the underlying homes. This would boost the value of the entire
> asset class assets from 50 cents to 90 cents on the dollar. Restored
> balance sheets would enable banks to resume lending. It sounds like
> a workable plan, and therefore is unlikely to ever see the light
> of day.

Citi's Underwhelming Bailout

After the initial pop in the stock price, the right move will be to reshort C. You can always bet against government intervention and its effects on the long run. I'm not short C or will be but this is just ridiculous. If you are an investor you are in the business of making money, not cheering. If you believe in capitalism, you take capital away from bad institutions and give it to the good ones. All these banks had "great" paper earnings and now are suffering REAL losses. They took a shot at something and they failed, just like every effort to try and keep their stock price above 0.

Citi's Desperate Straits

How about Citi getting out of its trouble by ceasing to exist. Their mortgage back security portfolio hasn't even been written down. They have a couple trillion in CDS exposure. And the real problem with C is that its leadership has no idea what to do to right the ship. In better times that might have been an opportunity to buy low with the hopes that everything would be better in the future. But if you've ever read anything about financial history and you truly understand what's going on right now, you know that not all the banks are going to be around when all is said and done.

Big Moves in Low-Priced Stocks

JM the only reason C exists is because Glass-Steagall was repealed. And the reason it was repealed was to birth C. So C deserves what it's getting now. And how about the hit it just took on the Lehman debt? This bank is insolvent.

Worrying About Large-Deposit Bank Runs

How about the 31 billion write down that JP Morgan is taking? WaMu was insolvent, and it's not the only insolvent bank out there.

The New Bankers

Buffet financed Salomon Brothers in the 80's. He knows how to turn "loans" into investments.