Gerry Sullivan

Why I'm Buying Citigroup Stock

Sold the Citigroup at noon. I will be watching it and would buy it back on a pullback. There is a possible reverse split and I would take advantage of any weakness to buy the Citi after that.

Why I'm Buying Citigroup Stock

Target of $4 has been reached, Citi is currently trading at $4.19 and I am still long.

In a subsequent general market article I turned bearish and that call now appears premature.

Why I'm Buying Citigroup Stock

In both April and May, Citi popped above $4 and fell back down. I think that was because of the arbitrage selling from the exchange offer. I think Citi (with all its problems) can get back to $4.

I observed on Monday that the spread between the C.wd and C had closed to around 4 cents. Likewise, the spread between C and synthetic C (short Aug 3 Put, long Aug 3 Call) had also declined to the same 4 cents.

At its peak, the synthetic long C could be created at a 40 cent discount to C. That was because the stock was not available to sell short or the borrow was very expensive. Arbs who were long the preferreds (at a large discount to the exchange value) were buying puts and selling calls to hedge. That pressure enabled the opportunity to buy discounted synthetic C.

The whole point is that when the C.wd started trading it took the pressure off the puts and calls because the arbs no longer needed the options to get short. When the hedge funds and others who had tendered the preferreds found out on Saturday that they had 100% of the tendered preferred accepted in exchange for C.wd, they were good to sell on Monday. The selling on Monday pushed the C.wd down and the C declined also, but the spread closed.
The bid to bid or offer to offer between the C.wd and C in the aftermarket session on Monday was 4-5 cents.

The closing of the spread told me that the selling pressure was off and that C was quite likely to rise. If this information was in Newsweek, I missed it.

Why I'm Buying Citigroup Stock

Hyperinflation, how can you or I understand any bank's balance sheet? Goldman (GS) has over $30 trillion in derivitives. JPM has over $87 trillion. BAC and Citi both have more than Goldman.
JPM's derivitive position is more than 600 times its equity.

The government has made the decision that these banks are not going to fail. They will be nursed back to health. Getting C, BAC, and others healthy has created a situation where GS can make enormous profits.

We have seen this before, most recently in 1990. Many large banks were technically insovent but they returned to health. The stocks were great investments.

C is up 15% since my recommendation. If it is overpriced you can short it and profit.

I notice that even with the market down today the lower quality banks are rising: C, BAC, MI, FITB, etc.

Why I'm Buying Citigroup Stock

I bought C today.

Why I'm Buying Citigroup Stock

My 2 month target for Citi is $4.

The objective data is the completion of the exchange offer which reduces arbitrage selling pressure. On July 15 the published short position in Citi was over 1.2 billion shares, an all time record for any stock. Much, but not all of that will be covered when the
C.wd becomes C. Some of the rest will be covered by buying.

GM Leaving the Dow (Soon): Likely Replacements

Maybe Honeywell comes back. Or Eaton. Something industrial.
Google is too high priced, it would have 20 times the weight of Microsoft.
Financials were a mistake for the Dow going back to when American Express became the first financial to be included in 1982.
Citigroup might stay in.

30 Investors Bound to Lose Big on GM

Is GM really going bankrupt? If they pay off the bonds maturing on June 1, 2009 (about $1 billion outstanding) GM doesn't have another
maturity for 18 months.

These GM bonds ($25 par) trade at $2.50 (Symbol GRM)...if they pay off, it is a 10-1 shot.

The Lowdown on Citi / Wachovia

Wachovia common stock is still WB. Wachovia preferreds B, C and D
are now Citigroup preferreds. Wachovia preferreds S and T and WNA preferred are still Wachovia preferreds.

The Lowdown on Citi / Wachovia

One additional thought on Wachovia (WB), the corporation that remains will have a large tax loss carry forward.
This could be of great value to another highly taxed corporation.

The Lowdown on Citi / Wachovia

Beware of the Wachovia (WB) debt. Citigroup (C) and Wachovia are engaged but not yet married. There is a good reason why listed Wachovia notes are available for as little as 60 cents on the dollar.

First, the deal has to be approved by the Wachovia shareholders.
(maybe the debt holders are buying WB common with this in mind)

Second, a lot of things could still go wrong. Either with the system, Citi itself, or Wachovia.

The Lowdown on Citi / Wachovia

I sent this in as a Seeking Alpha submission, but I will append it here in case anyone is interested:

We now have a clearer idea of what will remain in Wachovia Corp (WB) after the transfer of the banking assets and corporate debt to Citigroup (C).
I spent all day reading Wachovia Corp prospectuses hoping that the common and preferreds would get hit when they opened. It seems that others were reading them too.

The WB common closed in the after market today around $2. That is after being halted in the pre-market at $.90/share.

There are several different preferreds issued by Wachovia and they have unique features. Some are actually backed by debt. (WBprB, WBprC, WBprD). Dividends can be skipped for 10 years without triggering a default. I assume (a dangerous word) that these will
become debt of Citigroup. That is not 100% clear. All three are $25 par and trading between 9 and 11.

Then, there is WBprS (called preferred J) which is a 1/40 share of an actual preferred with an 8% dividend. It was sold in Dec. 2007. The dividend is not cumulative and this preferred is equity. It will continue to be a security of Wachovia Corp. It closed around $7.

The WBprT was issued at $1000/share in April 2008. It has a lot of moving parts. It closed at $320 and traded actively in the after market session. I suggest that you read the prospectus:
www.sec.gov/Archives/e...

Dividends on this preferred are 7.5% and not cumulative. It will continue to be a security of WB.

Then you have to figure out what the remaining Wachovia will be worth. It will consist of Wachovia Securities (including AG Edwards), Evergreen funds, an insurance subsidiary, and the $2.1 billion of Citigroup shares it will receive when the bank transaction is completed.

The common shareholders have to approve this.

There will possibly be a very large tax loss carry forward and this may be of value to a merger partner.

Prudential (PRU) will continue to own a minority interest in Wachovia Securities.

I don't know what all this will turn out to be worth, but I think all these preferred securities
will be worth more than today's closing prices in 6 months. The preferred securities that
remain with Wachovia will all rank ahead of the WB common stock.

FAS 157: Blackstone and Its Banker Buddies Have It Wrong

In January 1975 Merrill Lynch started the ML Ready Assets Trust, the first money market fund. That began the systemic change that eventually led to bank deposit rate deregulation.

Ironically, Merrill Lynch now makes it difficult for investors to access money market funds, preferring that customer balances go into their bank deposit program which pays much less.

The current rates on the Ready Assets Trust is 2.21%, an account
holder at Merrill with less than $250,000 gets a 0.20% rate in the Bank Deposit Program.

Why Citi Can't Be a Global Universal Bank

Citi is not even a statewide institution. In 2006 Citi sold its upstate banks to M&T, effectively leaving Buffalo and Rochester, the #2 and #3 cities in New York State.

Meredith Whitney Threatens Severe Deflation For Your Portfolio

Both previous comments are correct. Citi stock stayed in a range because of the reported earnings, resultant low PE, and high dividend yield which was considered to be very safe.

We now know that these earnings were largely fiction. The dividend has been cut.

Someone coined the phrase "gathering pennies in front of a steam roller." That is what Citi was doing.