Jacob Jordan's  Instablog

Good luck to the Citi board longs....  justmeinvesting, paulwahi, hurst.xavier.

In the brief (yet worrisome) storm of nationalization fears, trying to locate a market bottom, and waves of uncertain earnings releases, Citigroup is still standing.  You absolutely cannot surmise the prospects of this stock based on the volatile movement between Lehman Brothers' collapse and the earnings release. 

Unfortunately, many longs are subconsciously still judging the stock within the Lehman Brothers context.  Citigroup could very well plummet to 2.50 or even 2.00, post-conversion.  Vikram Pandit could be replaced (whether that is good or bad is for another post).  BofA or JPM could come out with some horrible news that drives the price of Citi down.  Citi may be one of the banks that require more capital infusion.  The point, however, is that it is the fears in the first paragraph that warrant the most concern. Those have subsided. If you are truly long, you will not become upset at a 5% or 10% sell-off (often due to invisible influences or manipulation).  You will not engage in the misspelled, ALL-CAPS banter on message boards, where any idiot is willing to toss out random price predictions.

Of course, everyone wants to take profits as soon as they are able with a stock.  Nobody likes to sit around and endure uncertainty before realizing gain--not if they don't have to.  Now is a time to reevaluate your reasons for getting into Citi.  Personally, I got in because this is has historically been a ten, twenty, or fifty dollar stock.  The risk to reward is attractive (if you have your life savings in the stock, you are not taking advantage of that ratio, by the way).  Prior to the collapse, I did not have any favor or resentment towards Citigroup.  So I am not guilty of falling in love with an investment.  Yet, I do think it is obvious that the company's long-standing government connections, brand-name reputation and  global entrenchment justify the U.S. government's unique involvement (which does not signify a fervent desire to nationalize, fear-mongers).  The Fed and the Treasury are honed in on Citi like a laser-beam--moreso than the other financial institutions.  They did, after all, value Citi's expansive infrastructure enough so as to put their money where their mouth is.  If full-blown nationalization were to occur, it would have already happened.  The Treasury, Congress, and the Obama Administration could have rammed through a much more draconian program when the uncertainty and emotional shock was much more intense.  Instead, the Treasury/Fed/SEC allowed the CEO to release specific profitability announcements (albeit through "leaks").  Such announcements (e.g. Vikram Pandit's mid-March memo) only serve to lure more investors in.  Vikram Pandit is probably not too keen on inciting an SEC investigation into fraudulent pre-earnings announcements.