Michael Shulman

The Citigroup Anomaly Lives On

The difference in price between the common and the preferred is quite simple -- short covering, the purchase of stock based on a value different than the calculation you are making.

Geithner's Plan Fits Perfectly with New Mark to Market

The net impact of Geithner plus a new MtoM accounting standard will be increased, and, for some banks, unwanted transparency. Banks will have to distinguish what is written down due to impairment and what is being held due to illiquidity. Once the auctions begin, banks unwilling to participate and keeping assets in the illiquid category will be seen as having marks too high -- and privtae investors will react accordingly. The banks that take the hit, either mark their assets down to where they belong and/or sell them at auction will be the first in line to receive private capital. I am no fan of Geithner's plan but in combination with the new MtoM rules, and stress testing, banks will begin to fall into various categories of "investor worthiness" -- private investor, that is.

Five Reasons Citi's Worth the Long Risk

I find it highly irresponsible you should publish an article advocating a position and you next to nothing about the company or its financial situation. Citi not only has to shrink a broken $2 trillion balance sheet -- it is unsustainable -- it has to manage down $1.2 trillion dollars in off balance sheet assets buried in entities with acronyms last made famous by Enron. The company had the gall to say more than $800 billion were not a problem based on changes in accounting rules. Over time Citi will be broken up, th question is whether any value will be left for shareholders after the government and preferred investors get paid. Probably not. But let me repeat -- th sound of your own voice is excellent only in the shower when you really are unable to carry a tune or you don;t know the words to the song.

Latest Bank Leverage Stats - Some Still High

THis does not include off balance sheet assets....Citi has $1.2 trillion.

America's Banks: Are They Really Insolvent?

Insolvency, in banking does not mean a bank shuts down in a meaningful way -- the customers can get their money, the loans are still serviced and so on. Insolvency means the banks have less tangible equity than liabilities -- and this is truly the case for several very large banks. Geither would not look like a deer caught in the headlights if this were not true -- and check out page 21 of the Citgroup town hall meeting presentation last November where they use acronyms to describe more than $1.2 trillion in off balance sheet assets. What insolvency means is shareholders in selected banks, over time, will be wiped out and so will some unsecured bond holders. Any solution you come up with, including bone head ones like suspending market rules, and there is so much dilution and so little of the current equity left shareholders get killed. And that is exactly the way it is supposed to play out. When I said this on Fox Business a week or two before Freddie and Fannie disappeared Ben Stein made fun of me, saying this was somewhere between improbably and impossible. So.....

How Did Citigroup End Up in Crisis?

You confine your analysis to the balance sheet -- an Citi has more than $1.2 trillion in off balance sheet assets as shown in their town hall presentation last Monday - it is available on their website -- page 21 -- and even they admit several hundred billion, perhaps more than $600 billion, could end up on their balance sheet. The government intervention today pays no heed to these assets. Using current mark downs or historical default rates, these assets would and could overwhelm Citi. You notice the stock cracked after the meeting. The first hint of of the VIEs was in an obscure SEC filing in February and I have been following them ever since. With all de respect, an analysis of Citi or other banks without looking at off balance sheet obligations is worthless or worse.

Michael Shulman
ChangeWave Shorts
ChangeWave.com

Citi May Be 'Cheap' but Isn't Necessarily a Bargain

I suggest you all look at the town hall presentation from this Monday on the company website -- and look past all the acronyms and realize there are potentially hundreds of billions of off balance sheet assets hit their balance sheet, and even a small default rate would be, well, you can figure it out. Just do the math and forget about viewing the company view the official balance sheet or tangible book.Look at the whole if obscure picture.