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Citigroup Pricing Anomaly and Efficient Markets

Very good article. I always appreciate looking at practical applications of academic theories. It is the absolute best way to gain an understanding of what those theories can tell you, and what they can't.

Citi Is a Dog: Go Long at Your Own Risk

All good points. It's also worth noting that just because a company will be around as an operating unit in 10 years, doesn't mean the common equity will be worth anything. Look at GM.

I view this stock kind of like Sirius/XM. It might be worth owning a very small number of shares as a speculative play, but the possibility of your investment moving to $0 is significant.

Credit Default Swaps May Be Playing a Supporting Role in Chrysler Bankruptcy Filings

Wolverine: Would you prefer for all financial firms to stop lending to American companies because the president could invalidate a contract at will? Or should Chrysler only take "free" government money so that it doesn't have to answer to stakeholders that expect to get their money back?

Credit Default Swaps May Be Playing a Supporting Role in Chrysler Bankruptcy Filings

I think we almost all agree that this is best decided by a judge and not by a politician. Don't forget that pension funds are pretty high up the seniority ladder, so the UAW will still keep a significant portion of whatever is left.

I've heard a lot of conflicting information about how senior the bonds are in relation to the pension funds. Some news commentators say the bonds are senior, others say the pension funds. I don't know enough to say who is right, but I'm just glad it's not going to be a politician making that distinction.

Credit Default Swaps May Be Playing a Supporting Role in Chrysler Bankruptcy Filings

I'm curious as to the number of CDS's actually written on Chrysler. I have zero data on this point, but CNBC was reporting that there were almost no CDS's issued on Chrysler.

Is there anyone out there that can get numbers on this? A number of us would like to know.

Why I'm Holding On to Citigroup Stock

Although I haven't touched Citi yet, I've been looking at long term call options on speculative stuff like this. I think the risk/reward profile of options fits these types of bets much better than owning shares.

Thanks for the article though, it's some good food for thought.

How Will Payday Lenders Be Affected by New Bill in Congress?

Anyone not living under a rock understands that it's preferable not to take a high interest rate loan unless there is a genuine NEED. The problem is, there are many people that do need these loans to meet their obligations.

If your choice is to take a high interest loan, or not eat for a week, what would you do? How about face eviction? Legislation that will reduce available credit for these situations will only hurt the people that it is supposedly designed to help.

Personally, I'd prefer to see people using services like prosper.com, as well as some more transparent industry codes of conduct. But the legislation is still a bad idea.

Glass-Steagall: If Not the Cause, Maybe the Cure?

The key problem is, and always will be, the limitations on risk management. As important as it is, risk management can generally only predict risk in markets that are behaving similar to the past. When the markets change, the models break down. If risk management were a perfect science, there would be no risk.

**I'm not saying this to absolve any of the incompetent risk management schemes out there, only recognizing the inherent limitations of the practice as a whole**

This is a problem that separation of banking functions might mitigate, but will not eliminate.

Here are several half-baked ideas that might make a real difference:

1. Require brokers of collateralized debt to insure the products they sell against losses above a certain threshold. Or require them to hold a percentage of what they sell. However it's structured, the underwriting agency must not be able to pass off all of the risk to unsuspecting buyers.

2. Implement margin requirements on derivatives contracts that are structured similar to the Fed's margin requirements on stocks.

Tangible Common Equity: How Much Is Enough?

Thanks for the good article.

Not being an expert on banks, I've never figured out why preferred stock shouldn't count as capital. Sure, they have a higher claim than common stock, but that doesn't make it debt. Anyone have a good reason for this?

I'm also mildly curious how the banks with large branch networks compare with the internet banks. It seems like all of the branches would create a large base of tangible assets that would not be comparable to those of internet banks.

Mortgage Cramdowns: A Disaster in the Making

You're right about forced cramdowns being a horrible idea. Too many people don't see the unintended consequences of completely abandoning the principle of contract law. What good is any contract in this society if Congress can "magic" the price lower retroactively?

Where legislation CAN have an impact is on homeowners that have a loan owned by multiple people (CDO packaged). In numerous cases, it is in the best interest of both the debt holders and the homeowners to re-negotiate the loan. However, if 30 people own parts of the loan, there is no mechanism for re-negotiating it. This is where legislation could actually help the process.

Granted, I'm no expert on CDO's. Still, this seems like the most common sense option.

Global Earnings Downturn Only 25% Done - Citi

I have trouble buying the argument that earnings will fall by 50%. I'm sure that earnings will continue to fall, but by half? That's a stretch. Being such an arbitrarily round number is also suspicious.

Now I'm not foolish enough to try and predict the stock market, but this sounds suspiciously like those predictions of oil at $200 and Google at $1,000. It's more likely an analyst looking for some sensationalism rather than a rational analysis.