ETFnerd

Expect Some Citi Fireworks

I'm going to put my 401K contribution in on the 26th, but the index funds haven't yet had to adjust their holdings because my $200 contribution hasn't been sent yet. For a penny stock like C, I guess that will have at least a 300% effect on the stock price. Gotta make sure I load up on C. ;-)


On May 21 02:09 PM Poor Dude wrote:

> The dilution is known and already priced in, but the index funds
> haven't yet had to adjust their holdings because the conversion hasn't
> yet happened. When it happens (early in June, last I heard), they
> will then be forced to adjust their weightings. And yes, the price
> of Citi could easily quadruple within a few weeks after the conversion.
> (And possibly go up even more, as the last shorts are forced out
> and that whole "momentum" thing gets started.)
>
> It's an interesting point, and one which hadn't occurred to me. Thanks!

Expect Some Citi Fireworks

Mr. Kommer is arguing that the market cap weight in indexes will quadruple with the preferred conversion. Assuming that the valuation of all other index components is constant, that would mean that the equity market cap of C would quadruple witht he preferred conversion.

Although it can be argued that not having to pay the preferred dividend may be beneficial to C, I don't see how that makes C 4x times more valuable on day one. Also the increased float will dilute the equity shares putting downward pressure on the price of the stock.

This is probably the worst analysis I have ever seen on seeking alpha. Why is this article so popular?

U.S. Credit Card Industry Moving into Uncharted Territory

"The easy credit led economy which fueled our GDP in 2003-2007 created massive unsustainable public and private debts. The public debt serviced by foreigners is shrinking meaning investor confidence in the U.S. financial system has been temporarily destroyed. Between inflation caused by currency devaluation, wealth destruction in real-estate, energy consumption costing consumer 25% of monthly disposable income (I didn't include food), offshoring and lack of job creation (rather permanent skilled job destruction) the total net loss calculation was 8 Trillion dollars of wealth destroyed in a four year cumulative period."

www.federalreserve.gov...

Is your calculator broken? See FED flow of funds as of March 6, 2008. See the last page 116. It shows US net worth going from $44.1 trillion on 2003 to $57.7 trillion in 2007. A net GAIN of $13.6 trillion! That's an entire year of US GDP. 2008 may show a decrease in net worth.

Tell the truth...you didn't really do any research, did you?