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Looking at Citibank Another Way

We have a global economy now more than ever in the history of mankind.

The global stock market meltdown of 2007 to 2009 is the confirmation rather than the denial that an inter-connected global economy does exists. And that interconnection is not a mere rubber band connection that can easily be disconnected. The interconnection is well placed and into the core of the financial systems of most nations in the world. The Dubai and Greece fiascos further strenghten the global economy concept despite their relatively minute sizes.

The 10 biggest banks in the world will face great challenges in the decades ahead on how to profit from that inter-connection.

Great risks command great rewards as well. And when you talk about a mature or maturing global scope. It is the ultimate risk that should command the greatest rewards.

Looking at Citibank Another Way

This last banking sector global shakedown created more global banks than before.

10 of the largest banks in the world commanded 59% of capital the last study I read.

Today, they command 70 percent.

It is only the confirmation of Citi's vision of being a global bank. JPM, WFC, and BAC are now following Citi's footsteps.

But among the 4; who is it that still commands global presence and with the backing of the most powerful nation in the world, the United States of America?

Citi share price suffered 98 percent dilution with the partial "takeover" of the US government and the panic selling from $59 high to 97 cents. Today it is still 94% diluted or rather at 94 percent discount.

A company that has undergone such massive share selloff seldoms recover it's previous value in 5 years or more.

Most of the stocks I studied that went meltdown mode were able to recover 27.2% to 38.2% of their losses using fibonacci retracement method.

Assuming Citi indeed goes the way of a melted stock and recovers only 27.2% of it's losses in 5 years; that will put Citi price at $16.79. A 38.2% recovery rate will make it to $23.19.

Those recovery rates are conservative estimates and assuming the US govt will not pull a rabbit out of it's amazing magic hat to favor Citi. Higher recovery rates can and will happen if Uncle Sam exerts it's considerable political, military, and financial clout among the nations of the world where Citi has it's own branches.

Best Way to Mask Economic Problems? Make All Numbers Too Big

Great! You mean Citi can or will go into a bubble?

$30, $60, $120, $180, $315, $3,150?

I will be more than happy with the lower numbers. I do wish for a mistletoe if not a diamond. Easier to achieve.

Short Citi right now and hope your mathematical prowess will prevail over the power of alchemy. And if you think that alchemy is impossible, think again. It is one of the fortes' of governments all over the world. Governments were not created for nothing or to obey the laws of mathematics.

Best Way to Mask Economic Problems? Make All Numbers Too Big

Is'nt it nice siding with the most powerful entity in the world?

The US Government.

Power can create miracles and massive power can create much more.

And citi is not a tiny bank either. It is the biggest bank in the world back then with all their branches reaching out to the farthest corners of the world. They still have the means if not the power to make them the biggest and most powerful bank in the world. With Uncle Sam's assistance, it is not too far fetch miracles can happen to citi.

Never under-estimate the power of the government.

Hidden Truths from Citibank

Since when did the government not help it's own?

There will be lots of government projects all over the world as it recovers from this severe recession. Those projects will require the assistance of banks. Who is in a better position to provide capital assistance both in the US and around the world?

With citi's global reach and the US government political, financial, and military clout all over the world. It is too easy who will be getting the choiced projects in the years ahead and possibly decades ahead.

Is Dubai's Default a Black Swan Event?

The Emerging Markets had been on the tear with vertical rallies almost across the board for the last several months with global investors pumping as much capital into that area. They definitely need a rest sooner or later that can last several months if not a year or so.

While the US and European had been languishing in an undecided higher high higher lows corrections since early August. Higher highs and higher lows but a correction none-the-less with no vertical rally similar to the Emerging Markets'. Bouyed by the tide but not the bigger waves that propelled the EMs into a vertical rally.

This is a welcome catalysts for most global investors to rake in some profits and start looking elsewhere for better bigger profit potential as the EMs start a long overdue pullback or correction.

US and Europe come into the spotlight since they had been in a consolidation higher highs higher lows running correction pattern for more than 3 months already.

1150 to 1182 is still the conservative target for SnP500 with 1270 to 1330 higher range for the SPX in case this Emerging Markets' crisis turned into flight to quality vertical rally for SnP500 and the DAX.

Global stock markets rotation in the works?

Similar to the US and European stock sectors' rotation played in the US and Europe long before the Emerging Markets start making their marks.

This could be a better way to sustain global rallies for the next decades than a synchronized method.

China and most EMs were able to print their last bottom in November 2008 while the US and European markets were the laggards being able to reverse their downside momentum in early March 2009. There is a 3-4 month differential that has to be addressed with.

Charlie Gasparino: Another Crash 'Has to Happen Again'

Life is too short!

Those who invested during the 1929-32 stock market crash are long dead already if not few are still living their last gasps of life. Dow Jones went down 470 to 42 at that time and is now hovering at 10,000 levels these days.

Those who invested during the 1965-80 secular bear markets saw Dow Jones unable to break 1,000 level and went down 470-500 levels before ramping up to 12,000 of year 2000 and 14,200 of year 2007. Many of them are still living but will die soon enough.

I will be long dead or in my old age, and will have better knowledge and wisdom for the latter if not senelity, in order to enjoy the fruits of my labour long before the next "financial crisis of the century" comes along.

Why wait for the next CRASH to happen?

Nothing Wrong with Taking a Little Profit

I bought some more SIRI on the pullback off 0.63 at 0.31 since 0.31 was my pullback target. I got it a day ahead of time schedule in late May.

Now, with the last rally, the double top at 0.63 was a compelling reason to sell using Elliott Waves analysis as the resistance coincides with the projected 12345 target; so I sold half of that last buy at 0.62 expecting a minor pullback before the next rally.

One thing unexpected is the sudden breakout above 0.63 resistance. This breakout morphed the pattern into a complex 12345 instead of a simple one. There is nothing wrong with that particular type of morphing pattern, only that it happens much less than the usual patterns. It actually is a good breakout with volume support.

Suffice to say that in the current form, SIRI should be able to make a complex 12345 rally on the daily chart with a target of 1.03 off the 0.37 low before it will require several weeks of correction.

On the weekly chart; I expect SIRI to be able to reach 1.46 to 1.82 on a sustained rally before it will require several months of correction.

Long term; SIRI is a simple zigzag pattern on the quarterly and yearly charts. If it proves true to form and become a highly profitable company; it should be able to reach the last high of year 2000 in less than 5 years from it's most recent low.

Hope this will help those not technically inclined longs.

Citigroup Looks Overpriced

As far as technical analysis is concerned; citi is still bullish and can run up to 4.61 to 5.92 short-term before requiring several weeks of correction that can last 4 to 6 months.

On the bigger picture; citi can make a total run toward 10.21 before it will require a major correction that will span several months and can last a year to a year and a half.

For me, I am long citi. My conservative target is 8.40 once citi breaks above the last high of 4.48.

Overall, I intend to sell portions of my holdings at targets and buy them back after the necessary corrections.

Citi is much maligned in the US among common folks. Look elsewhere outside the US and most of their affluent citizens respect citibank. Follow the money, 20% of populations controls 80% of global wealth. Citi need only to cater for that 20% of population and they can control a significant portion of the wealth on earth.

Citi Is a Dog: Go Long at Your Own Risk

Ask yourself a question:

Will you be shorting Citi at this price level?

What is the probability you are going to make lots money in less than 6 months, 12 months, 3 years, and/or 5 years shorting Citi at current share price of $3?

What is the probability you will lose money in those time periods by shorting Citi now?

Now, do the right thing.

Regulatory Tightening: Remember Chuck Prince!

Tighten regulations on the banks at this stage and we may have the perfect scenario for a total system breakdown.

The government is now tapped out. Their tax receipts are plunging at unprecedented speed while expenditures are still climbing. No solution on big ticket healtcare either in the near term. Local governments will be crying foul if Congress don't give them financial assistance.

And the US can't borrow a lot more from the likes of China when they are scared stiff of potential global hyper-inflation as a result of trillions of dollars of stimulus packages sloshing all over the world diluting their $ cash reserves and loans to the US.

Non-financial companies will be approaching their cash burn-out limits and many of them will be declaring bankcrupcy as the consumer crunchdown continues.

Regulating the banks further will only result in another credit crunch thereby ascerbating the potential next wave of company bankcrupcies and jobs layoffs.

Credit crunch can go from housing to consumer credit cards to the corporate level by implementing regulatory tightening at this stage.

Regulatory forebearance might be the better solution if the current economic crises goes from worse to worst. The exact opposite from what those who want to punish the guilty would want to happen.

They will have to wait a lot longer before the cleanup process can proceed. Doing it now can only result in finally sinking the ship.

For now, every available hand is needed, guilty or not, in order to salvage the economy from a potential total meltdown.

An analogy can be made of the Iraq War. After the war, GWB and Karzak decided to purge the Iran government of all former "guilty" officials and personnel and tried to train new "clean" hands to manage the new government. An admirable solution during a critical condition of building a new nation from the ashes of war. Remove the cancer and start a new beginning.

Regulatory tightening across the board. Punish the guilty was the norm.

It only resulted in total breakdown of the local governments since the new central government and the "macho" Americans simply did not have any knowledge and experience on how to run and manage the "new" Iran government and the "same old" problematic diverse population resulting in tribal wars across the country and hundreds of thousands of civilian deaths including a few thousand more of American casualties.

They got caught flat-footed. While those who had the expertise on how to right the ship were found guilty of past misdeeds and had been purged out of the system and thus prevented to provide the necessary helping hand.

A Summary of Q1 Bank Earnings: World, You Just Got Hustled

There will always be half-full and half-empty fundamental analysis. There will always be buyers and sellers with contrasting analysis of the markets.

But the banking sector was able to have an 85.33% haircut going from $121 down to $17.75. What do you call it? It cannot be called half-full nor half-empty. It is more like a dry towel already. And this author is trying to short the financials again?

I bought the financials as it goes from 80% to 85.33% discount as it approaches my maximum target of $16.85. It is not so often that the glass becomes almost empty rather than just half-empty. Well, $BKX was not able to reach it's maximum lowest target but rather made a turnaround at $17.75. Now, it is still have a lot more room to run to the upside even at $42 or so price levels.

Do you know that $BKX was able to form a 1-2-3-4-5 pattern on the weekly and daily charts to the downside during the last sell-off iteration? It is a high probability bottoming process used by bottom fishers for precision entry.

Do you know that the $BKX has successfully broken out of a potential inverted Head and Shoulders pattern on the daily chart. Another high probability bottoming process used by those who try to chase the rally.

InvHnS has a probability rate of 65%. 65% probability rate is very high - you don't want to go against such an odd with your shorts more likely to be squeezed hard you might not be able to know what hits you.

Why not short AIG again at the current price of almost $2.00? It might go back down to 33 cents again and you will gain more than 80% profit on your trade. The trend is your friend, right?

Meanwhile, those contrarian traders who bought AIG at 33 cents are now up almost 500% on their trades.

Who is the greater fool getting hustled down here at these extremely depressed prices? The trend traders or the contrarian traders?

Bank Stress Test: The Cheat Sheet

Banks don't want to borrow from the TARP anymore. Some of them would want to pay back their loans in order to avoid government control.

Problem is, the government don't want them to pay back the loans.

Why? Because the government will be left holding the bag. The government must have borrowed the $700B TARP from the likes of China and will be paying annual interest rates on those loans.

Stress testing the banks might force them to borrow more from the TARP and thus the government can have their 5% annual interest from most if not all of the $700B TARP allotment. But the government will have to give assurances they will not use command and control over the banks.

The more the government gets it teeth sunk into the banking industry, the more chances the banks will not fail in the furture since the government can always legislate new "projects" or initiative to help out the banks in particular and the economy in general. Meaning, the government has the power to make the banks profitable in the future and will not hesitate to use that power in order to protect it's own $700B investment. Since the taxpayers money is on the hook, the public will be more hesitant to oppose of new legislations that will benefit the banks in particular and the economy in general even if such legislation can potentially adversely affect the US consumers.

Since most of the $700B TARP has been deployed into the mega-banks who has more exposure all over the world, it would be beneficial for the banks if the government will pass legislation toward further easing of trades specially to that of the developing countries.

The developing countries will still need lots of capital for their basic infrastructure projects such as electrification, water supply systems, roads, etc. - specially the smaller ones in order for them to sustain their industrialization efforts of the last 2 decades.

They are going to need the assistance of the mega-banks such as Citigroup, BAC, JPM, and WFC who are among the most liquid banks in the world and are therefore in the best possible position to provide financing to the developing countries once this global economic downturn has turned around.

China is the first one to make a credible turn-around since Oct 2008. Most other developing countries has been making substantial gains since Oct 2008 while the US and Europe had been going downstream until March 2009.

There is a big world out there. The United States local market may have shrunked but the consumer markets in China, India, Brazil, Russia, Indonesia, Thailand, etc. are still a vast untapped markets the US can cultivate in the decades ahead.

The US and it's mega-banks have vast $trillions of liquidity, albeit borrowed from the likes of China, at very low interest rates.

Those trillions of dollars cannot be deployed in the United States since the US is already a well developed country and it's own consumers have already learned the lessons of how bad things can go if they spend beyond their means - meaning, no need for multi-billion infra-structure projects and less consumerism in the US and thus much less new companies (who will need financing from the banks) setting up in the US.

Thus, the mega-banks $trillions of cash reserves cannot be deployed in the US but rather most of them should be used as assistance loans to the developing countries.

This will be a good alternative on how the US can generated "export" income while the US is not in a viable position to gain substantial market shares in the developing countries through the "traditional" export earning industries such as agriculture, mining, manufacturing, and technology.

The US is in the most viable position in garnering a substantial portion of the profit from the global marketplace by Financing the industrialization projects of the developing countries rather than try to fight teeth to toe in the highly competitive consumer markets of China, India, Brazil, Russia, Indonesia, etc. where the profit margins on consumer products are absurbly tiny as compared to that being enjoyed by US companies from the US consumers.

For example, a retailer in the US can easily make 30% gross profit margin while in Asia a 10% gross profit margin is already acceptable if not desirable. They achieve more profit through fast turn-overs and economies of scale rather than through percentages. Add the cheap labor to the equation and the United States' manufacturing companies have very little chance to compete effectively in the consumer products markets to those produced by the developing countries.

Thus, the US has to deploy those $trillions of "borrowed" money into financing industrialization projects in the developing countries.

Borrow at low interest rates from cash rich countries such as China and lend the money to cash-strapped but viable developing countries at much higher interest rates - that way the US can use it's global leadership and credibility for maximum profit in the field where it commands the most - the banking and finance/insurance sectors.

There are only 2 sectors by which the US has commanding lead in the global marketplace:

- Military hardware/software, and

- Banking and Finance/Insurance

Thus the government cannot afford to lose the banking/finance sector to the "western world's" CDO/CDS crisis.

Develop new means and ways later on in order to become competitive again in manufacturing and/or technology as we try to solve this unemployment problem primarily caused by the stock markets meltdown and the crunchdown in consumer spending.

5 Reasons Bank Shareholders Will Take a Hit

This is a very confusing stage.

What will the government gain by doing these things?

Did the government borrowed so much money from China and/or Japan they have so much cash to lend to the banks and other companies such as GM? How will they force those companies to borrow - by doing the stress test?

How can the TARP make more money? By converting them to common shares?

What if the the banks fail and many of them goes bankcrupt or dibilitated by so much borrowings from the government while the economy stays in a funk for several years, then they will have to dismantle many of their operations in order to save cost. That will be very bad for the government who loaned so much money to the banks.

Will the government do something about that to make sure the banks will make money in the future? The government can always create any type of opportunity for any industry through legislation.

I think using that above logic, it will be almost a suicide to bet against the banks.

We Need to Make Banking Boring Again

Why is it that most analysis of big banks focus on the US consumers rather than international trade?

Are the Mega-banks not supposed to provide support to the realization of multi-billion projects in the different parts of the world not necessarily benefiting American consumers directly?

The world has changed dramatically since World War II. Russia and China came to power and the third world is now considered developing world. Japan came and went but still a major force to recon with. Germany went the way of Spain and England = obscurity.

International trade has now expanded dramatically while the United States started looking inward since the Tech Meltdown of year 2000-2002. The Bush Administration decided to prop up the housing and retail sectors instead of rescuing the manufacturing and tech sectors.
That was the start of the death sentence for the US manufacturing sector and may as well be the start of the US's technological lead.

Dismantle the big banks and that will become the death knell for US suppremacy in global banking and finance.

What will happen in the next 10, 20, 30 years and beyond?

How about when the time comes that China starts becoming the primary global force in international trade while the United States kept on deleveraging. China, India, Brazil, Russia, and the rest of the developing countries will still keep on planning and implementing mega-infrastructure projects costing multi-billions of dollars (assuming hyper-inflation does not happen otherwise it will become giga-zillions of dollars) in the decades ahead. While the rest of the US goes into the deleveraging process. I don't know about Europe but I have'nt read any effort on their part to deleverage their industries. Japan will buy part of Citigroup. Which country is deleveraging and which country is trying to grow bigger conglomerated companies?

Just imagine how the US will start scampering trying to integrate many smaller banks and the other financial institutions into a mega-bank after distmantling Citigroup, BAC, JPM, WFC, AIG, etc. into small portions. Why not dismantle GM and GE too? How about Microsoft, Intel, and Cisco? They may become too big to fail in th future too.

Dismantle the whole Dow Jones 30 large cap companies. Any one of them are or can become too big to fail company.

Soon the US will join the ranks of Spain and England. Contented with their accumulated wealth but no longer in the position to compete effectively in the international arena.

Perhaps a good thing after more than 30 years of unbridled profligate living and then choking on it's own gargantuan dept.

How can the US pay for it's trillions of dept if it can't compete in the international trade arena and thus won't be able to generate excess income to pay for the dept?

Hyper-inflation? Pay the trillions of dept with worthless dollars that will enable the likes of China to buy a few cans of beer with their trillions of dollar holdings?

This can easily lead to World War III.

Forgive my ignorance, but that is how I see the way things are potentially starting to unravel with this economic crisis of the western world, specifically the United States.

Hope such myopic analysis by many as a result of this confusing times don't become a reality. Stop looking and over-analysing each individual tree. Look at the jungle first.

I think Geithner's proposal of keeping them big while requiring them to provide substantial capital-based liquidity will prevent them from going the way they did in 2007 to 2008.