Citi is reporting its earnings this Friday...  Do you think they will
beat the expectation or miss it? Also, do you see any chance of
dividend cut?

Citi's earnings would be Shitti.  They scrambled at the last minute to
sell $12 billion worth AAA stuff to raise some cash to offset some
other issues.  Its in a deep mess.  If anything I would short above
$23 and buyback below $18 in the short term. C may go below $10 if
shit hits the fan.

Also, they had issues selling the 5 billion dollars worth of EMI
loans.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aqjoS.gLRqNQ&refe...

I would think this is also a big concern, they are trying to sell
loans to increase their assets, and not only have they had to take 90
cents on the dollar for other loans that they have sold, but now
they're having trouble selling them period, which I'm assuming is what
driving pps down today.  If they're having trouble selling their loans
to raise liquid asset I would think that is a real concern.

I'm not adept enough to be able to look at their balance sheets and
income statements and say too much further about their condition, and
if write downs are going to exceed the estimated (what 12 billion or
so?).  I guess the market is priced right now for that 12 billion in
write downs, so depending on whether or not they exceed that 12
billion is probably what will swing their stock one way or the other
come earnings on friday.

I have a sept 22.5 put opened as of last week.  Thoughts?  I'm curious
to see what others think of what the write off could potentially be.

I am guessing it won't be as bad as many analyst think. If you can buy
Citi at $22 or even below, I believe you can make lots of money in a
couple months ahead.

http://dividend-growth.blogspot.com/

Well, this may be a naive comment, but how come the P/E ratio of Citi
is much higher than others in the same industry?  I know that the P/E
ratio is not the only factor to base your investment on, but i am just
curious.  Currently, i am shorting Citi at $24, and hoping that it
will fall to or below $20.  This is because I expect them to have more-
than-expected writedown and miss their earning.

I would like to hear what other people think about the P/E ratio of
Citi.  I appeciate your input.

Forward P/E is in line with the sector.  Book value is $21.63 so
disappointing results *should* be well and truly priced in.  Barring
an outright catastrophe when earnings are released, I see very little
downside and significant upside, especially after they put a couple of
good quarters together...though I wouldn't hold my breath.

I think that Friday's report is a 50/50 shot. To the big market
movers, bad news could still be interpreted as good news. Personally,
I feel that this whole credit crisis isn't over just yet, and have
some open Puts in at $22.50 as well. Time will tell what happens.

After this quarter's write downs the book value is 12.50. They will
either cut the dividend or sell Smith Barney to shore up capital. They
will miss expectations. However the market can still rally because so
many retail investors are so so dumb.

The stock will bounce like crazy this week so I recommend a strangle
or a gut. WM will miss earnings and send citi lower, but it will
rebound when JPM announces on Wednesday. Consider selling off calls at
$25+ and puts at the 52 week low. There will be resistance at the 52
week low for a while until the next edition newsletters inform the
citi buyers that it is no longer "cheap".

Did you notice the 3 American banks that met with the G7 were MS, C,
and Leh? That tells me that those are your short targets.

Where did you get this information??

I can't find the article that I read, but 10 banks were invited. These
are the banks that are in the worst shape:

http://www.businessweek.com/ap/financialnews/D8VVV9483.htm

"The G7 finance officials had a dinner scheduled for Friday night that
was to include executives of some of the world's biggest financial
companies. The idea: Look at the causes and consequences of the recent
financial turmoil. Officials invited to those talks included top
executives of Citigroup, Deutsche Bank, Barclays, Credit Suisse,
Lehman Brothers and Morgan Stanley."

Also invited was Muzio (Japan) which just had some huge write downs.
And others....

Answer me this: why wasn't JPM, GS, or Mer invited? Makes no sense.

I also think they might be working out a plan to cover up earnings. So
watch out. They might pull a Lehman and suprise the street, but if you
actually go back and read Leh's q1 earnings you will figure out that
they are perhaps insolvent. Watch the short interest on LEH, but be
careful that mother fucker Ben Shalom Bernanke is working against
you.

Here's msaghi's source for the outreach dinner attended by the banks:

http://www.reuters.com/article/idUSN1148342820080411

I'm staying long on this stock, but as I've said before, I have a few
short ETF's to protect the downside.

You are wrong to say "Very Little Downside", do you know C was the one
major bank that went bankrupt in 1987 recession? This time, C is in
the worst spot, specially given the fact of existaance of CDS
market.   C may very well go BK my friend, so down side is -$23,
upside is unknown as is the future of the US Economy.

infofi, when did they go bankrupt? The company has never been bankrupt
- they may have been insolvent, but they didn't go bankrupt...

@msaghi and sharaddhin

thanks for the link.

This is very interesting. I dont understand too why JPM or GS were not
invited. I think you are right, maybe the are working on a plan to
rescue a Bank. All the Banks have huge Level 3 assets (see the latest
SEC for Goldman Sachs for example
http://www.sec.gov/Archives/edgar/data/886982/000095012308003960/y512...
).
I'm still short on GS, C, MS. Good luck to everyobdy.

Good luck to everybody.

Go look on the web.  Citibank was bankrupt and secretly seized by the
Controller of the Currency in hte Crash of 1987.  Everyone knows it.
It was sort of a bailout like what they did to BSC. Unfortunately, we
got a lot more BSC's this time around.

IF they rescue the banks you should celebrate. THEY WILL WIPE OUT THE
SHAREHOLDERS. That goes for FNM and FRE too.

That's not bankruptcy...that's insolvency. You need to file for a
bankruptcy, until you file, that's just insolvency...I have no
credible sources online...so I don't think that they were going to
file for bankruptcy...I do know that they were in enough trouble in
1997 to call the Fed for a 50 bps cut (as per Greenspan's book and
Barton Bigg's book)...this credit crunch is tough, of course, but we
had over 2,000+ S&L bankruptcies in the 80s...Use the right
terminology...scare tactics don't work...plus, if there is a bailout
with the same efforts as 1997, shareholders will be just fine...

As I said, longs still got hedge up...don't be a hero...

sharaddhin
I dont differentiate between solvency of bankruptsy. For me, both end
up in tatters, with solvency taking away the name as well.  Look what
happened to BSC. it may infact very be worth $2 given its exposure to
CDS market and with its exposure JPM would have fell in no time.  They
covered it up, put the stinking body into the freezer for now, wait
until electricity goes out and everyone starts to smell it again.  If
you take into account $157 trillion CDS market and look at the worlds
largest banks who are the holders of this trash, do you really think C
would be worth anything? Its a coverp. You and I are not smarter than
Warren Buffet and Warren Buffet has labeled this CDS as a weapond of
mass destruction of global financial system, when he says this, it
surely means something. I hoppe you know and understand what CDS is.

I am waiting for C to drop at 17.60 on Friday morning. but definitely
stock will be higher in pre-market on friday by some instituions to
make money.

My dream: C drops to the 52 week low. Sell puts. Rallies. Sell calls.
Buy more puts. Drops again. Buy more calls. Drops more. Sell puts.
Rallies and rallies some more. Sell calls. Etc.

Do keep an eye on expiration date though!

"they are trying to sell loans to increase their assets"

Um, loans are assets.  And there is a liability for every asset - that
is an accounting identity.

Selling loans that are in higher risk categories doesn't change
assets, it lowers the amount needed as reserves against the same
number of assets.  If the whole portfolio has higher average credit
quality, then fewer reserves are needed against the risk of default,
according to standard Basel capital requirement formulas.  Those
requirements have risk adjusted assets in the numerator, and reserves
in the denominator.

If a bank sells assets generically, all types evenly, and uses the
proceeds to repay debts, then it shrinks the balance sheet on both
sides - both assets and liabilities.  That will also raise the ratio
of available reserves to overall assets - same denominator, smaller
numerator.  But not nearly as fast as moving "up market" in credit
risk terms.

Right now, Citi has nearly a quarter of its assets in the lowest risk
treasury and governments sector, which require no reserves for credit
risk (still can for interest rate risk etc).

Thing is, moving up market in credit risk terms does come with a cost
- lower available spreads.  Short term treasuries yield less than bank
borrowing costs right now (bank borrowing costs are a mix of fed
funds, LIBOR, CD rates, commercial paper rates, and portion of higher
cost, long term debt and preferred).  So a bank that puts a ton in
treasuries is sacrificing income for safety.

What is going on with all of them is their losses in mortgages have
reduced their risk capital from around 12% to a bit over 10% of risk
adjusted assets.  10% is the regulatory line for "well capitalized".
8% in the Basel legal limit.  In practice, banks that drop to 9% get
visits from regulators and orders to reduce risk or raise capital or
shrink the balance sheet, to avoid dropping below 8.  Citi's is like
10.5% before the recent loan sale.  They try to run more like 12% in
good times.

Right now the spreads on the riskier bits are so wide, it is hard to
not make money if you have free reserves.  By that I mean, banks can
borrow at 3% in multiple ways, and can invest at 5-6% in low risk
securities (GNMAs, higher grade intermediate corporates, etc).  Do
that 9 times over plus 1 of owning the asset with your own equity, and
you are grossing 23-35% on that equity.  Even if you pay half that in
running costs and salaries etc, it is pretty hard to lose money that
way.

A few years ago, they chased spreads by using dodgier assets and
higher leverage, and that is the source of present losses.  But there
is no need to in this environment - prices have already moved, giant
spreads are back, and a bank that just doesn't make obvious mistakes
can make money hand over fist, standing still.  On the other hand, put
everything in treasuries and you can fail to earn anything.

For investors, the key thing to understand is that spreads have
already widened.  It will take time for that to appear in new earnings
and therefore equity, and in the meantime they can have losses on
older stuff etc.  YMMV, and stocks will fluctuate.  But the Fed has
basically already engineered the conditions needed for renewed bank
profits (wide spreads).

The *trailing* PE is low because they just booked a large loss.

Banks are cyclical stocks.  Their earnings do not come in a smooth
steady stream.  Instead they make money in good times and the amount
rises as their balance sheets grow, in line with the overall economy
pretty much.  But in recessions, they loss money outright.  Their
*average* earnings over a whole cycle aren't as high as you'd think,
looking at only the good years, nor remotely as bad as you'd think,
projecting a bad one into the future forever.  The right way to price
them is off of average earnings, or an average return on assets times
current assets.  Good years and bad.  And incidentally, as with other
cyclicals, the time when the stocks are cheap is when the earnings are
low and the PE looks high, and conversely, the time when they are
expensive is when rear view mirror earnings look great, and the PEs
are low.  You can't trust a one year PE figure for a cyclical.  Any
cyclical.

Don't worry about Citi's negative earnings, writedowns, writeoffs, or
P/E...
These days, Wall Street could even send those bank stocks up with
negative-positive suprises (can u imagine?)
Looks like it's gonna to take another 3 years to repair the financial
statements.
Simply assumed all earnings and assets built-up by Citi in the past 5
years were completely wiped out...
and just pick up the financial statements from 2001 or 2002, that's
roughtly its values today.

re: this article to get closer look of our greedy banks -- $600
trillions!!! of derivative trades in open positions
http://globalresearch.ca/index.php?context=va&aid=8634