I really wish the Prez wasn't so out of touch, although I suppose it's basically a pre-requisite for the position.
http://zerohedge.blogspot.com/2009/04/citi-market-barometer.htmlEgan Jones is not alone in their condemnation of Citi's grotesque Criss Angel-esque interpretation of reality. The consensus seems to be thumbs down for the bank, even though the latter, together with the balance of the worst companies in the S&P, has benefited mightily from the less and less connected to reality "crap rally" (but more and more connected to quant fund deleveraging and viability).
What happens now? The market has reached a very curious inflection point, which is eerily reminiscent of what happened to the basis trade in the post-Lehman days (just ask Boaz Weinstein for advice if the equity market is cheap now). Liquidity is disappearing - in fact with every market uptick more and more quants and L/S funds deleverage if they can, while some are stuck and have turned their phones off entirely. Ironically, the higher the market goes, the higher the probability that we will see not just a few small quants blowing up, but some of the big guys also taking a bullet to the temple. In a hypothetical case where a $100 billion+ provider of market liquidity ceases to function the market will break, pure and simple: this is not a directional bet, this is a volatility bet.
Ironically Citi common is now the basis trade reincarnated in the ongoing market melt up. As liquidity becomes scarcer and scarcer, Citi's stock price is likely among the best barometers: this manifests in lack of borrow, in high trading costs, increasing repo rates, as well as the threat, despite repeated promises to the contrary, of an adjustment in the common-preferred conversion rate. In an extreme example it is easy to see the stock skyrocketing to multiples of its current price, however when (not if) fundamentals take over, the way down will be quick and painful.
And while Jim Cramer likely top ticks the rally yet again, and Barney Frank wants to guarantee every risky asset in the United States in another misguided attempt of postponing the D-Day for all the fiscal and monetary insanity happening in this country, the FDIC announces that 2 more banks have failed (bringing the 2009 total to 25), which will cost the FDIC (aka taxpayers) $100 million and $143 million, respectively. And while we are on the topic: Sheila, maybe you can at least tells us if the FDIC's Depository Insurance Fund has finally gone negative, especially now that your brilliant actions have made it unneccesary for banks to use the TLGP and thus pay the FDIC the recently increased TLGP fee?
PS: Based on these headlines, maybe Messrs Dudley and Kohn can join Mr. Cramer in the Wall Street Top Tickers cheerleading camp (Zero Hedge to provide its thoughts on Mr. Kohn's misrepresentation of reality shortly). Then again, if even the market custodians of the Federal reserve are doing all they can to get every last retail investor to believe this bear market rally is for real and incite a market liquidity event, then there truly is no hope.
Think Obama will do anything about this developing issue? Nah, me neither. Hell, I would imagine he has no CLUE about it. I figure he will listen intently while the FEDsters keep talking about green shoots right up until the next thing blows up. Then BernSumGeiBama will come up with another plan to pay off the crippled banks under the cover of darkness.