Index Percentage % Volume
Dow -1.22% down
NASDQ -2.38% down
S&P500 -1.58% down
Russell2000 -2.11% -




Citi Group/Government Deal

The NYT has announced that our government is taking over 30 to 40% of mega bank Citi Group’s common shares in exchange for giving up preferred shares. Translation –  If Citi goes bankrupt YOU basically go from from first to last in line as a debt holder. Great for Citi because preferred shares were a liability and they are up to their necks in liabilities (credit default swaps etc) What was used to sweeten the pot for taxpayers (you)?


AIG, Fannie & Freddie 

You do have a majority stake of preferred shares in these mega companies. Judging from the stock price and their need for additional capital infusion the deal has not turned out as well as expected. 

What is nationalization? When you own 10 times the stock of the next largest shareholder you pretty much can run the company or is nationalization owning 50%+ of a company?


The Black Hole

The obvious black whole is the growing amount of unfunded liabilities. As more people default on mortgages the greater the pressure on banks. As quoted earlier in Time magazine Citigroup’s unfunded liabilities vs assets ratio from 2009 to 2010 will shrink from 7.7% to 3.8%.  This would make Citi one very sick sick bank. It’s already in the hospital and got IV’s pushing green paper into it.


The Bottom Line

There is fodder for more than dozen editorials here. But the major point is that this financial crisis is “far, far, far, far, far, far bigger” than most folks realize. Right now we are running a virtual banking system hiding its liabilities and bankruptcies.  The world’s financial system is on life support and if the financial system collapses there will be blood. Remember what happened when tiny Lehman Brothers collapsed.   An enlightening editorial  in Financial Time on – Time To Expose Financial Collateral Debt Obligations






Technicals & Fundamentals

Here we go again. The Benchmark S&P 500 closed at 752 just above its 750 support level.  Don’t look at 750 as an exact number because we are comparing it to a 2002/2003 low. The 2008/2009 low has been 741/742. As stated before this is the mother of all support battles.  When major  support falls usually creates a flood of selling.

The fact that we have to buy more share of Citigroup to keep it afloat is going to be very negative for all major financials and therefore most stocks.  By buying more shares of common stock we dilute the existing shares of stocks. 

Therefore, It’s time to bring out the old Lost in Space Robot who protected young Will Robinson by shouting “Danger Will Robinson Danger Danger”


 The Bad news - We could get a nasty break of a major technical support.

The Good news – If we do get a climax sell off (big volume fall) its an opportunity to nibble. 

The Ugly news – The SPX ends closing  a bit below 741.  This would just establish a lower low (see chart on right side of blog) and further entrench the bears rule chart pattern.


Long Term Outlook BEARS RULE


See STRATEGY, POSITIONS, OVERVIEW  & ARCHIVES sections of blog for more



  • Share/Save/Bookmark