What's up with C quotes. CNBC shows the stock as being up right now better than .20, but my Tradestation feed shows the stock as being down 0.48
I don't really know much about this deal, but it sorta looks like the end result is they're borrowing at 11% in order to give it out as a dividend...
Um, no.... They're borrowing at 11% to bolster reserves that will increase solvency. They would already have to pay 7% or and 11% is a bit of a premium but not prohibitive. The real question is if C will continue to make money going forward? They are decreasing exposure to risk, increasing reserves, and the dividend doesn't need to be cut due to the fact that cash flows can support current rates. Been here done this before with MO years ago. MO was going bankrupt and the dividend was going to be cut.... well that never happened. Hell C could be broken up and sold off in parts and its worth more than $30. Look trading can only take you so far. C right now is a deep value play for investors. Taking advantage of opportunities like these is where the real money in the markets is made. Good Luck!
Good point Algorithm. But most at ET are not setting up their portfolios like a mutual fund manager would. No doubt you'd hit a home run buying at these levels in the mid- to long-term. Question for most is how low can we go in the short-term and how much comedy can be extracted in the process. It takes money to make money - but as we've seen...a fool and his money are soon parted - or in t(u)rdrs case farted! paySSense:eek:
Nothing you said changes my opinion that it is a valid point of view to look at it as an 11% loan to pay out as a dividend. They could cut the dividend to "bolster reserves that will increase solvency". They don't *need* this loan for extra capitol, they need it to maintain the dividend. More or less a question of semantics.
Citigroup (C 30.32, +0.52) has been upgraded to Buy from Market Perform at Punk Ziegel. The firm says that earnings estimates have not been revised and it recognizes that the company is prone to sizable write-offs in the fourth and first quarters. However, the firm believes Citi's dividend is well protected.
Then you don't understand the difference between cash flow and reserve requirements and how that relates to the banking system.