Citi to consolidate SIVs onto balance sheet Thu Dec 13, 2007 6:48pm EST NEW YORK, Dec 13 (Reuters) - Citigroup (C.N: Quote, Profile, Research) said on Thursday that it plans to take $49 billion of structured investment vehicles onto its balance sheet, after ratings agencies' threats to downgrade the SIVs debt. The largest U.S. bank's move to assume responsibility for its SIVs comes after the structures have been slammed by a lack of access to funding and a slide in the value of their assets, which include repackaged consumer debt. Citi said it had succeeded in cutting the SIVs assets, net of cash and cash equivalents, to their current level from $87 billion in August, while maintaining the portfolio's credit quality. Citi is following in the footsteps of HSBC Holdings Plc (HSBA.L: Quote, Profile, Research), Europe's biggest bank, and unlisted Dutch bank Rabobank, which both took their SIVs onto their balance sheets in recent weeks. Along with Moody's and Standard & Poor's recent announcement that they were considering cutting the SIV's senior debt ratings, Citi said it was intervening to support them because of reduced liquidity in the asset-backed commercial paper and medium-term note markets. The SIVs have traditionally sold such notes to fund their purchase of longer-dated, higher yielding securities. (Reporting by Christian Plumb; editing by Carol Bishopric, Leslie Gevirtz)
Smart Value investors wait and watch on the sidelines. They wait for the Fundamentals of the individual stocks and sector to change to the upside. Stupid Value Investors jump in and BUY stocks like CFC at $20.00 a share and then watch their investment lose money and wallow for months and sometimes years. The truth is there are many so called Value Investors that get routinely caught holding the bag and catching the knife.
We can agree to disagree about some of what you said. The most unusual part of your statement is the part about value investors waiting for technical reversal. Value investors are primarily looking at fundamentals. How do you know which bounce up is the bottom? You don't. What you do is look at the valuation and make an educated guess about the possibility that a stock is trading at a price that does not fairly reflect its value in the marketplace. Most stocks trade at multiples of their earnings, right? You might correctly take issue with the idea that C can't go to $1. Of course, it might. Value investors won't agree; they'll say there's a certain point at which they will start buying the stock and accumulating a position. I don't really agree that we don't know how far C could fall. It's a matter of the fat tail scenario. 5 sigma events can always happen, but I still drive my car. Please remember, a fairly good investor once said you must 'buy when blood is running in the streets'. Making big money in stocks like C is accomplished by acting in a contrarian manner. To be honest, I have no dog in the fight about C's correct valuation or its worth as a value investment here. I just don't think that C at $30 is a bad longer term hold. The guy I responded to said 'It's a bear market!'. He meant the overall market, probably because he's never seen a real bear market. I gave him the out by saying 'You mean it's a bear market in C?" and he took it. ------------------------------------------------ During trading, I sometimes wonder who is on the other side of my trades. Then I come to ET, and I realize - it's the same guy from the checkout line. You know, the guy who stands there watching the cashier punching in every digit and checking the numbers on the screen. Then when the cashier gives him the total, he stand there for a minute, then slowly reaches for his wallet. Then he searches around in his wallet for a while, and then finds some bills. He then puts the bills on the counter and reaches into his pocket for change. Then he gets the change out. He looks at the screen, and starts to count change out. Each coin is placed individually on the counter. He roots around, occasionally pulling a coin out and looking at it, then rejecting it and putting it back in his pocket. Finally he finishes the process and looks around to see who's watching the display. That's this guy.
IF you think this or other financials are sold out, then you would start accumulating in Dec, because you would expect, and history would be on your side, lots of tax loss selling right about now. That's where folks who are on the long form sell so as to book capital losses next year. This artificially depresses the price, thereby giving you a good opportunity to pick up lots of shares on the cheap. If you're not on the long form, you might not know about this, of course.
anyone have a level headed analysis of what C is worth chopped up and Level 1, 2, 3 debt written down to zero??
I will take a guess $0 for the shares .30-.50 per dollar on the debt, if all three levels were written off. Debt holders would get any break-up value. But, I would not expect these assets to be written down to 0 looks like most of these SIV assets are sound. no position tho, and no time dig deep. I would worry more about the economic effects of tighter lending due to C,s and other banks problems.
yep same guy who finds the brokerage fees when trading absurd and try to refrain from over trading to defray costs.... got me down to a tee i might say.