Why is C up after hours? I don't understand. They're getting .90c on the dollar for awful loans. Sure it's nice to get rid of bad risk but don't people realize it's costing > billion$ ??? What am I missing? Seems like all crappy banks (C, WM, LEH) are desperately trying to pull shit to keep the heart pumping after next weeks earnings. I have no positions in any of these companies and I'm not a scared short. I just really have no idea what's going on with the pricing in these companies. can anyone help me figure this out?
I had a DBL Diag on MER that I closed out of today in preparation for earnings myself. It was a nice little 16% trade since March 25th (2 weeks) but with earnings coming up and no idea what kind of write downs the banks will still have left to announce I wasn't staying in it.
i disagree only because this move is news based, i can only see slamming shorts when there is not crazy news.
I'll admit to being somewhat puzzled by the action in C. They suffer terrible dilution to get capital, and the stock rallies. They sell loans at a huge loss, ditto. I'm not so sure these are terrible loans either. They are private equity corporate paper, not some subprime mortgage garbage that no one knows what it's worth or how to collect on it in default. The thing is, banks make these loans with the idea they will book some fees and quickly get them off their books. Now, they can't move them, and because of all the writedowns, they don't have the capital to carry them. So they are caught between a rock and a hard place. They have to raise capital on onerous terms, and they have to sell their best assets at firesale prices. They are still stuck with a lot of crap that they can't sell at any price.
what are you guys smoking? 90 cents on the dollar is EXCELLENT given the current liquidty and market situation for those products. Citi basically just unloaded a truck full of garbage and only lost 10% of what it paid. Of course the stock is going up...... We will see how this plays out, i do think it will fall back down again as the bullish market runs out by late part of april, as there are still many problems with the company. Loaded up a few hundred bucks of c may otm puts for a speculative gamble...
.....apparently you aren't seeing the big picture. The only reason you sell assets at a discount is if you have nothing else to sell. That was good paper. Smells like a forced sale.
No you are the one that is not getting it. With the exception of a few, all the banks will need to start raising cash to cover the additional writedowns. What C did was raising cash by selling its illiquid asset, this accomplishs 3 things right off the bat 1) clean up the balance sheet 2) raise cash 3) no dillution This is a very smart move, as oppose to what wm and leh (to a much lesser extent) did which only accomplished 1 thing - raising cash at the cost of dillution and continue to keep the garbage on the books risking further deterioration. Now that i think about it, this is actually insane if c manages to pull the deal off at only 10% loss.
The reason they could sell at about 90% is because this is not the worst they have. Sure its great that they can sell it but now they should mark down the rest on their books, so anouther 3 billion plus on this paper alone. I think this is the begining of the large debt firesales that will finally end this thing but it is only the start right now.