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Two Ways To Play: Citi on the Chopping Block


Strengthen your portfolio in good times and bad.


The dismantling is set to begin in Citigroup (C). According to the Financial Times, Citi plans to separate a large portion of its investment bank and consumer finance businesses from its global commercial banking business, a move that essentially reverses the 1998 merger between John Reed's Citicorp and Sandy Weill's Travelers that created the financial conglomerate.

This means that CEO Vikram Pandit must abandon his "financial-supermarket" business model that the company had been following over the past decade. Citi already admitted today that it is in talks to spin off its Smith Barney brokerage business and combine it into a join venture to be controlled by Morgan Stanley (MS).

Citi shares finished the session +5.36% to $5.90.

From the Bull Pen: The reaction to the news is most important. Bulls can consider playing the ultra financials (UYG) for a play, but beware of the next test, JP Morgan Chase's (JPM), which reports after the close on Thursday.

From the Bear Cave: Bears can look to the dollar index (DXY) which is rapidly approaching significant resistance. Vehicle of choice may be the UDN, the dollar bearish fund.

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No positions in stocks mentioned.

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