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Citibank to Investors: We Suggest You Bet Against Us


Company predicts an end to the rally.

In a statement that ought to scare the hell out of the bears, Citigroup (C) Says Buy Bank Puts Because Rally Will Fade.

"Investors should buy put options on financial companies because derivatives-market trading suggests the industry will retreat after a 43% surge since March 6, Citigroup Inc. said. 'Despite the rally, credit and option markets are pricing in increased downside risk,' New York-based Citigroup strategist Alvin Wang wrote in a note sent to clients today.

He recommended puts giving the right to sell the Financial Select Sector SPDR Fund, an exchange-traded fund that tracks a basket of bank stocks, for $8 before May 15. The XLF, as the ETF is known, added 5.5% to $8.81 in New York, bringing its gain since March 6 to 43%. The May $8 puts fell 25% to $0.70 today.

XLF Holdings Financial SPDR

Inquiring minds are investigating the top XLF holdings as well a couple component charts.

Click to enlarge

JPMorgan (JPM), Bank of America (BAC), Wells Fargo (WFC), and Citigroup are the 4 largest components comprising 34.9% of the total weighting of XLF.

Is this really a good time to short these stocks? Let's take a look.

Bank of America Weekly

Click to enlarge

Citigroup Weekly

Click to enlarge

XLF Weekly

Click to enlarge

Citigroup is essentially telling investors to bet against JPMorgan, Citigroup, Bank of America and a whole slew of financial stocks that have been smashed to smithereens.

Pardon me for asking, but where was this advice a year ago? Or 6 months ago? Or even 3 months ago?

I'm not particularly bullish on financials right now, but perhaps I ought to be on the grounds that Citigroup hasn't gotten anything right during this economic decline, and is now recommending a bet against itself.

Indeed, Citigroup's recommendation could be a nice contrary indicator, especially as More Ugly Details Emerge On "Geithner's Heist America Plan."

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No positions in stocks mentioned.
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