Citibank to Investors: We Suggest You Bet Against Us
By Mike Mish Shedlock Apr 02, 2009 10:50 am
Company predicts an end to the rally.
"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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Reply
2009-04-02 10:53:26
Contrary Clowns
I saw some people in clown costumes in London protesting. I suggest the citi analysts should be wearing such costumes. Meredith baby says dont be short, I would hate to not measure up with her!
2009-04-02 11:05:06
XLF Component Weighting
Mike - Your weightings are out-of-date.
See:
http://www.djindexes.com/mdsidx/? event=components&symbol=DJUSFN
Ralph
See:
http://www.djindexes.com/mdsidx/? event=components&symbol=DJUSFN
Ralph
2009-04-02 13:40:49
Right at last?
Maybe they might actually be right for a change... after the rule changes today will anyone want to buy banks? They couldn't be trusted before and now they can make up what they want and inflate their earnings
2009-04-02 16:38:46
Can a Backlash Develop?
40% (and growing) of the folks pay no income tax and blame businesses when they pass along taxes to the consumer rather than go under.
Another 10% figure they will be marginally affected or be dead before they are burdened further. The Nationalized Biscuit Company (NABISCO) may soon be producing Soylent Green and lending credence to the handle of Crackers.
Another 10% figure they will be marginally affected or be dead before they are burdened further. The Nationalized Biscuit Company (NABISCO) may soon be producing Soylent Green and lending credence to the handle of Crackers.
2009-11-23 20:05:35
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