Two Ways to Play: Citigroup's $3 Billion Capital Raise
Bank dilutes its share value, but you can strengthen your portfolio
The Wall Street Journal reports FDIC Chairman Sheila Blair will be officially proposing to allow the Treasury to make direct loans to almost one million homeowners. This latest government initiative will require the FDIC to raise approximately $50 billion and allow borrowers to pay down up to 20% of the principal they owed on their mortgage. They will still be required to pay their mortgage, but will only have to make interest-only payments to the Treasury for the first five years. Afterwords, they would begin repaying the Treasury loan at fixed rates. Read Mr. Practical's Free Market in Jeopardy.
From the Bull Pen: Bulls see a breakout in the Real Estate Index Fund (IYR) above the 200-DMA; sell-stops below $70 or $66 for those with a higher risk profile.
From the Bear Cave: Considering the weakened consumer as well, bears see a downside play in Ethan Allen (ETH); buy-stops can be set above $29.
Citigroup Dilutes with Another $3 Billion
Shares of Citigroup (C) are down about 3.5% this morning. According to Reuters, the largest U.S. bank is raising $3 billion in common stock to bolster its capital levels. The move comes after the company suffered $15 billion net losses over the past two quarters and reporting over $45 billion of write-downs since last summer. The offering brings the total amount of capital raised since late 2007 to $36 billion where just last week the company sold $6 billion in preferred stock. See Mr. Practical's U.S. Banking System on the Fritz.
From the Bull Pen: Bulls still see a series of higher highs and lower lows in the financial ETF (XLF); sell-stops can be set below $25.50 on upside tries.
From the Bear Cave: Those bearish on Citigroup can press the downside; buy-stops may be set above yesterday's close ($26.32).
For more ideas, check out Minyanville's Spotlight Stocks.
Quick Check Around the World
Asian trading closed with the Hang Seng -0.61%, Nikkei -0.32%, Sensex -0.52%, Taiwan -0.32% and Shanghai +4.82%.
A quick check across the pond finds the CAC +0.32%, DAX +0.42%, FTSE +0.13%
As of 8:30 AM EST, S&P futures are higher +4.5 points to 1395 and Nasdaq futures are up +7.50 points to 1946.
A Look At Commodities
In commodities, crude is up +0.39 to 116.01. Gold is lower -6.80 to 869.40. Silver is up +0.005 to 16.545, and copper is lower -0.60 to 389.35.
The dollar index is higher +0.131 to 73.026.
On the Radar
MBA Mortgage Applications: -11.1% vs. -14.2% cons.
ADP Employment: 10 k vs. -60 k cons.
GDP (Q/Q): 0.6% vs. 0.5% cons.
Personal Consumption: 1.0% vs. 0.7 cons.
GDP Price Index: 2.6% vs. 3.0% cons.
Core PCE (q/q): 2.2% vs. 2.2% cons.
9:45 Chicago Purchasing Manager: 48.0 cons.
10:00 NAPM – Milwaukee
2:15 FOMC Rate Decision
Click here for the full trading radar.
Good luck, Minyans!
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