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Why Citigroup Matters to You

By

Reading between the picket lines.

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Despite the fright since the wheels fell off the global financial wagon five years ago, Morgan Stanley CEO James Gorman recently warned that overcapacity and compensation are "way too high" in the banking complex, and expressed "sympathy" with those who believe "the industry is still overpaid." Similarly, Bank of America (NYSE:BAC) CEO Brian Moynihan announced a few weeks ago that he is speeding up his cost-cutting efforts and will cut 16,000 jobs by year-end.

In 2006, in an article titled The State of the Art, I offered: "There will always be a Wall Street and a need for capital markets. The trick, for an industry mired in overcapacity, is to proactively adapt before the trade passes them by."

That process -- and it's just that, a process -- is now in full swing; despite year-to-date gains in the stocks of the world's largest financial institutions -- the BKX (INDEXDJX:BKX) is up 27% year-to-date -- few of the folks I speak to within these large firms are feeling particularly plucky. Many of them are looking over their shoulders, others are just happy to have a seat. All of them understand that in the eyes of John Q, they are Public Enemy No. 1.

I often opine, when referring to the economic imbalances and the longstanding socioeconomic malaise, that "in order to get through it we had to go through it, and we're going through it now."

The same can be said for the financial industry; we're likely in the middle innings of this seismic readjustment. We can choose to look at that as a negative -- as most people are -- or a positive, in that we're a LOT closer to where we need to be for the next phase of secular growth, one that hopefully won't require trillions of dollars of taxpayer money.

From here to there, both for the financial industry and the economy as a whole, we'll have to put our heads down, bust our humps, and work much harder for less money -- not all of us are in a position to walk away with hundreds of millions in our back pockets. We must survive to thrive and preserve capital to create wealth. That's our mission in the rain, for the other option -- the white flag -- isn't a viable scenario.

Yes, it will take persistence, passion, and elbow grease, and no, it's not exactly fun -- but I will tell you this: When the dust settles, and yes, it will settle, there will be better days and easier trades. We just have to get there, one step at a time, while reminding ourselves that we don't live to work, we work to live.

R.P.

Twitter: @todd_harrison

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No positions in stocks mentioned.
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