Monday, 23 February 2009

Citigroup - trades below $2

News regarding a further capital injection into Citigroup (C) that circulated late Sunday from an article in the Wall Street Journal appears to be providing some support in overseas markets.

The Hang Seng Index (HSI) in Hong Kong managed a three percent gain and most European markets are up between one and two percent in early trading on Monday morning. There has been no official acknowledgment of the exact nature of the Citigroup assistance and its effect on the capital structure but it will almost certainly involve the taxpayer downgrading its preferred to common with subsequent dilution.

In this writer’s view the capital being made available to this behemoth bank is quite mind boggling and shows an obstinate refusal to accept the obvious - this bank is insolvent and should be placed into some form of re-organization or nationalization or whatever other euphemism provides the necessary fig leaf.

As the hourly chart reveals, Citigroup (C) did manage to see a minor bounce off its low on Friday afternoon but still closed below the $2.00 level.

It is hard to see how any kind of short term government rescue plan is going to significantly alter the big picture which is one that resembles the futility of re-arranging the deckchairs on the Titanic.

No comments:

Post a Comment