Word: cities
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Dates: during 1990-1999
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...minor disappointment in earnings will let out a lot of air. Consider Citicorp, which gets about 20% of its profit from Asia. Cut the Asian profit in half, and the bank's overall earnings would decline from an estimated $9.54 a share next year to $8.57. Even if Citi's stock sells at 15 times earnings, the same lofty valuation (for banks) it commanded before the crisis, the price would fall from its recent $144 to $129. Indeed, Citi got halfway there last week, tumbling...
...most obvious risk to Citi is that, five years from now, the S&P will be lower than it is today, and Citi will have to make up the difference. But because the market's natural bias is up, what with growth and inflation, it rarely falls over any five-year stretch...
...less obvious risk is that the S&P might zoom 75% right off the bat, say, and then just sit there for five years. That would be an "average" 75% gain, which Citi would have to double. Wow. But, my friends, the chances of the market zooming 75% anytime soon are . . . Well, forget about it. In any event, Citi can hedge against these risks...
...consider: five years from now, on the off-chance Citibank has been forced to pay out more than the actual S&P gain, investors will be thrilled. Asked whether they want to renew for another five years, most will say yes. So, just as at Las Vegas, if Citi can keep the people betting long enough, it'll do just fine...
...Citi's offering the only thing to watch out for these days. Here's a small sampling...