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...screens giving the latest news by satellite. At 10:40 p.m. Riyadh time, with trading temporarily suspended at the New York Stock Exchange, he dials Michael Jensen, his starched-collar financial adviser at Citicorp's private banking office in Geneva, who in turn gets on another phone with Citi's brokers in New York City. "At that point," Jensen will later recall, "His Highness said, 'Buy!'" First the prince supplies the names of four finalist companies. Then he supplies the figure: $1.2 billion. Jensen sucks his breath back out of the phone and places the order. "Everybody on Wall Street...
...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...
...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...