Word: citigroup
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...Didn't the government already rescue Citigroup? True, this is not the first government handout. On Oct. 13, Treasury told Citi and eight other large banks that it would be buying billions of dollars worth of stock in their institutions, the opening move in a mass recapitalization plan for the banking sector. Citi got $25 billion in exchange for preferred shares on which it is to pay 5% interest for five years and then...
...latest move to prop up the nation's flailing financial system, the U.S. government unveiled plans on Monday to rescue one of the world's biggest banks, plowing $20 billion of new capital into Citigroup and shouldering up to tens of billions of dollars in losses tied to the bank's soured assets. After a brutal week for Citi - marked by pink slips for tens of thousands of workers and a 60% drop in its stock price - news that the government would step in propelled its shares, which rose 58% from Friday's close. "Equity investors were panicked about...
...even with more bad news on earnings, stocks worldwide still look cheap, according to an analysis headed by Robert Buckland, a global equity strategist at Citigroup. Even assuming corporate profitability falls 50% all told (so far it's down only about 10% from last year's peak), P/E ratios will still be in line with their 40-year average. "There's a major space for earnings to fall," says Buckland. "What we're saying is, a lot of that fall is already in the price...
There are, of course, a host of other issues that might swing the market one way or another, from the fates of Citigroup and the auto-industry bailout to the Federal Reserve's mid-December meeting, when another cut in interests may be in the offing. Add it all up and the short-term view is - surprise - more uncertainty. "Sometimes we have year-end rallies, and we definitely could use one. We could all use a break from this bear market," says Ed Yardeni, president of Yardeni Research. "But just because we need it doesn't mean we're going...
...Next, the government could suspend trading in the credit default swaps on Citigroup's debt. The price of those contracts, which pay out if Citi goes bankrupt, have been rising recently, and that is spooking the stock investors. Without that constant reminder of the increasing chance of Citi going out of business, some observers say the stock would rise...