Sachs & the Citi...

Speculation that the Citi is finally sleeping has been put to rest, atleast for the time being, by the mammoth bailout package announced today.The government has agreed to guarantee $300bn of troubled assets owned by Citigroup apart from infusing fresh capital of $20bn, this is in addition to $26bn handed over to Citi a few months ago. The hemorrhage doesn’t seem to stop and its curious & disturbing to see that the world’s most respected financial system is collapsing like a pack of cards.

A look at some recent events makes one wonder about the consistency in policy making and the strength of the regulations :

The aggregate support for the banking system in US and Europe is estimated at GBP 5 Trillion as per Bank of England’s recent report, one wonders if these are the same countries that taught us the principals of capitalism and free markets .

In 1997 the US treasury influenced the IMF to force a liquidation of 16 “weak” banks in Indonesia, one wonders if the US system stands on a different footing.
At a huge public cost AIG and Bear Sterns were rescued a few months back, while Lehmann brothers was allowed to fail, one wonders whats the long term vision of the regulators which guided such policy flip flops.

Citi’s market cap has shrunk to $20bn while Goldman has fallen below its IPO price for the first time in its 10 year trading history.

The story seems far from over … we truly are living in historic times…

Pirates of the Citi...

The fall in its stock price has shrunk Citi's market cap to $20bn, the bank is looking at every possible source of funding to stay afloat, a humorous take on bid to rescue the Citi...

Somali Pirates in Discussions to Acquire Citigroup
2008-11-20 14:23:00.260 GMT
By Andreas Hippin November 20 (Bloomberg) --
The Somali pirates, renegade Somalis known for hijacking ships for ransom in the Gulf of Aden, are negotiating a purchase of Citigroup.
The pirates would buy Citigroup with new debt and their existing cash stockpiles, earned most recently from hijacking numerous ships, including most recently a $200 million Saudi Arabian oil tanker. The Somali pirates are offering up to $0.10 per share for Citigroup, pirate spokesman Sugule Ali said earlier today. The negotiations have entered the final stage, Ali said. ``You may not like our price, but we are not in the business of paying for things. Be happy we are in the mood to offer the shareholders anything," said Ali.
The pirates will finance part of the purchase by selling new Pirate Ransom Backed Securities. The PRBS's are backed by the cash flows from future ransom payments from hijackings in the Gulf of Aden. Moody's and S&P have already issued their top investment grade ratings for the PRBS's.
Head pirate, Ubu Kalid Shandu, said "we need a bank so that we have a place to keep all of our ransom money. Thankfully, the dislocations in the capital markets has allowed us to purchase Citigroup at an attractive valuation and to take advantage of TARP capital to grow the business even faster." Shandu added, "We don't call ourselves pirates. We are coastguards and this will just allow us to guard our coasts better."

Cash is kinng...

Not too long ago investors and analysts viewed companies with huge cash balances as inefficient we almost took the supply of funds for granted. However the credit squeeze came much faster then anyone expected and is proving to be far worse then the street expectation, hope it doesn’t last very long (we are already in the 10th month but more on that later). Cash, in the current turmoil has turned out to be the most precious commodity and while corporates like Vedanta ($10bn in cash) and Microsoft ($21bn in cash) can survive for a few years without any business and would also be able to cash in on the opportunities that the downturn presents. Cash strapped companies,like the American automakers would be forced to restructure, cut costs and offload assets at throw away valuations. Liquidity would define corporate performance in these difficult times.