Citigroup shares may be not worthless?

September 15, 2009 by · Leave a Comment
Filed under: Stock Market News 

Well this may be correct, with the amount of losses Citi has written-off and the “assistance” Uncle Sam has extended to them, yes the shares may be have some real value.  I still don’t agree with the bailout and the socializing the losses but it is done now so we have take a look at their value.  Even Jim Cramer called it when it was at $3.75 per share that it was a “buy”. he laid out a case for the purchase of the shares and it pains me to agree with his assessment.  They still have massive derivative exposure so if somehow those are triggered then they would be in serious trouble, unless we bailed them out again.  Could happen, seriously.

DISCLOSURE: I am not a financial advisor and this article or any articles in this website should not be taken as a recommendation to purchase this or any other securities.  Please talk to a registered financial advisor before making any investment decisions.


Reuters, New York – Citigroup Inc is slowly regaining favor among institutional investors, a development that could help the U.S. government unload its 34 percent stake in the still-troubled bank.  A series of bailouts has put taxpayers on the hook for tens of billions of dollars of potential losses, but left Citigroup with some of the strongest capital ratios in banking.

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Barrick Announces Plan to Eliminate Gold Hedges

September 10, 2009 by · Leave a Comment
Filed under: Stock Market News 

This is pretty big news in my opinion.  Barrick, being one of the world’s largest gold producers is now going “unhedged”.   If you don’t know what that means then here is short little lesson to help you understand the depth is this article.  Hedging works sort of like the futures market does for agriculture.   Mining is a very capital intensive process and it literally takes years to bring new mines online.  Mining producers need to lock in a price for the material they mine (in this case gold) so when they bring it to market, they get a price that is above the cost of production because of the lag time between digging it up and selling the finished product.

This is where the hedge comes in, they basically sell forward delivery commitments on the gold they are going to produce so they “lock” in the price.   This work great when the price drops below the contract value but in Barrick’s case, it has hurt their profitability because they had hedges that were way below the market price of gold.  Now that they are going “unhedged” and if they gold price continues at these levels, you should see more profits coming from this company among others with all things being equal.  DISCLOSURE: I am not a financial advisor and this article or any articles in this website should not be taken as a recommendation to purchase this or any other securities.  Please talk to a registered financial advisor before making any investment decisions.

News (MSN Money Central):

Barrick Gold Corporation announced today that it has entered into an agreement with a syndicate of underwriters, led by RBC Capital Markets, Morgan Stanley & Co. Incorporated, J.P. Morgan Securities Inc. and Scotia Capital Inc., for a bought deal public offering for gross proceeds of approximately $3.0 billion representing 81.2 million common shares of Barrick at a price of $36.95 per share.

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Pimco’s El-Erian says U.S. stock market rally has hit a wall

August 18, 2009 by · Leave a Comment
Filed under: Stock Market News 

El-Erian makes a good point that stock valuations are not in-line with actually performance of the underlining companies.   After reviewing some of the numbers, statistics and earnings that have been posted as of late, it looks more and more likely we will have another major correction in the next couple of months.  I just don’t see the earnings continuing to be robust during a recession that the consumer is really tapped out when you look at their debt levels and stagnant incomes.  2009 is has been the worst year for getting a raise in about two decades.

News (Reuters):

Mohamed El-Erian, the chief executive of top bond fund manager PIMCO, on Tuesday said the rally in U.S. stocks had topped out because valuations have shot up too quickly.

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CIT delays 2Q report and warns on bankruptcy possibility again

August 11, 2009 by · Leave a Comment
Filed under: Stock Market News 

This does not bode will for CIT.  With this delay and a reiterated warning on possible bankruptcy, CIT is really shaking investor confidence and that could be the final nail in the coffin for CIT.  Bankruptcy could be the best option for CIT so they can deal with their $65 billion in debt obligations, they will need to address this with their bondholders and work out an equitable deal for both parties.

News (CNN):

Shares of CIT Group Inc sank 20 percent Tuesday after the troubled lender delayed filing its second-quarter report with regulators and again warned it may have to file for bankruptcy.

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Mark-to-Market Accounting Pushes Freddie Mac to $768 Million Profit in Q2

August 10, 2009 by · Leave a Comment
Filed under: Stock Market News 

According to the article this surprise profit was due to a one-time accounting gain rather than an actual turn-around in the business making it actually profitable.  The shares did react strongly, increasing a whopping 80% at the time of this writing.  These two GSE’s will most likely have to tap the Treasury for more funds and I see Ginnie Mae as the next GSE that will need a substantial taxpayer backstop in the form of more bailout money.

News (Globe St.):

VA-While there are growing signs that the economy and housing markets are hitting bottom–or at least ending the free fall it was in at the beginning of the year–the latest earnings from Freddie Mac do not fall into this category. On Friday the GSE reported–on the heels of dismal earnings from Fannie Mae–that it issued its first profit in two years, with a net income of $768 million for Q2, compared with a $9.9 billion net loss in the previous quarter.

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