Citi Will Be Next on the Upgrade Parade
By Jim Cramer
5/18/2009 9:05 AM EDT
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Is Citigroup (C - commentary - Trade Now) next to be upgraded? This morning Goldman Sachs raises Bank of America (BAC - commentary - Trade Now) to "buy." Given the need for more financing there and the prospect of "no bottom" in Merrill -- a judgment I do not share -- this upgrade could turn the tide against the bank bears who remain in force and evident by the day. Put simply, I believe that with the capital raisings coming to an end, the upgrade makes sense.
So does the very exciting stock-and-bond deal at State Street (STT - commentary - Trade Now) that clears up the conduit situation that has plagued them. I think this stock should be bought aggressively, because this deal will mark a key bottom.
Bringing us to the elephant in the room -- Citigroup. While everyone frets about it, the bank has quietly been selling off divisions and raising capital. This "supermarket" bank has more assets to sell than just any other, and judging by the high-profile way that Vikram Pandit has been comporting himself, I sense that the changes here are going well and that you will soon hear upgrades on the stock.
This is a remarkable turn, one for the ages, and I think that the two loudest voices on the group, Meredith Whitney and Nouriel Roubini, will prove to have been problematic in their insistence that all is bad, whether it be residential mortgage, commercial mortgage or credit card.
They remind me of Dick Bove, who had been everyone's hero during the 1989-1990 downturn but then stayed negative for the whole glorious upswing. Bove went, ultimately, from hero to goat and his reputation never really recovered.
I have nothing but positives to say about Whitney's work until the middle of March, when she reiterated her strong sells. Roubini is an opportunist who makes me feel like I should go get a teaching job in finance if only to get the patina that puts him on some sort of hallowed ground.
Watch Citi. It's next.
▓ Citi Bond Sale Shows Strength ▓
The Wall Street Journal
Monday, May 18, 2009
Citigroup stood on its own two feet Friday and sold $2 billion of investment-grade bonds without the backing of the federal government.
This is the first time the financial institution has sought financing away from the protection of the Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee program begun in November.
Demand was strong, with orders exceeding $6 billion, according to one person familiar with the deal.
The Citi offering was the latest in a string of non-FDIC bond offerings from financial institutions recently tested by the government to determine how well they could stand up to further deterioration in the ....................
▓ Overall Decrease in Short Interest on Financials ▓
Sunday, May 17, 2009
On May 6th we reported that eight of the nineteen financial stocks facing the results of the government stress test had seen an increase in short interest (as measured by Percent Shares Outstanding on Loan). Since then, only five names have seen an increase in short base; BB&T (BBT) (+1.56%), Keycorp (KEY) (+1.92%), Morgan Stanley (+11.18%), JP Morgan (13.71%) and Bank of NY Mellon (BK) (+43%).
The names that saw the largest drop in short interest were PNC Financial (PNC) (-31.6%), Bank of America (BAC) (-25.59%), Wells Fargo (WFC) (-20.05%), American Express (AXP) (-11.85%) and Capital One (COF) (-14.17%)
This overall drop in short interest is reflected in the 6.4% drop in the DESLI 19 Stress Test Banks index.
Could not have said it better. Thanks for the post. For all the Cramer controversy, I think he has this one right. Particularly his apt characterizations of Whitney and roubini, the soros stooges.