Citigroup Spoils Option Expiry Antics with a Simple Statement of the Obvious

The usual suspects were walking up the XLF to squeeze the short interest in financials when this little truth-bomb from Citigroup hit the wire, spoiling their traditional quad witching option expiry market manipulation.

It is not over yet. The worst is yet to come. They have taken the easiest writedowns first.

You don't like to hear this do you? Well, how many times does someone have to lie to you about something important before you realize they are a liar? That they view the truth as something to convenient bend to their will to get their way, to skin you from your money? To take away your family's wellbeing?

We are in for some hard times. Don't believe much of what you hear because the lies and scams and propaganda are coming hot and heavy, and it is not designed to help you. Try to use your critical judgement, or at least your common sense. A useful step is to get your information from sources beside CNBC and Fox. Reading is a useful habit to acquire.

There is a list of interesting internet sites over on the left under the title Divertissement Éducatif. Read some. Get some other viewpoints, some other sets of facts, some other interpretations. If you are not doing so well, maybe, just maybe, you are being used badly, and you are allowing it to happen.

Gold and silver are not contingent on anyone else's word, but can be slammed by the same short term forces that make stocks go up against all reason. Now might be a good time to have some at hand.


Citigroup CFO Crittenden Expects More Writedowns on Bank's CDOs
By Josh Fineman

June 19 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank, will have substantial writedowns on its holdings of collateralized debt obligations, Chief Financial Officer Gary Crittenden said.

The second-quarter markdowns won't be as large as last quarter, Crittenden said today on a conference call with investors hosted by Deutsche Bank AG.

Citigroup fell as much as 4.4 percent on the New York Stock Exchange after the comments. The shares dropped 81 cents to $19.59 at 11:42 a.m., after reaching $19.51.

To contact the reporter on this story: Josh Fineman in New York at jfineman@bloomberg.net.
Last Updated: June 19, 2008 11:43 EDT


Citi's CFO: More 'substantial' write-downs in 2Q
Thursday June 19, 1:16 pm ET
Citigroup CFO predicts 'substantial' write-downs on debt instruments in 2nd quarter

NEW YORK (AP) -- Citigroup Inc.'s chief financial officer on Thursday warned that the nation's largest bank by assets would suffer more "substantial" write-downs on debt investments in the second quarter.

CFO Gary Crittenden also said that there will likely be more write-downs related to leveraged loans and bond insurers.

Citigroup shares fell 77 cents, or 3.8 percent, to $19.64 by early afternoon trading.

Crittenden did say that Citi's second-quarter write-downs on structured debt products known as collateralized debt obligations, or CDOs, would be lower than they were in the first quarter. In the first quarter, Citigroup marked down the value of its CDOs by about $3 billion. All told, the bank in the first quarter wrote down more than $14 billion.

The executive spoke at a conference hosted by Deutsche Bank. His comments come on the heels of profit declines at three major Wall Street investment houses, and Fifth Third Bancorp's decision to raise $2 billion in capital. Futures and options broker MF Global Ltd. has also warned that tight credit spreads will weigh on its fiscal first-quarter earnings.

Gold Seasonality

Rogue Trader Strikes at Morgan Stanley UK Office

Morgan Stanley trading results marred by trader
Firm says credit positions mis-valued by roughly $120 mln; trader suspended
By Alistair Barr
MarketWatch
3:59 p.m. EDT June 18, 2008

SAN FRANCISCO (MarketWatch) -- Morgan Stanley said on Wednesday that fiscal second-quarter results were dented after a trader at the firm's London offices incorrectly valued positions by roughly $120 million.

When Morgan Stanley discovered the problem, the firm said it immediately suspended the trader and told U.K. regulators at the Financial Services Authority. It's now conducting a full internal review, the brokerage added in a statement emailed to MarketWatch.

A Morgan Stanley spokesman declined to comment further.

"We are very angry about it, but in this sort of environment of stressed markets, one would expect to see people try to behave improperly," Colm Kelleher, chief financial officer of Morgan Stanley, said during a conference call with analysts. "The issue is, do you have the controls to catch them? We believe we do."

The mis-valuation happened in Morgan Stanley's credit products unit, which includes trading of credit default swaps, credit derivative indexes and certain types of swaps.

Morgan Stanley's valuation snafu highlights again how the global credit crunch is testing the risk management of the largest brokerage firms and their ability to accurately value complex, sometimes illiquid exposures.

The credit products unit is part of the firm's fixed income sales and trading business. That business generated net revenue of $414 million in the second quarter, down 85% from a year earlier.

"We found this disclosure somewhat troubling, as it indicates that there have been some lapses in terms of valuing its trading book," David Hendler, an analyst at CreditSights, wrote in a note to clients on Wednesday. "Its ability to monitor its traders and marks is not as robust and timely as we would have hoped."

Other firms have experienced similar problems with traders incorrectly valuing positions this year.

Credit Suisse said in February that it overvalued asset-backed securities by at least $2.85 billion, leading the Swiss investment bank to suspend several traders. See full story.

In January, Societe General (FR:013080: news, chart, profile) , France's second-largest bank, stunned financial markets when it announced that rogue trader Jerome Kerviel cost it more than $7 billion. See full story.

Alistair Barr is a reporter for MarketWatch in San Francisco.

FDIC Criticizes Fed Handling of Bear Stearns: Says Banks Need Expanded Supervision

We think they need ADULT supervision.

But why quibble when its obvious that the Fed can provide BILLIONS in free money to investment speculators at NO COST to the public! They keep what they win, and if they lose the Fed takes it at no cost to anyone.

Isn't this what they have claimed? Marvelous!

We hear Wall Street calls this 'special facility' The Magic Dragon.

Investment banks need expanded supervision: FDIC
Wednesday June 18, 12:53 pm ET

WASHINGTON (Reuters) - Any troubled U.S. investment bank headed toward bankruptcy should be subject to supervisory intervention just like commercial banks, the head of the Federal Deposit Insurance Corporation said on Wednesday.

Renewing her call to expand regulation of investment banks after the collapse of Bear Stearns, FDIC Chairman Sheila Bair said a receivership and resolution plan should be created to maintain order in the markets and minimize losses for all parties involved.

"The government cannot be put in the position of having to simply write a blank check when these institutions get into trouble," Bair said in prepared remarks to be delivered before a group of financial professionals. (No matter how you wish to spin it, this is what was done under the leadership of the Bernanke Fed, and it was probably the worst policy decision of his chairmanship thus far - Jesse)

Bair was referring to the move taken earlier this year by the U.S. Federal Reserve to provide discount window liquidity and a credit guarantee of $29 billion to Bear Stearns, which is being acquired by JPMorgan Chase (NYSE:JPM - News).