USO $83.73 - Oil Fund - Short ** Stop Loss $85.00 **
That was about as much fun as a root canal. The dip on Tuesday triggered our short just before the Wednesday inventory numbers and Venezuelan terror news. Holding this short may be a challenge in the current environment. We have a clear breakout in progress, although news driven. I put a stop on it and we could end up taking some more lumps here.
Breakdown trigger: $79.00 hit Mar-4th
Position: April $77 PUT UNA-PY @ $2.70
C $20.88 - Citigroup
Punk Ziegel's five-star banking analyst Dick Bove called Citigroup a trade of a lifetime on Friday. He said Citigroup was at levels not seen since 1999. It is trading at 8% below book value an historically wide margin. Bove thinks future write-downs will be less than expected. It has $2.2 trillion in assets, $5 billion a quarter in free cash flow, one of only six companies in the world that can make that claim and 200 million customers. It has the best franchise in the entire world, falling costs, new management and a market cap roughly equal to its revenues. They have written off $19 billion in assets over the last year and received investments from overseas investors of $20 billion to shore up their balance sheet. They are planning on reducing their mortgage portfolio by $45 billion in 2008. That is $45 billion in cash going right back into the bank. The write-downs are non-cash charges and a write down is not a write off. As the economy recovers those assets will recover to some number higher than they are today. Comparables in Q3/Q4 are going to be extremely low and Citi will probably post huge earnings. When rumors were circulating last week about the potential need for additional capital the new Citi CEO responded quickly and aggressively that there was NO ANTICIPATED NEED for additional capital. They have had plenty of time now to shuffle assets and build up cash. They are in the perfect position to profit from the eventual rebound in the financial sector.
I originally thought the calls to buy Citi were too early. We may still be early but $20 is good round number support. Their earnings are scheduled for April-18th more than a month from now. If we buy them now the call options are cheap. If we wait for a positive trend they will become expensive.
Citigroup Inc. (Citigroup) is a diversified global financial services holding company whose businesses provide a range of financial services to consumer and corporate customers. The Company is a bank holding company. Its activities are conducted through the Global Consumer, Markets and Banking, Global Wealth Management, and Alternative Investments business segments. Citigroup has more than 200 million customer accounts and does business in more than 100 countries. In July 2007, the Company merged with Citigroup Japan Investments LLC, a 100% subsidiary of the Company. In July 2007, Citigroup completed the acquisition of Old Lane Partners, L.P. and Old Lane Partners, GP, LLC. Old Lane will operate as part of Citi Alternative Investments (CAI), the Companys integrated alternative investments platform. Citigroup acquired Grupo Cuscatlan's banking operations, some of its insurance operations and other financial activities. In August 2007, Citigroup acquired The BISYS Group, Inc.
Buy 2010 $25 LEAP Call WRV-AE currently $4.00
Buying the insurance covers you against a catastrophic loss through mid June.