Man, these bankers are not looking forward to the possibility of reduced pay and government control…Go figure.

Treasury Said to Link Citigroup Sale to TARP Payback (Update1) – Bloomberg.com.

1. John Paulson has recently bought a big position.
2. Hopefully, the worst of the recession is over.
3. I like the banking sector overall because, even though there has been a run up, some banks like Citicorp still have a long way to get to get back to legitimacy.  IF they get back, the stock has upside.

On the 50% chance I lose, it is probably based on the following:

1. The company is in really bad shape right now and just doesn’t ever figure it out.
2. I am not convinced the current CEO is the right guy for the job (I bet if they found a good bank guy, the stock will go up).
3. Other banks are fairing much better.
4. Stocks really shouldn’t be this scary to own. I have plenty of stocks, that while they will go up and down, they are good solid companies you can really feel good about.
5. Commerical Real Estate problems bury Citicorp.

There are probably more reasons but this is how I based my decision. Let me know if you find compelling reasons for or against owning Citicorp.

Friday is a big day.  Own financials?  Tomorrow will be a big day for you.

Friday, July 17
Before The Open Actual First Call Yr Ago Yr/Yr Rev
A.O. Smith AOS 0.50 1.03
Amcol ACO 0.29 0.58
Badger Meter BMI 0.54 0.48
Bank of America BAC 0.28 0.72
BB&T Corp BBT 0.21 0.69
Bemis BMS 0.41 0.46
Citigroup C -0.31 -0.49
First Horizon FHN -0.33 -0.11
First Niagara FNFG 0.14
General Electric GE 0.23 0.54
Marshall & Ilsley MI -0.69 -1.52
Mattel MAT 0.00 0.03
Prosperity Bancshares PRSP 0.50 0.52
Webster Financial WBS -0.44 0.42

Other major business events and economic events scheduled for Friday:

Commerce Department releases housing starts for June, 8:30 a.m.
House Financial Services Committee hearing on the president’s proposed financial overhaul.
European Union foreign trade stats for May are released.

Dead Cat Bounce

Citicorp

Buy Citi now??  This certainly isn’t the catalyst needed to turn Citi, but it couldn’t hurt… or could it?  Higher defaults coming?

High oil and moves like this stacked on top of each other will cause the double dip that might be around the corner.

Below from FT.com

Citigroup has sharply increased interest rates on up to 15m US credit card accounts just months before curbs on such rises come into effect, in a move that could fuel political anger at the treatment of consumers by bailed-out banks.

via FT.com / Companies / Banks – Citi raises card rates on millions.

In my opinion, this is the best way to buy the banking sector with minimal risk.  Banks could still go bust.  The “too big to fail” mantra may begin falling on deaf ears if new capital is needed and unavailable in the open market.  Buying individual names such as Citi or Bank of America could be dicey.  The XLF tracks the good and the bad and you will profit as the sector moves up.

The XLF is up 73% in the past three months.

Bob

Scott makes a move in Citicorp and discusses his feeling on the stock given a long time horizon.  MSFT takes down $3.5 billion to add to the $20+ war chest on hand.  Chris Flowers buys a bank and Bob and Scott discuss the possibility that private equity is lining up to lend to the business community when traditional bank lending fails to refinance.

Episode 5 - What is the next market catalyst?

The market loves to see capitulation.  Shares come out of weak hands and move into stable hands.  Limit orders are taken out.  I haven’t felt too good about the way the financials have been acting and decided to take my loss on this trade and lighten up other bank positions.

Perhaps I am making exactly the wrong move, but you never know.  Geithner is speaking and the May 4th stress test results will be a real swing point.

There are times when I feel like you should just use me as a contrarian indicator.  Today is one.

Keep in mind that today is options expiration.  We will swing wildly today.  My guess is that we could crack $3.70 down and push $4.30 up.   The option contracts would call for this to close around $4 per share.  Direction should be determined next week.

I am fairly certain there will be somewhat of a wait and see until the bank stress test results are revealed 5/4/2009.

Options expiration.  Friday will be a wild one.