“Treasury and the Federal Deposit Insurance Corporation will provide protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup’s balance sheet. As a fee for this arrangement, Citigroup will issue preferred shares to the Treasury and FDIC. In addition and if necessary, the Federal Reserve stands ready to backstop residual risk in the asset pool through a non-recourse loan.
In addition, Treasury will invest $20 billion in Citigroup from the Troubled Asset Relief Program in exchange for [$27 billion of] preferred stock with an 8% dividend to the Treasury. Citigroup will comply with enhanced executive compensation restrictions and implement the FDIC’s mortgage modification program”
Citigroup pre-market futures indicate a sharp recovery from Friday’s lows. The stock is up 60% to $6. Dow and S&P futures are up as well.
Blue chips, including Citigroup (NYSE:C - News; $6.40), Alcoa (NYSE:AA - News; $8.16), Xerox (NYSE:XRX - News; $5.58), Motorola (NYSE:MOT - News; $3.44), Starbucks (NasdaqGS:SBUX - News; $7.97) and Yahoo (NasdaqGS:YHOO - News; $9.14), not to mention beleaguered automakers Ford Motor (NYSE:F - News; $1.26) and General Motors (NYSE:GM - News; $2.79).
According to S&P data, 101 is almost double the 59 companies with share prices below $10 in October 2001 when the dotcom meltdown was in full swing and almost triple the 35 sub-$10 stocks in October 1987
We predicted this last month. We are seeing a W in the Candle charts. If this retest is successful today, we will aim higher. Otherwise lookout below.
Here is an excerpt from BigPicture blog.
Markets have come increasingly close to their October 10th lows. Contrary to what you may have read or heard on TV, this is precisely as it should be. Why? Major lows get retested. That is a basic tenet of market behavior, and crowd psychology. (This has been verified by a variety of studies by different technicians, economists and traders).
There are a variety of different ways to define the terms, yielding some variations, but the basic outline remains the same: All major sell offs hit a point where markets become so deeply oversold, that a rally ensues. Depending upon how deep the prior sell off is, this rally typically lasts anywhere from 3 to 6 weeks. Our work at FusionIQ shows that these snap-backs typically go for about 4 weeks and average ~24%.
The number of newly laid-off individuals seeking unemployment benefits has jumped to a level not seen since just after the Sept. 11, 2001, terrorist attacks, as companies cut more jobs in the face of a slowing economy.
Aggregate earnings over the past year are greatly depressed by huge write-offs not only in the financial sector but in other firms. For example, Ford, GM, and Sprint, whose aggregate market value is less than 0.2% of the S&P 500 Index, lowered the S&P’s reported earnings by about
Note: We made a similar case 2 weeks ago when the market bottomed out at 8000.
VIX drops below 50 for first time since October volatility.
But I think S&P is finally close to 15xp/e. I am not saying you should get out and buy stocks today. But it is definetely looking attractive compared to a month ago. I think as the DOW approaches to 2002 lows of 7500, we can look into nibbling some long term investment plays.
I guess I nailed this one. I called the short term bottom yesterday. It turned out to be true. Both Longs and Shorts battled out today in this historic trading day, which only made the investors on the sidelines even more nervous. In the final hours of the day, market breadth turned extremely positive pushing all major indices 4-5% greener and higher. Volatility Index, VIX surpassed 42 to end at 34. Usually a spike in VIX followed by a reversal means a short term bottom is in. It will be interesting to see if market actions today will initiate a short term bear market rally.
————————————————————————————————————— Sep 17 - Wall Street plunged again in a crisis of confidence Wednesday as anxieties about the financial system still ran high after the government’s bailout of insurer American International Group Inc. The Dow Jones industrial average dropped about 450 points, and investors seeking the safety of hard assets and government debt sent gold, oil and short-term Treasurys soaring…. » read more
I can’t believe I am saying this, but is this a near bottom? VIX touched Jan, mid March lows again.
Executives from AIG, bankers and Treasury and Federal Reserve officials are meeting today on the company’s situation at the New York Fed. A number of options are under being discussed to fill a shortfall of $75 billion to $100 billion in funding, one of the people said.
In a bid to save financial markets and economy from further turmoil, the U.S. government agreed Tuesday to provide an $85 billion emergency loan to rescue the huge insurer AIG. The Federal Reserve said in a statement it determined that a disorderly failure of AIG could hurt the already delicate financial markets and the economy.
On my way to a client meeting in Times Square, I passed a bunch of people gathered around something. I peeked to see what was happening. There was the picture of the infamous Annotated Fuld, the guy who brought down the venerable investment bank Lehman Brothers.
Barclays has circled back to pick up the pieces of Lehman Brothers Holdings, agreeing to acquire business operations and real estate holdings from the bankrupt investment bank for about $1.75 billion.
The British bank will buy Lehman’s North American investment banking and capital markets operations, with a 10,000-strong staff, for the fire-sale price of $250 million, Barclays said in a statement Tuesday.
![Freakonomics[Revised and Expanded]](/images/21xRHBWYYML.jpg "Freakonomics[Revised and Expanded]")
