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BIG POP ON MONDAY?

28 February 2009 by Cullen Roche 0 Comments

Interesting story developing in the government’s deal with Citi.  The brainiacs on Wall Street may have misinterpreted the Citi deal while betting against the common and buying the preferreds.  Excellent coverage over at Zero Hedge.  

Here’s a basic primer from Baseline for those of you that aren’t familiar with some of the intricacies of the deal…

Personally, I think Citi has zero shareholder equity and this will come to light in the coming months as the economic downturn worsens and the write-downs mount.  The government appears to be boosting Citi’s tangible common equity while avoiding the cancer that is plaguing the asset side of the balance sheet.   Nonetheless, a short squeeze in Citi on Monday would likely result in a bounce across the board in financials which will almost certainly lead to a pop in the market.

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