Thursday, December 17, 2009

Just Make All the Numbers Too Big

Well today is all about Citigroup once again so I guess I will pick up on that line again. I have tomorrow off and only a two day week next week. Then it is January before I roll back into work. Nice!

On a blogging note I will probably move to more festive posts because I do not like to be upset going into the holidays. Post fun ideas for content in the comments (no one has requested a Friday night song in 2 months!) and I should have time to put something together. If there is something financial you would like covered, by all means put that in as well.

Just Make All the Numbers Too Big
It seems today that the best way to mask problems or hide actions is to shroud everything with numbers that are just so huge no on can really grasp what they mean. I see this with the budget, deficits, cost expectation and so on. You want to fix the budget? How do you tackle a Trillion dollar mess? This works in reverse as well. You want to gripe about 100 million in the budget, that's too small to worry about. Amazing really.

Tonight's post is inspired by the days MUST READ article written by Macro Man. After I read his piece this morning I could not think about anything else (financial, I had real work to do as well!) the rest of the day.

Macro Man covers something that is right in front of all of us, but I can admit I never even saw the details. Here is the relevant sections, but the post has great graphs and great commentary so I would point you there before continuing on.
Hidden Truths?
As you can see below, the once-mighty C has seen its share price is down some 48% from the 2008 close, so it's badly underperformed the broad market. Or has it? [see link for graph]
Sure, if you've been long since last year, you're rather out of pocket on your investment. But for the institution as a whole, it's been something of an annus mirabilis; thanks to its capital raising/share issuance, etc., C's market cap has nearly tripled this year. The company's now worth nearly $100 billion!
Betcha didn't know that. Even more remarkable is fact that Wells Fargo's market cap is now at all time highs (at least at the close of the year.) Yes, this is the same institution that has both hands thrust deep in the stinking morass that is the California real estate market and that has employed every trick in the book to avoid fessing up.
Readers are invited to judge for themselves what, if anything, this remarkable recovery in bank market caps means for 2010. It certainly suggests that something should be changing, and it doesn't take Sherlock Holmes to deduce where Macro Man's bias lies.....
This is important.

Macro Man's numbers work led me to do some work with numbers myself. All data is supplied by Yahoo Finance (under the key statistics label for stocks).

Citigroup had 22.86 Billion shares outstanding. Does that mean anything? Is this important? Well, I don't know. I can put together some comparisons and make a guess though.

Let's start with banks so we can compare apples to apples.

A Citi sized bank is Bank of America (BAC). What kind of shares are they floating?:

BAC = 8.65 Billion shares

Maybe they are an exception? How about Wells Fargo (WFC)?

WFC = 4.69 Billion shares

Ok. What about some other players like Goldman Sachs (GS)?

GS = 514 Million shares. That's MILLION not Billion.

Ok, so maybe Citi is just so big and amazing they have tons of shares out there. What about some big names?

Microsoft (MSFT) = 8.88 Billion shares
Exxon Mobil (XOM) = 4.75 Billion shares

Every ones favorite Google (GOOG) only has 317 Million shares out there.

For the gold lovers high end estimates put all the gold ever mined at 10 Billion ounces.

Again, is this important?

The answer is it depends.

On it's face this kind of crazy stock manipulation is insane. Think of it this way:
-Today C is at $3.20 a share and has a market cap of around 75 Billion (depends how you count it I know; I am just using Yahoo closing quotes).
-To return to the point at which Sovereign Wealth funds poured cash into Citi stock (back around say $30 a share) Citi market cap will have to be 750 Billion, or an entire TARP program!!
-To return to the all time high of $55 a share Citi would sport a market cap of, are you sitting down, 1.29 Trillion!!

In comparison:
XOM market cap = 324 Billion
MSFT market cap = 262 Billion
BAC market cap = 128 Billion

Now do not bother writing me and telling me about stock buy backs, warrant expiration's, etc. I get it. They still cannot account for these kinds of numbers. Besides, remember when companies (think 2007) were borrowing money to buy back stock? Good luck on that loan nowadays.

And again, is this important? The answer is maybe.

If anyone really wants their money back (or make money), then Citi is to be passed on no matter what. If however you want to play games and try and pretend all this works out, then by all means play C stock (50% of NYSE volume today!!) and ignore these numbers.

This is a joke. Citi should be broken up and the best made of the outcome. Their future is a mathematical impossibility.

This is just one on the run analysis. I think there are plenty of others out there like this one.

I think I have identified the next bubble. The next bubble is wishful thinking. You already know how bubbles end.

Have a good night.


Anonymous said...

I nominate Elvis Presley's "Blue Christmas" for a Friday night song.

EconomicDisconnect said...

I cannot refuse the first request in 2 months! I am so glad you did not ask for a Beatles song.

If Gawains is checking in, I thought the game Saints vs Dallas was in Dallas but it is in the Superdome. I am sorry my man, but that game will be ugly for the boys. Lets still be friendly.

watchtower said...

I never know if I'm pushing the edge, but here goes, I wouldn't mind seeing this on 'Friday Night Entertainment'

Foo Fighter's 'My Hero'

Stagflationary Mark said...

"It seems today that the best way to mask problems or hide actions is to shroud everything with numbers that are just so huge no on can really grasp what they mean."

Look, they are just wrong numbers. There's nothing to worry about. Go back to sleep. ;)

EconomicDisconnect said...

that Foo Fighters song has special meaning here in MA due to a fire at a Worcester wharehouse when several firefighter died. No problem.

please tell me you did not voluntarily watch Cacrol Bernette! My mom made me watch that show!

My number in the city I grew up in was last 4 digits 9314 and a nearby pizza delivery place was 9324 and I used to take delivery orders for hours that never made it! HAHAHA.

EconomicDisconnect said...

Not that I want to keep sticking Calculated Risk's author Bill , but I would give a thousand talons to get his real take on this:

If PIMPCO is bailing and selling to the FED then the FED had better wake up.

Dave in Denver said...

You gonna IPO Wishful Thinking?

Stagflationary Mark said...


I was no more than 10 years old. I doubt I did much of anything voluntarily, lol.

GawainsGhost said...

Yes, GYC, the game on Saturday is at New Orleans. And you're right that does not bode well for Dallas. In their history, the Cowboys have only won twice, and Tom Landry lost two Super Bowls, there. So I'm not holding out much hope.

But, hey, you know, anything can happen in the NFL. The Cowboys had never won at Lambeau Field, until Tony Romo did. He also beat the undefeated Colts on their way to the Super Bowl. For what that's worth.

However, that was then, this is now. These Cowboys have yet to score a touchdown on their opening drive this season, they cannot convert on 3rd downs and maintain drives, they have no deep threat or running game to speak of, and they consistently stall in the red zone. Oh, and their kicker can't make a field goal to save his life.

So, yeah, I think this one is going to get real ugly real quick. These Saints are on a roll. And I like New Orleans, always have. I mean, I don't hate them like I do Washington and Philadelphia and New York.

I'd like to see the Saints win it all. I would rather they not win on Saturday, you understand, but then that would only prolong my misery.

I was at that game in Dallas in 06 when Sean Payton's Saints slapped 42 points on my Cowboys, who could only manage 17. I really don't expect this game to be any different, in fact it may be even worse. Such is life.

But we'll still be friends. Just not when the game is on.

EconomicDisconnect said...

It is a tough game for the Cowboys but of course the Saints are famous for having bad games so anything can happen. I really want the Saints to lose a game, th whole undefeated thing is not a good way to go into the playoffs.

The Topiary Cow said...

Fascinating stuff.

(Got to you through Bubble Meter)

Thanks, much to think on here...

EconomicDisconnect said...

thanks, I do try and keep it interesting!

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