Citibank Handout - Part II

by Larry Levin

Last week I wondered if Citibank was going to change its name to Saudibank (it had just received another huge investment from Sheik Al-Waleed) or Shitibank since the bank was going down the toilet? At the time I said the odds-on favorite would be the former, but now it's clear: any new name must be Shitibank. The latest handout to the Wall Street greed machine is sickening, potentially putting innocent taxpayers on the hook for about $?-trillion!

A few weeks ago TARP funds were distributed in a secret meeting (minutes of the meeting will NOT be released to the public) in which Shitibank received $25-billion. Will the garbage assets that we are now back-stopping be listed for public review? Hell no! Where did the new $1/4-trillion funds come from? Sure, Shitibank hasn't lost the money yet but what if it does? Isn't this money supposed to be appropriated in the House of Representatives? Does anyone in Washington follow the constitution any more, or is it just a quaint relic used to describe the old days?

By the way, the Federal Reserve refuses to disclose how it has practically given away $2 or $3-TRILLION. Where is the outrage?

When the TARP funds were given to Shitibank, its market capitalization was approximately $76.3-billion. With this weekend's additional funds the taxpayer has been forced to give Shiti a combined $45-billion. Using today's closing price of $5.95 we see that its market capitalization is now just $32.43-billion. So, we give Shitibank $45-billion yet it's not even worth $33-billion? How the *^%# can Shiti pay back the taxpayer when we have given it more than it's even worth? Where is the outrage?

Knowing that the average American doesn't give a damn about the ever escalating handouts to Big Business, the largest homebuilders in the country squawked this afternoon. They too want a handout! Who's next? Probably credit card companies, then city and State governments. Who will be after that? My bet is the major retailers. After a poor Christmas season Macy's, Sears and others will warm up to the teat of government largesse. It is truly sickening!

Where is it all leading us? Total system failure in my humble opinion. The official national debt is now over $10 trillion. (The official debt does NOT include the $53-trillion in unfunded liabilities for Medicare, S.S. and government pensions.) For ease of calculation, let's say it bears an interest coupon of 4%. That would put the annual interest charge at $400 billion - or 13% of a $3 trillion budget.

But remember, the U.S. government does not take in enough in tax receipts to pay current costs. With falling tax revenues and rising social costs, not to mention rising bailout bills, the deficit is expected to come in above $1 trillion. Or, to look at it differently, the entire interest payment has to be borrowed too - in fact, more than 2 times the interest charge!

So, in 2010, the interest charge would be another $1 trillion x 4%, or $40 billion more. Some are now saying that the deficits should go to $2 trillion or higher. Whatever it takes to get us to spend money we don't have on things we don't need they say - like the good 'ole days. And what happens if a $1 or $2-trillion deficit persists for a few years? It wouldn't be too hard to imagine a national debt greater than the GDP as early as 2011.

And when that happens, the same slack-jawed yokels who stand idly by while the government willfully uses the Constitution as toilet paper will wonder why the government spent the country into ruin. At this point, US sovereign debt will be a joke.

A tale of a Shitibank employee:

The youthful and enthusiastic Chuck moved to Texas and bought a donkey from a farmer for $100. The farmer agreed to deliver the donkey the next day. The next day the farmer drove up and said, Sorry son, but I have some bad news, the donkey died.

Chuck replied, Well, then just give me my money back. The farmer then said, Can't do that. I went and spent it already. Chuck added, Ok, then just bring me the dead donkey. The farmer then asked, What ya gonna do with him? Chuck replied, I'm going to raffle him off. The farmer said, You can't raffle off a dead donkey! Chuck countered, Sure I can. Watch me. I just won't tell anybody he's dead.

A month later, the farmer met up with Chuck and asked, What happened with that dead donkey? Chuck said - I raffled him off. I sold 500 tickets at two dollars apiece and made a profit of $998 while recovering my initial investment of $100.

The farmer asked, Didn't anyone complain? Chuck replied, Just the guy who won. So I gave him his two dollars back.

Chuck went on to work for Shitibank's investment banking unit where he designed and sold packaged product investments including S&P triple-A rated collateralized mortgage obligations, CDOs and CMBSs. They were easy to sell to Morgan Stanley and especially easy to dump at Wachovia and Lehman Brothers. It was all a huge success while it lasted.


Previous Day's Trading Room Results:

Trade Date: 11/24/08

E-Mini S&P Trades*
(before fees and commissions):

1) OTF buy @ 11:10am at 834.50 = -2.00 (1 lot)

2) Algorithm positions (22)...combined daily total...+14.25

ZB (30 Year Bond) Trades*
(before fees and commissions):


1) No trades today.



Sign up as an AvidTrader Member to receive "The Technician" Value Area's each day. The market then has an 80% chance of filling the Value Area. Many traders familiar with the Value Area and the techniques that go along with it use it to help them decide what trades to do each day. Join and see how this technique can help you trade more successfully!