Citigroup Nonsense

Vikrim Pandit, the CEO of Citigroup, missed his calling -- he should have been a carnival barker, touting three legged tigers, bearded women and other anomalies, for that is what he is touting now -- a broken bank posing as a profitable one.

This morning the Citi public relations machine put out a note about their profitability in January and February -- and I can only assume this is based on the definition of operating earnings. So what. The bank is broken with not just two trillion dollars in assets that include a chunk of uncertain value but $1.2 trillion in off balance sheet assets Pandit never, ever, ever refers to. You had to be a Citi watcher -- or a short side guy like me - to find these, the first reference to them being in a smallish SEC filing in February of 2008. Then, in November of last year, Citi unveiled these assets on page 21 of their town hall meeting presentation -- you can see the whole thing on their website. My broker, a very smart Citigroup broker (he has taken his whole group and moved to Wachovia Securities, now part of Wells Fargo, wonder where he will move next year, more on that later) could to understand the chart and its acronyms. Simply put, the chart showed $1.2 trillion in off balance sheets and only used acronyms, including the one made famous by Enron -- QSPE -- Qualifying Special Purpose Entity. Mr. Pandit's carnival barking and press releases don't compensate for these off balance sheet assets including more than $800 billion Citi said not to worry about due to an accounting change. Comforting.

Will Citi continue to tally? Maybe. Will the government fudge the stress test and not include these off balance sheet assets? Possibly. Does Citi have any intrinsic value? None -- eventually I see the company being broken up and shareholders ending up with little or nothing. Stay away.