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Brother, Can You Spare 400 Billion?

Click the below link for musings about Citigroup's $400 billion garage sale.

Courtesy of the AP:

Citigroup Inc.'s new chief executive plans to stick with a global banking model after months of intense review -- but only after shrinking the company by about one-fifth first.

The three-year game plan, revealed Friday, includes getting rid of more businesses, mortgages, real estate operations and jobs.

The bank aims to shed between $400 billion and $500 billion of its $2.2 trillion in assets and grow revenue by 9 percent over the next few years as it tries to rebound from massive losses tied to deterioration in the credit markets.

Ah, yes, Citigroup.

Selling off non-core assets is a time-honored and proven method of unlocking shareholder value. In fact, with the sole exception of buying back shares, non-core asset sales and similar divestitures are the best methods for boosting the value of a business -- especially a mature business.

Even though its share price has jumped way up from its Lemming-induced, intra-year lows, Citigroup remains an obvious buy target. Hell, Citi is such an obvious buy target that you'd have to believe in the tooth fairy, or in so-called "Operation Chaos," not to realize in five years Citi's share price substantially will be higher than its current price.

Morals of the story:

1. Ignore the Lemmings of Wall St.
2. Blue-chip companies selling at discounts to book value must be purchased.
3. Intelligent investing is a marathon, not a sprint.


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Comments (1)

Not to minimize the deterio... (Below threshold)

Not to minimize the deterioration of the credit market, but part of the reason they're selling off subsidiary companies is gross mis-management of them. The parent company can't continue to absorb those losses or simply pass the expenses off onto the customer.

My husband works for CitiStreet which was just bought by Ing. (Employees are now calling it CitiString.) Fortunately, for us, my husband doesn't work for any department that Ing plans to discontinue.






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