March 20, 2008

Citibank steals a page from HP: "The Great Unwind has begun"


I should have trademarked "The Great Unwinding". Oh well.

This Citi report is straight from Manias, Panics and Crashes I swear. Or HP.

So what do you think is gonna blow up next?

The Great Unwind has begun, Citigroup Inc. strategists warned on Wednesday.

As markets and economies de-leverage across the globe, investors should avoid companies and countries that have grown to rely too much on borrowed money, they said.

"Steady growth, low inflation and rock-bottom interest rates encouraged economic and financial participants across the world economy to gear up over the past few years," Robert Buckland and his colleagues on Citi's global strategy team wrote in a note to clients. "Easy money encouraged many to buy a bigger house, a bigger car or a bigger speculative position."

"But now, any behavior that relied upon continued access to easy money is being dramatically reassessed," they added. "Leveraged banks must lend less, leveraged consumers must consume less, leveraged companies must acquire or invest less, and leveraged speculators must speculate less."

27 comments:

satan said...

Hi Keith,

We know things are bad when citibank publicly agrees with your prediction.
The real question is whether the world will be recognizable after this "event".

I do not think any job/ profession is safe in this downturn, even doctors won't come out of the other end without severely reduced incomes.

satan said...

PS Marketwatch has tagged this article as "death bed confessions".

Anonymous said...

You know all these network types troll the blogs for ideas and then take credit for it. Pretty unethical. Oh by the way, Hi! xyz network researcher/reporter. Oh, you are welcome. Not fair that you get paid when someone else does your work for you.

Anonymous said...

Shanghai Index Down More Than 6 Percent
Thursday March 20, 12:56 am ET
China's Main Stock Index Down More Than 6 Percent; Hang Seng, Kospi Also Lower in Early Trade

HONG KONG (AP) -- Asian stock indexes fell in early trading Thursday as investors took a cue from overnight losses on Wall Street

Anonymous said...

I actually think I agree with satan. I think we will see asset and wage deflation on a large scale. It's the end of leverage.

Ed said...

You are forgetting about the great trillion dollar bailout that's coming as well. You still don't get it do you? It's an election year and both sides will spend everything and the kitchen sink to keep this from unraveling.

Anonymous said...

Commodities are getting routed today again people going to cash

horndog said...

where have they been for the last 3 years?great call citi.

horndog said...

where have they been for the last 3 years?great call citi.

Peter T said...

Mish over at Global Trend Analysis had a fitting comment to Citi's analysis: It's as close as you will get it to a sell recommendation on self (Citi).

Anonymous said...


Commodities are getting routed today again people going to cash



If you believe that, then there will be no inflation. Inflation is caused by labor and raw materials costs. We know wages and salaries are not going up. If raw materials prices drop, then the cost of living should go down, according to your theory. I think it's just a retracement. Would you rather hold food and energy, or paper dollars that are being dropped from a helicopter? So in the short term, there can and probably will be a huge retracement in commodities to shake out J6P, but in the long term, the price of food and energy will increase. Just don't gamble with leverage and you will be fine.

Anonymous said...

Dow soaring - up 0.81% to 12197 as I write this. Nice "unwind" you've got going there Keith.

Mammoth said...

Ed said...
"It's an election year and both sides will spend everything and the kitchen sink to keep this from unraveling."
---------------------------
Putting a band-aid over a gushing wound will not prevent or halt the flow of blood.

Malcolm said...

That’s kind of funny.

Am I the only one who remembers that Citibank used to be the place to go for easy credit?

As I recall, they would give a credit card to any unemployed or unreliable person, dog or corpse who filled out the pre-approved form that arrived in the mail.

I can still remember a friend of mine (who never made more that $8000 per year) getting on the hook for about $40k to these guys. Every time he maxed it out and couldn’t make the minimum payments, they would just raise his limits.

Reminds me of the drug dealers who sell crack in their mother’s neighborhoods, then complain about the class of people who show up.

Anonymous said...

WHO ARE THESE STUPID/MORONIC PEOPLE BUYING STOCKS TODAY AFTER THE BEAR STEARNS CRISIS?

THE SAME PEOPLE WHO BOUGHT HOUSES 3 YEARS AGO MAYBE??

DUMB,DUMB,AND DUMBER!!!

STUCK ON IGNORANT AND SLIDING INTO STUPID!!

Anonymous said...

Remember the Rothschilds - they talked and sold the market into a panic and then bought everything up at fire sale prices.

satan said...

http://tinyurl.com/2jcn7g

Bernanke's Own Home on Capitol Hill Shows Housing Boom and Bust

By Brendan Murray

March 20 (Bloomberg) -- The U.S. housing recession has arrived literally on the doorstep of Federal Reserve Chairman Ben S. Bernanke.

Bernanke lives in Washington's Capitol Hill area in a four- bedroom, 2,600-square-foot house he bought new in May 2004 for $839,000. Almost four years later, it may not be worth any more, according to real estate records and local agents.

Anonymous said...

What are the odds of a full-blown civil war breaking-out in the colonist within in next 6 months?

g said...

Cmon Keith - didn't Michael Panzner come up with "great unwinding" in his Financial Armageddon book a couple years ago?

keith said...

I thought I owned "real estate industrial complex" or "REIC" too, but I guess someone else also had put that one out there too

Did I tell you I invented the internet too?

Anonymous said...

And they paid some idiots $1,000,000+ a year to state the obvious ... after the fact! I want one of those jobs. I'll even wear a suit.

eric in vegas said...

"HONG KONG (AP) -- Asian stock indexes fell in early trading Thursday as investors took a cue from overnight losses on Wall Street"

Damn China can't even keep their market propped up and we're still months away from the Olympics. Asia will be the first to fall, then Europe, then the US.

"You are forgetting about the great trillion dollar bailout that's coming as well. You still don't get it do you? It's an election year and both sides will spend everything and the kitchen sink to keep this from unraveling."

So what happens after the elections? They just let everything go to shit?

Anonymous said...

Citi is correct! We need to unwind all this debt we have been leverageing over and over again. Only the public can get a handle on the Wall Street gang and stop all the speculating with anything that can be securitize.

Take back our country by getting out of debt! Let the banks finance more public schools, public works, parks and infrastructure.

Financing the housing bubble is not for the greater good!

Anonymous said...

The Fed is now DIRECTLY lending an average of $13.4 bn daily (13.4 bn dollars every day! Yes! You heard it right) to big Wall Street investment firms who seem to have been granted bank status, thanks to Bernanke's largesse!

http://tinyurl.com/2fvw3s

The scary part is that those firms are not regulated like the banks!

I would really like to know what would happen to those tens of billions of taxpayers' dollars if tomorrow a company like Lehman, G. Sacks, M. Stanley or any of those dubious new Fed clients on Wall Street suddenly desintegrates like BSC.

Can someone help me out on this?

MAX

Anonymous said...

PS:
The funny part of this new round of Fed handouts to Wall St. Investment Firms is that they are kept anonymous (just like I am here!).

Every Bank I know that has ever lent me any money has always made sure that my privacy was a fair game until the day I paid that money back. And even after I paid my dues, my entire history is still kept open for anyone to check and scrutinize!

Try going tomorrow to the Fed begging for 5K and see:

1st- if you can get the money.

2nd- if Bernanke can issue a gag order so that no one at the Fed would dare divulge your name, address, tel number, employer, wife, kids, and your entire FBI file!

MAX

Anonymous said...

Wait until the travel industry collapses. Why? Oil. What do cruise ships, planes and Amtrak trains and Greyhound buses have in common? They use diesel! Note that No. 1 heating oil (used by ships), jet fuel (planes) and diesel (trains and tour buses) are so similar that the US Navy uses one and the same fuel for ships, the planes, and diesel devices interchangeably.

The commodities futures price for heating oil is $3.15/gallon and diesel and jet fuel are in near lock-step because they are so similar.

The airlines are now adding a fuel surcharge and Carnival Cruise Lines is doing the same - retroactively if you already booked.

Couple that with would-be travelers are paying more at the pump to commute to work. Any town that depends on tourism is toast. New Orleans will never recover if people can't afford to get there to party it up.

As oil production peaks and starts its slow, maddening decline tourism is toast. Just like those far-flung developments that are toast.

Anonymous said...

McGruber!