Citigroup Inc., once the world's biggest bank by market value, dropped below $1 in New York trading for the first time as investors lose confidence the shares can recover after more than $37.5 billion in losses and a government rescue. Citigroup fell to $1.03 at 12:32 p.m. on the New York Stock Exchange after reaching 97 cents earlier today, marking an 85 percent decline this year and giving the New York-based company a market value of $5.5 billion. At its peak in late 2006, Citigroup stock was worth $55.70, for a market value of $277.2 billion. Citigroup, run by Chief Executive Officer Vikram Pandit, is now the 184th biggest bank by market value, behind Malaysia's Bumiputra-Commerce Holdings Bhd and Turkey's Akbank TAS, in which Citigroup owns a 20 percent stake, according to data compiled by Bloomberg. "You can finally buy Citigroup shares at the dollar store," said Diane Garnick, who helps oversee $354 billion as an investment strategist at Invesco Ltd. in New York. "The banking industry is about to enter the era of entrepreneurship as the umbrella model fails and companies will position themselves to focus on one niche. – Bloomberg
Dominant Social Theme: A historic collapse. Who would ever have suspected?
Free-Market Analysis: Citigroup Inc. is a penny stock now. We are well aware of the special contempt that American regulators hold for penny stocks. We've heard it in their voices. But Citigroup is worse than a penny stock, because penny stocks in the United States are stocks that trade at less than US$5. Citigroup went under a dollar on Thursday. It is a dollar-penny-stock. Yet for some reason, however, the vituperation aimed at the ordinary penny stock seems to be missing as regards Citigroup. People seem more puzzled and frightened than anything. They just can't figure it out. How did Citigroup go from a market valuation of US$300 billion to US$5 billion? "Mabel, did you see this! Crazy times, Mabel. Crazy times!"
But as we pointed out in the other article in this edition of the Bell, what has happened is not crazy at all. Citigroup was at the very heart of the longest long-term fiat money bubble in the United States (some 30 years, we figure). It was the engine of that bubble, with hundreds of thousands of employees and trillions of dollars in loans and investments and derivatives. Lord knows what kind of wreckage remains on its books now. In fact, that's probably one of the reasons for the current share price. The market knows what it doesn't know – and the market is stating loudly and clearly that it doesn't know much about the real nature of this behemoth bank. What it does know it doesn't like.
How much of Citigroup's business is wrapped up in failed developments and ruined houses? How much of its capital is tied up in loans to ventures that are now seen as impractical and useless? That is the reason for Citigroup's valuation. The market realized about a year ago the nature and extent of this biggest of bubbles and it has been pricing in the ruin of it all ever since. And Citigroup is ruined. In fact, absent the government's endless injections of billions, the bank would be in pieces by now. It would not exist. Its businesses would have been cut up by now and purchased. The real value would have been known. The worst, in fact, would have been over. But that is not going to happen. Citigroup is deemed too big to fail.
It is indeed puzzling to see the fluctuating value of marketplaces and major financial players. Bank of America and even venerable Wells Fargo are plunging toward the penny stock range (BOA is already there.) Of course, people don't get it. Capitalism has failed, they say. Maybe there is something to socialism after all. What they don't understand unfortunately is that central banking IS socialism. It is pure socialism – a bunch of insiders determining basic money prices for the entire world. What has failed, in fact, is socialism – and its apostles (Citigroup) have failed as well. Unfortunately, its enablers remain to confuse us and to confound the general population. Even now they are working hard to rebuild the failed system using "stimulation" to prop it up under the justification that its most useless excrescences are simply too important to dissolve. But Mabel, these are not crazy times. Sadly, they are all too predictable.