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Goldman Now Shorting Citi As It Upgrades Vikram's Insolvent Ward Of State To Buy, Puts Jefferies On Conviction Sell
Goldman is now adding to its clients' future woes by upgrading bankrupt bank Citi even as it sells Citi shares to clients who follow its advice. The reason: "There are two themes that keep us positive on universal banks – the turn in consumer credit, and prospects for a good capital markets quarter." Oddly enough, there is no mention of the fact that the primary means by which banks have generated (near) flawless recent quarters has been due to the extremely steep yield curve and that this steepness has been reduced by almost 20% in the past week, thus taking away a massive chunk of Bank P&L. As for the turn in consumer credit, should some administration be voted in that actually tells homeowners to pay their mortgages for a change, the bloodbath in bank balance sheets will be unprecedented. Now that Goldman has put Jefferies on the Conviction Sell list it is time to load up. Here is the full rating change summary from this morning's Goldman report on financial firms.
We are adding BLK, ACE, CME and NTRS to the Conviction Buy List and removing BEN, BX, STI and EVR. We are adding JEF and AMB to the Conviction Sell List and removing FII. We are downgrading the Asset Management coverage view to Neutral from Attractive, and are downgrading JNS and CLMS to Sell from Neutral. Within banks, we are upgrading C to Buy from Neutral and downgrading WFC and CMA to Neutral from Buy. Within Insurance, we are downgrading ACGL and VR to Neutral from Buy.
When will Goldman introduce the dodecatuple conviction client guaranteed to lose money list?
Specifically, here is why Goldman is feeling so bullish on Citi and BofA:
An issue that remains on the table for the large-cap banks is resolution authority and the resulting risk of rating agency downgrades. The ratings methodology of S&P and Moody's includes an uplift to ratings due to assumed support from governments in a stress scenario. Resolution authority gives the FDIC power to unwind failing financial firms and explicitly bars the use of taxpayer funds to rescue them. Thus the ratings agencies have said lower ratings could result given increased risk of bondholder losses in a stress scenario.
Specifically, if we focus just on bank-level ratings, BAC, C and MS are all rated as A+ companies by S&P, with three notches of uplift from government support. S&P has not clarified whether, when government support is removed via the passage of resolution authority, ratings will fall three notches, or whether mitigating factors will offset this.
S&P has also said that any company with a long-term rating of A- or below would fall from A1 to A2 in the commercial paper market. Many money market funds cannot buy A2 commercial paper, according to their charters. Moreover, it is harder to repo anything other than ultra-safe government bonds with an A2 rating.
While we recognize the risk of downgrades, we are less concerned about the funding implications as (1) banks’ capital and liquidity have improved, (2) short-term funding is 17% of total funding and has shrank 37% since 3Q2007, and (3) cash on balance sheets is high. The risk is likely asset deleveraging – if all the banks and brokers that face this risk shrink their balance sheets, some $175 billion of deleveraging could result, assuming these banks lose 75% of their CP access and 20% of their repo access.
And even as Goldman upgrades Citi, Citi has upgraded Google. When will Google return the favor and upgrade Goldman?
Full report below:
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so they want out of C, eh?
I think the market is so thin on new meat that they have to start cannibalizing themselves to make bonuses.
Yep, there is nobody else to gamble with so they just have to gamble with each other.Nothing like a good game of battleball or king of the hill.
Who gets paid to read this nonsense?
Goldman knows what the FED knows...QE is coming. Who are the beneficiaries? Banks. Who loses? Everyone else.
+1
As Time Rolls By...
"And even as Goldman upgrades Citi, Citi has upgraded Google. When will Google return the favor and upgrade Goldman?"
Circle jerking with the squid.
There is one theme that keep me positive, for now, on universal banks: that they have a limitless and uninterrupted pipeline into the current and future earnings of every worker in the US of A.
And that will continue, until it can't. But until then it's RALLY ON!!
Intersting find on JPM board over at yazoo: check this out, probably 100% true
Subject: Fwd: Bank of America
Bank of America, can I help you?
Customer: Yes, I want to cancel my account. I don't want to do business with you any longer.
The Bank: Why?
Customer: You're giving credit to illegal immigrants and I don't think it's right. I'm taking my business elsewhere.
The Bank: Well, Mr. Customer, we don't want to see you do that, but we can't stop you. I'll help you close the account. What is your account number?
Customer: (gives account number)
The Bank: For security purposes and for your protection, can you please give me the last four digits of your social security number?
Customer: No?
The Bank: Mr. Customer, I need to verify your information, but in order to help you, I'll need verification of who you are..
Customer: Why should I give you my social security number? The reason I'm closing my account is that your bank is issuing credit cards to illegal immigrants who don't have social security numbers. You are targeting that audience and want their business. Let's say I'm an illegal immigrant and you've given me a credit card. I have a question about it and call for assistance. You wouldn't be asking me for a Social Security number, would you?
The Bank: No sir, I wouldn't.
Customer: Why not?
The Bank: Because you would have pressed '2' to speak in Spanish. We don't ask for that information when calling in on the Spanish line.
If it does raise the hair on the back of your neck, then forward it to every human in the country including every representative in Washington , DC four times a week for a month.
Provided "snopes" for doubters:
http://www.snopes.com/politics/immigrati...
"When will Goldman introduce the dodecatuple conviction client guaranteed to lose money list?"
LOL
I think I need to begin compiling a "Tyler Durden Zinger List" of one or two sentence stun gun zingers.
BTW Tyler, could you please add "dodecatuple" to the ZH comment box spelling dictionary? Thank you. :>)
TD wrote: " . . . should some administration be voted in that actually tells homeowners to pay their mortgages for a change . . . "
What a joke! The nanny state lives after all, I guess.
How about letting the wonderful little capitalist market do its thing? If the banks want to issue mortgages to gin up trash and pass off to suckers, what business should the state have in serving as their debt collectors?
If you insist on the state doing something, how about issuing a debt morotorium and taxing derivatives to high heaven (re-opening schools, hospitals, senior centers, etc. in the process)?
Anyone suckered into a mortgage that has them underwater today SHOULD walk away. Let the swine and the parasites fight over who loses more.
Goldman's a jerkoff
A jerk-off that paid my rent this morning. Thanks, Lloyd!
Wasn't the gov't going to sell it's stake in Citi? If Treas it is still selling (or about to sell) C, then perhaps this could be viewed as GS trying to curry some additional favor, given its current regulatory and legal entanglements, and hoping for some mutual backscratching in return?
what's the deal with JEF? trying to ram down the price so they can buy it? or help a client buy it?
The rats are getting off the Cit(i)antic ship.
Buy Citi, we'll sell you all our shares. You want BofA, we've got BofA.
Um, is it already an official stance of ZH-readers to do the exact opposite of what the Giant Squid says it's clients should do? Or is it still just common sense?
Also, while we are on the subject does this mean that when GS starts telling the truth it means there are no more bodies to feed off and it's left last-man-standing in the wasteland of what was previously known as The Market?