zt: Citigroup: The Death of Buy-and-Hold Investing?

http://seekingalpha.com/article/123425-citigroup-the-death-of-buy-and-hold-investing?source=yahoo

[Excerpted from Bill Cara's Daily Report]

Sex and the City was a very popular television and movie comedy-drama. Washington and the Citi, on the other hand, has been a drama totally devoid of comedy or sex. Call it nationalization or call it a public-private partnership, but traders walked out of the theater this week. They had wanted to see Citi fail.

Citigroup (C) shares have now plummeted all the way to $1.50. Oh, how the mighty have fallen. As recently as April 2008, there was a high of $29.89 and as much as $56.28 in 2007 when Citi was the largest financial services company in the world. But C is now down -$55/share on 5.5 billion shares, losing roughly -97.7% of market value, causing the single biggest loss of wealth in world history. And if it wasn’t for the US government (ie, taxpayer) stepping in, there might even be a movie called the Lost Citi – or as some of us would like to have the script written, the Last Citi.

To watch Citi self-destruct in only about 16 months has been stunning. All through this drama, management tried to make it appear they were in control, and their investments in real-estate mortgage-backed securities would pay off, while others claimed the destruction was due to short-sellers. They all lied. Greed made them do it.

The Citi case study, however, has an upside; it has led to the death of buy-and-hold investing, which is ultimately a good thing in that the public can now see that vested interests of a relatively small group of Wall Street connected insiders, acting without full transparency, some might say deceptively, can be ripped apart by free market patriots from Main Street.

Moreover, regulators in Washington have now been shown that the one-stop shop marketing concept was really a ruse for management control by a small group who used their added power over shareholders to greedily pay themselves billions of dollars in annual bonuses.

Greed; it’s all around us, and in truth we need it, but clearly not too much


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Just go to any broker. Buy and hold mantras still exist everywhere. It's what keeps you from cashing out.

When it dies, then you'll know. It's called market capitulation. In this downturn, it won't be because investors don't believe equities won't eventually rise. It's going to be because they can't afford to keep holding the position.

As for Citibank, we can learn a lot more from it than don't buy and hold a garbage stock forever (We can learn that from Enron and every other failed business). Here are a few: Don't let banks get too big. Don't let them regulate themselves. Don't let them gamble on things requiring no collateral and unlimited liability (derivatives). Don't let them keep losses off the balance sheet. Don't let government bail them out and keep the existing bad management. Don't let them bet trillions on contracts that are undtandardized, untradable, and undisclosed to their investors (derivatives). Don't let banks write contracts that are like insurance companies and brokerages or otherwise break down the barriers of Glass-Stegall. And most of all, don't depend on the government to fix a bad situation. Usually all they do is make it worse.