Hi. Only got time for a few items today, but they're pretty good ones. Citigroup hit the confessional this morning, and the implications of what they reported about their past, present and future are sobering. Also, a smart person sends up a warning flare for conditions that could lead to a stock market crash, Senators Obama and Clinton turn back on to the high road, and inquiring minds want to know what really happened in the Strait of Hormuz last week.
So it was Citigroup's very bad, truly awful, no-good day: and the litany of bad news included a $10 billion loss, an $18 billion write-down, a dividend cut, 4,200 layoffs, a $14.5 billion chunk of itself sold to investors including Singapore and Saudi Prince Alwaleed, and at the end of today a 41% drop in its stock price in just 3 months. The NYT rounds it up. And if you have a WSJ subscription, here's their version. That, combined with a weak retail sales report from December sent stocks plummeting, with the Dow closing below the August swing low for the first time.
That last fact brings up a commentary by fund manager John Hussman, in which he describes market conditions that might be the set-up to an exceedingly rare outright market crash. QUOTE: "..I am emphatic that investors should evaluate their risk exposures and tolerances now, in order to allow for substantial further market weakness. Market conditions presently feature a Pandora's Box of rich valuations, vulnerable profit margins, rising default risk, rapidly deteriorating market internals, failing support levels, and accumulating evidence of oncoming recession. As I noted in my December 17 comment, "there is one particular scenario that would be ominous in my view. That would be if we see a relatively uninterrupted series of declines that breaks cleanly through the August and November lows, followed by a one-day advance of 200-400 Dow points. That's a script that markets tend to follow pre-crash. Though it's not a strong expectation or forecast, it's something worth monitoring, because we've started to see the pattern of abrupt jumps and declines at 10-minute intervals that is often a hallmark of nervous markets.""
Oh and Paul Krugman sees yet another sign that the Apocalypse is here.
And one more note on this: USA Today's editorial page did a nice job of arguing that Fed Chairman Ben Bernanke is not responsible for Wall Street's excesses.
And here's a nice segue from the economy to politics, a survey of financial advisors that finds their biggest fear is a Democrat in the White House next year. Here's an answer to those fears from House Financial Services Chairman Barney Frank, who points out that what the world needs now, is a little less Republican laissez-faire. On the other hand, who was responsible for loosening banking rules that allowed the "financial innovation" that got us into this mess in the first place? Bill Clinton and his Treasury Secretary (now Citigroup elder statesman) Bob Rubin would be one place to look. Read more about the long demise of the Glass-Steagall Act here.
Steve Benen at the Carpetbagger Report points out that, as Senators Obama and Clinton have pledged to knock off the race-based rhetoric, it's the Clinton surrogates who seem to be the ones to watch.
And Cernig at Newshoggers is asking some pointed questions about the Iranian fast boat incident in the Strait of Hormus last week. He also posts the full video, which doesn't look a whole lot like what we saw on TV last week.