finance.yahoo.com
Saudi Prince Fails to Halt Citi Slide: More Pain Ahead for Banks, Roque Says
Posted Nov 20, 2008 10:48am EST by Aaron Task in Investing, Newsmakers, Recession, Banking
Related: C, JPM, BAC, XLF, WFC, ^DJI, ^GSPC
Citigroup shares got a very short-lived bump early Thursday on news Saudi Prince Alwaleed plans to up his stake in the beleaguered bank to 5% from 4% currently.
But the pre-market bounce dissipated even before the 9:30 a.m. ET open of regular trading and Citi shares were recently down another 18%.
"Citi trades as if it were going to need some [additional] assistance from the government," says John Roque, managing director and technical analyst at Natixis Bleichroeder.
As discussed here, the government will not let Citigroup fail but that doesn't mean equity holders won't get wiped out in the process if the bank becomes a ward of the state, similar to AIG.
But with Citi shares at a near 14-year low and Citi, JPMorgan and Bank of America having lost over $450 billion in market cap since the 2007 peaks, there has to be some value in the sector, doesn't there?
Roque says otherwise, noting value investors aren't tripping over themselves to buy these "cheap" financials. Even with the S&P Financial SPDR down more than 70% from its peak, the entire sector still has more pain ahead, he says, based on the historical peak-to-trough declines of past market manias, including:
Dutch Tulip Mania (1637): 90% peak-to trough decline
South Sea Co. (1720): 90% peak-to trough decline
Tokyo Real Estate (1989): 84% peak-to trough decline
U.S. dotcoms (2000): 92% peak-to trough decline |
