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Strategies & Market Trends : Value Investing
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To: MCsweet who wrote (35112)8/14/2009 5:30:47 PM
From: Arthur Radley  Read Replies (1) of 78729
 
MC,
On the surface your Citigroup strategy sounds good, however, the mere fact there is that nice spread between the common and pfd means that 'professionals' are willing to gamble that your strategy is wrong. This nice spread is there for one reason......a shaky corporation is the basis for your gamble. Ssfe bets are when the spread is smaller...if sound investing is ones strategy. As for having any position in (C) you would have better luck going to Vegas and putting all your money on red or black, and letting it spin. Remember, it was only a few months ago that an middle eastern Arab sheik invested a boat load in (C) common at around $28.00. Hard to believe this guy didn't have some of the smartest advisors in the world give him the go ahead with his oil money to buy C stock. Of all the major banking firms.........IMO, it's the shakiest of them all. Never forget all that toxic debt that got them down to the current bargain basement share price..........is still on (C) books. None of this stuff has gone away....the final shoe hasn't dropped on these banks.

I just got off the phone with my next door neighbor......he is the IT manager for Shell Oil and they just appointed a new chief executive and he is cutting staff left and right, so if one thinks this economic environment has improved, just know that suddenly the 'grim reaper' has shown up in Texas and when a multi-national corporation like Shell is now laying off workers......why would anyone want a multi-national bank stock in their portfolio?

Hey! I appreciate the points you make......but, I still stand by the position that margin debt in this market enviroment is a sucker bet with the broker firms loving that interest you are paying them. Always remember one think about margin accounts.......the brokerage firm owns your stock and can declare is as their asset...you get a piece of paper that tells you they have your stock in 'street name' only.......and if the stock goes down you have to give the brokerage firm more money to cover your margin......all the while you are paying them interest. Bottom line is that brokerage firms allow margin accounts for one reason.........so they can make money off the investor.
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