Probe of Citigroup et al Could Hit Financial ETFs
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Citigroup’s (C) imminent charges could wind up packing a wallop for financial exchange traded funds [ETFs].
New York Attorney General Andrew Cuomo has said he plans to charge the bank with fraudulently marketing and selling auction-rate securities, as well as destroying subpoenaed documents, report Joseph A. Giannone and Jonathan Stempel for Reuters.
Cuomo has left open the possibility for a settlement, but any resolution is going to require that Citigroup buy back the affected debt at face value, pay damages and a penalty.
Other financial institutions are under the microscope of regulators, who are looking into auction-rate sales practices. They include many of the top holdings of financial ETFs, such as Bank of America (BAC), Merrill Lynch (MER), UBS AG (UBS) and Wachovia (WB).
Some ETFs that could be affected as the investigations progress include:
- Financial Select Sector SPDR (XLF): down 25.4% year-to-date; Bank of America, 7.8%; Citigroup, 5.9%; Wachovia, 2.6%
- KBW Bank (KBE): down 23% year-to-date; Bank of America, 8.2%; Citigroup, 6.7%; Wachovia, 5.3%
- iShares MSCI Switzerland (EWL): down 9.7% year-to-date; UBS AG, 4.6%
- iShares Dow Jones U.S. Financial Services (IYG): down 25.3% year-to-date; Bank of America, 8.8%; Citigroup, 7.5%
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This article has 18 comments:
Can you imagine the Governor of Michigan suing Ford or the Governator of California suing Disney?
No one expected these auctions to fail, but hindsight is a wonderful thing.
Citi, et al.. have the integrity of loansharks.
Go Cuomo! You're doing the right thing.
Tiedeman
Everyone probably has a "vested interest" in promoting their take on the outlook for mkts, sectors, or stocks.
However, because they may/may not have a VESTED INTEREST...DOES "NOT NEGATE" their REASONING!
in reality...being short or long on something...indicates.... PUT YOUR MONEY WHERE YOUR MOUTH IS.
My take...
how, can you be LONG the "financials" when the FUNDAMENTALS keep getting worse "day-by-day" ...week-by-week" etc.
SHORTS have BACKUP OF FUNDAMENTAL DATA...
...and their "short" because that's the PROBABILITY OF MAKING A RETURN ON YOUR INVESTMENT.
I LISTEN TO "all news, etc." AND TAKE A POSITION ...BASED ON "PROBABILITIES&qu... of a sector, stock, etc.
whether, someone has or doesn't have a "so-called vested interest" GOES WITH THE news, analysis, etc.
Who, convinces me...is the WAY...and WHAT SIDE I INVEST ON!
short financials: all the fundamentals, news, statistics...STRONG CASE...
long financials: CHEERLEADING MOSTLY...no facts or logic to support their position...
suspect many LONGS are "shills" for "big boy investors" who like Lewis in the case of Bear Sterns...AFTER THEY TOOK A TERRIBLE LOSS as Bear Sterns kept declining over time...tried desperately to STAVE OFF "FURTHER LOSSES as Bear Sterns went down to like $2.
Looks, to me like "evidence" is for WORSE NEWS for "many large financials" and they will GO THE WAY OF BEAR STERNS...
screwing their investors...despite last minute help from the Gov to prop their prices, and rally the financials...but based on what...
the gov will let you survive...even the Gov will stop support when IT REALIZES THIS price prop spin WILL FAIL...
AND THE GOV WILL "TAKE OVER" MANY FINANCIALS or engineer Bear Sterns type buyouts...
geez, the Treasury is putting itself in position to "buy your stock!"
Hooray! ...you say...until you realize... they are not doing that to Prop your stock, or drive it up in an "unjustified by the fundamentals" rally...
...they know in the end, that when prop fails...THEY WILL BE BUYING YOU particulary FNM, FRE...FOR "PENNIES ON THE DOLLAR!"
think about it...if your a "weak" big financial YOU'LL GO THE "BEAR STERNS "precedent!"
FNN, FRE...another gov bureaucracy...
but...you the "common shareholder" in these entities...
ARE AT THE "BOTTOM OF THE TOTEM POLE" for "pennies on the dollar" (if that)...bondholders, preferred securities...
get paid out of "what's left over" in liquidation...the future for many of you...
Financials have not reached "bottom" ...the Gov just keeps lowering it...that's all.
Most Financials are like the "former great city of New Orleans!"
...was always REBUILT "bigger and better" after each calamity...in the twentieth century...BUT NOT THIS TIME!
just "small portions" mostly Gov related...
so you still have a GS financial...small portion probable survivor...but MANY...will like
New Orleans..."NEVER RECOVER!"
your money longs... gonna go down with a "Lewis" ala "Bear Sterns" or put your money in something more LIKELY to Recover....
flashrob
I suspect that the U.S. government at some point in the future is going to similarly have failed auctions rolling over our U.S T-bills, notes, and bonds. Our fiscal finances are a disaster! You can wait until these safe instruments blow up or better yet as a wise investor move your money and investments to “hard” currency countries. One day our AAA rating is going to be seen as a joke. And you won’t get a dime from suing the government for after all “you can’t fight city hall.”
ng