Hi Folks,
The market rallied today on news of IBM's earnings and a possible Fed rate cut in the future. It definitely leaked into the Financials and especially C.
Tomorrow before the opening bell, C will release earnings. There has been a lot of spin about the information to be released in the earnings call.
Estimates are for -$1/share earnings, $10-24 B in write downs (yeah, that's a freaking B for billion), a cut in the dividend (one of the main reasons many people hold this stock), cut in employment and approx ~$10B of cash loans from outside sources (see earlier post on C as to why this is bad, look at what it did to CFC).
That's sounds awful to me. This is why I am positioned to take advantage of the call tomorrow with puts.
There is one kink in my strategy though--the Market is a bit goofy. There is the belief that with a new CEO (the old on got canned for all the housing investments) ,this will be the worst of the write-offs (and with all the spin, if we get anywhere under $24B, it will be a good thing) as he will want to get everything into the open and blame it on his predecessor. After that ,things are only up from here with all the changes being made. This could lead to a pop instead of a drop in the price. It makes no sense, but everyone wants a rally and it could happen tomorrow. There is no IQ test to be able to trade in the Market. *sigh*
There is other data coming out as well that could add to this--PPI and retail numbers.
I believe we have one of two things happening, but before I share, let me say that I believe this stock and company are broken in the near-term, and the long-term is questionable.
1. C reports crap, but not as bad as everyone thought it would be, stock pops $5 and a week later tanks $10
2. C reports really bad crap and stock tanks $10 now and more next week.
Two choices and both work in my favor. Let's see what happens tomorrow. BTW, these two cases can be affected by the PPI and retail numbers tomorrow.
A few trades to add:
Friday Jan 11:
$30 March C Puts at $3.15
$32.50 May BAC Puts at $1.25
Today:
$30 March C Puts at $2.70
$62 Feb SDS Calls for $1.80 (Ultrashort on the S&P, I bought calls into the spike today)
-Rocketshoe
2 comments:
Oh boy. The Market is tanking today. C came in at twice the losses/share, another offering of preferred stock, and ~40% cut in the dividend. Did I mention the Retail and PPI numbers came in bad? There is potential for Fed meddling and/or the circuits tripping on the indices. Yikes.
Not as bad as it could have been, but terrible.
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