What are you buying today?

[rpadebet]

Bought some JPM and GM.

[wescobrk]

So far I look like an idiot with citi.
I don't  understand why bac is trading at 12.5x earnings and citi is at 9.5.
I didn't think the market would wait till March 1st and then the banks would shoot up for ccar 3 years in  row.
I thought it would happen by now.
I'm ready for mid march when the dividend raise is announced and in April when citi can start buying back stock.
In the aftermarket it was trading at 15 percent discount to tangible book but it earned 8 percent last year and this year is 9 percent on tangible book.
The irr is well over 10 percent.
Interest rates are at zero and the 10 year treasury is at 2.6 and we are suppose to grow at 3 percent GDP according to Moynihan and other bank ceos with the biggest loan and deposit growth in years.
The risk premium with citi is about 800 basis points.
I feel like I'm living on an island and no one else sees this.
I'm not arguing it should be at 12.5x earnings like back but 9.5?
I don't get it. It should at least be at 11x earnings.
The bloody earnings rate for the investor is higher than the multiple.
And this is a company that earned 4.42 this year, projected by all analysts to earn 5 this year and 5.85 next year.
And a dta worth a third of the market cap.
That's part of being a value investor willing to look like you are on a deserted island.

[fareastwarriors]

So far I look like an idiot with citi.
I don't  understand why bac is trading at 12.5x earnings and citi is at 9.5.
I didn't think the market would wait till March 1st and then the banks would shoot up for ccar 3 years in  row.
I thought it would happen by now.
I'm ready for mid march when the dividend raise is announced and in April when citi can start buying back stock.
In the aftermarket it was trading at 15 percent discount to tangible book but it earned 8 percent last year and this year is 9 percent on tangible book.
The irr is well over 10 percent.
Interest rates are at zero and the 10 year treasury is at 2.6 and we are suppose to grow at 3 percent GDP according to Moynihan and other bank ceos with the biggest loan and deposit growth in years.
The risk premium with citi is about 800 basis points.
I feel like I'm living on an island and no one else sees this.
I'm not arguing it should be at 12.5x earnings like back but 9.5?
I don't get it. It should at least be at 11x earnings.
The bloody earnings rate for the investor is higher than the multiple.
And this is a company that earned 4.42 this year, projected by all analysts to earn 5 this year and 5.85 next year.
And a dta worth a third of the market cap.
That's part of being a value investor willing to look like you are on a deserted island.

 Citi has a much bigger presence in EM markets than the other big universal banks.
I think the Emerging Market 'crisis' is dragging down C. Investors/traders sell this because they are afraid of the EM exposure.

[wescobrk]

They do have a bigger presence but so far I haven't heard of any impairments..
Their max loss to Argentina is less than a billion.
If this doesl turn into 97-98 again I can see that but it's a lot different now compared to then. Floating currencies, less external debt.

China just released their January pmi at 50.5. They are still expanding.
I think within 2 weeks we will shoot upward.
I plan to be better protected in the future though.

[wescobrk]

It looks like cities max exposure to Argentina is 17 cents a share.
They have a lot more exposure to Brazil and Mexico.
That would be the time to get worried, if it spread.

My comment about it not lasting more than 2 weeks is speculation of course as psychology can feed on itself.
My earlier post was trying to wrap my head around the  25 percent discount to bac.
If there is contagion with em I suppose that discount is warranted.
Mexico seems to be doing quite well.
Anyone on thew board follow EM closely?

If so, what is the probability of contagion and things getting much worse?

[no_free_lunch]

Wescobrk,

Pre 08/09 did C generally trade at a premium or a discount (based on earnings multiples) to BAC and the other domestic banks?

[wescobrk]

I honestly don't know.
It use to sell at multiples of book value but that won't ever happen again.
It probable sold around the same multiple of bac and jpm pre 08.

[damianolive]

Comparing multiples to book or tangible book may not be the best alternative for Citi right now. If you instead look at price to basel 3 tier 1 capital used at Citicorp (i.e. excluding Holdings) and compare that to BAC and JPM, they are very similar (1.4x in all 3 cases). This makes sense considering that capital tied up at Holdings has a negative return now. However, this ignores the high probability that Holdings will break even in the near term as well as the pace of capital build up at Citicorp from earnings, DTA use and decline in Holdings RWA. Citi is on its way to massive over capitalization in the next 2-4 years and the stock price doesn't reflect it. This is perhaps reasonable given Citi's performance in the 2012 ccar (who knows if shareholders will get their hands on that excess capital) but it sill ignores the ~20% annual growth in basel 3 tier 1 capital that Citicorp can achieve in the next 3 years just by staying the course (i.e. using Wall Street consensus numbers, which assume modest earnings growth).
 
As a side note my work relates to investing in EM and I'm from Argentina. The issues going on there are specific to the country, I don't think the chances of contagion are high, but we'll see.

[wescobrk]

"Comparing multiples to book or tangible book may not be the best alternative for Citi right now. If you instead look at price to basel 3 tier 1 capital used at Citicorp (i.e. excluding Holdings) and compare that to BAC and JPM, they are very similar (1.4x in all 3 cases). This makes sense considering that capital tied up at Holdings has a negative return now. However, this ignores the high probability that Holdings will break even in the near term as well as the pace of capital build up at Citicorp from earnings, DTA use and decline in Holdings RWA. Citi is on its way to massive over capitalization in the next 2-4 years and the stock price doesn't reflect it. This is perhaps reasonable given Citi's performance in the 2012 ccar (who knows if shareholders will get their hands on that excess capital) but it sill ignores the ~20% annual growth in basel 3 tier 1 capital that Citicorp can achieve in the next 3 years just by staying the course (i.e. using Wall Street consensus numbers, which assume modest earnings growth).
 
As a side note my work relates to investing in EM and I'm from Argentina. The issues going on there are specific to the country, I don't think the chances of contagion are high, but we'll see."

Thanks for your comments.

I've seen estimates for 25 cent dividend and 5-7 billion in buybacks in March.
They are estimating roa of 90-110 by next year so I'm assuming assuming holdings will be at break even by late next year.
2015 and beyond ccar should be very attractive.

[alertmeipp]

C - What is happening at emerging market exactly.. I check Turkey's currency, it's down a few percent... but seems not that much.. and what else?