The Citigroup Conundrum

The Treasury announced that they were planning on selling shares of Citigroup on April 1. Most analyst reports and articles I read assumed that the Treasury was waiting for earnings to pass before beginning to sell. Insiders generally wait until after earnings before selling shares in order to avoid insider trading charges. While the Treasury is not considered an insider it makes sense that they would want to avoid any appearance of improper trading.

I am baffled as to why the Treasury has still not announced when the sales will start, now that Citigroup's earnings have passed. I am now reminded that trying to figure out what bureaucrats are thinking is an exercise in futility.

Part of the reason I was willing to short aggressively during this seasonally strong period was that I thought the government would start selling their nearly $40 billion stake in Citigroup, which would help offset some of the seasonal strength. Now that my assumption is in question I am not going to be as aggressive putting out the shorts I took in on Friday until the government announces a share sale. If the government does not announce a share sale I will simply wait until early May before putting out more shorts.

4 comments:

Anonymous said...

I think Timmy might think C is going to go higher. He's waiting for it to break clearly the double top at 5 and when that happens he might sell at 7. Why does he need to sell it now?

Tsachy Mishal said...

He said the government entered a pre determined trading plan with Morgan Stanley for the precise reason that the government should not be playing the market. That is definitely not the reason.

Anonymous said...

It's because the Fabulous Fab is the short counterparty on the trade. He doesn't want the SEC to investigate MS since he bailed them out. Plus he doesn't like to report taxes. He filed an extension and is going to try to delay his gains for as long as he can.

PJ said...

ZeroHedge has a rumor the government wants C to go above $5 so all institutions can hold it. How they're raising it above $5 without buying more is one of those mysteries I guess I'm too dumb to understand.

Or maybe they are buying in secret, they want the propaganda win from a high price on the public sale and are willing to lose money on manipulation trades to get the bullish headlines before the public and create a further illusion of prosperity?