Now that the lock-up for the government on its Citigroup (NYSE: C) (Cramer's Take) stake has come and gone the U.S. has several ways to sell its gigantic stake in the bank and right now it looks like it is considering all the wrong ones.
Professionals know that you never turn a gain into a loss and the government's got a gain on its shares. So what the heck? Dispose them. We don't want the government to play market with its stock. If you read the commentary on this site you would think that the government's about to give up a buck and break even on the thing.
But what we hear is that the government's either going to sell some blocks over time or dribble it out on a daily or monthly basis. Given that we are talking about a paper profit of $10 billion on 7 billion in shares it should take its 39% gain and skedaddle. If it feels like it wants to play it safe, then sell half, make a loss hard to come by and then dribble it out.
But to put this stock out over time betting that the market will stay strong doesn't seem to be in the best interest of the government or the stock. You put a lid on the stock even if the upcoming quarter is good and you risk leaving a huge gain on the table if it isn't.
The whole episode with Citigroup and the government has been a tortured one. It is still considered the poster boy for all that is wrong with the banking industry with CEO Vikram Pandit being viewed as a villain. I think he has done everything in his power to turn around this franchise, which was the most poorly run of all financials, except Lehman, Bear, Washington Mutual and Wachovia, because of its disastrous Golden West acquisition. The best thing the government can do is take its gain and let Pandit work off the Troubled Assets Relief Program.
The worst thing it can do is bet the market goes higher.
Jim Cramer is co-founder and chairman of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.
Black Friday expected to be strong, no promises for Christmas
Will JPMorgan chief Jamie Dimon be our next Treasury Secretary?
Gold surges to another new high of $1167 per ounce
Reader Comments (Page 1 of 1)
9-15-2009 @ 9:54AM
Dan Barnett said...
Can the Govt. move that much stock w/o saturating the market for it & trashing the price?
9-16-2009 @ 3:22AM
Beltway Greg said...
If Citi's fundamentals support a higher price, yes.
In regard to the call on Apple. I agree with you in the long run, but if this doesn't come to pass you've given Jon Stewart more fodder for future shows. $200 is a given.