MAJOR PAPERS:

• Luqman Arnold, the former UBS AG (NYSE: UBS) president forced out in 2001, wants the firm to split its investment bank from the private client bank, and look at selling the investment bank and asset management business, according to the Wall Street Journal's "Heard on the Street".
• Microsoft Corporation's (NASDAQ: MSFT) bid to acquire Yahoo! Inc (NASDAQ: YHOO) has not gained any steam even though executives of the two companies met this week, the Wall Street Journal reported.
• The Financial Times reported that the landmark merger that created Citigroup Incorporated (NYSE: C) was a "mistake" that failed to benefit the financial services giant's investors, customers and employees, said John Reed, who masterminded the $166B deal with Sandy Weill in 1998. Reed, the former head of Citicorp, has advised Citigroup CEO Vikram Pandit at least to consider spin-offs, sources said.

• Walgreen Co (NYSE: WAG) is branching out by acquiring two companies that provide health-care services, BusinessWeek reported, following in its competitor CVS Caremark Corporation's (NYSE: CVS) shoes. Some investors are wary of Walgreen's move, but Mark Wiltamuth of Morgan Stanley sees it as a new growth avenue and as a push into services complementary to drugstores.

MAJOR PAPERS:

• Treasury Secretary Henry Paulson will today outline a new plan to better organize the overall bureaucracy that oversees financial markets, the Wall Street Journal reported. Paulson's new proposals include merging or eliminating all together institutions such as the SEC.
• According to people familiar with the matter, the Wall Street Journal also reported that Alphonso Jackson, the Housing and Urban Development secretary, is expected to today announce his resignation, a move which could deal a blow to the Bush administration's efforts to combat the crisis in the housing markets.
• The Financial Times reported that Bank of America Corporation (NYSE: BAC) may take its equity prime brokerage business off the market after receiving weak interest from potential bidders. People close to the situation emphasized that no final decision has been made on the unit.

• Bloomberg reported that Citigroup Incorporated (NYSE: C) will set up an independent credit card unit, according to sources. The rest of the consumer division, mainly bank branches and non-bank lending, will be divided into five regional groups, according to the inside sources.

Several weeks have passed and I still can't help thinking about how tough it is to invest in individual stocks and how many ways there are to be blind-sided. When the Board of Citigroup (NYSE: C) finally asked for the resignation of CEO Chuck Prince at an emergency Sunday meeting, after the company announced that an earlier released figure of a $6.5 billion write-down was actually going to be $11 billion, were they surprised of just disgusted?

Was that the last straw or were they in the dark as to the magnitude of the losses. As investors we have to consider a vast array of issues to determine if a company is worthy of investment. I know most people do not, but lets give them the benefit of the doubt and say they do. So you look at the sales and services offered, the quality of management, the various performance metrics like P/E, P/S, P/B, ROE cash flow, debt and more. You may look at the macro economic environment, interest rates, even the weather but in the end what do you know?

After you analyze everything you can get your hands on you are still just giving it your best shot (in the dark) and hope for the best. If the Board of Citigroup can't keep track of it's own company, its management structure, its risk analysis and it's exposure to major market conditions that will greatly affect the company, how are we supposed to?

Just one more good reason to stay diversified. If you are not, you should give that as much consideration as you do any individual investment. Was the Citigroup Board really in the dark? I don't know, but you should not allow yourself to fall prey to their folly.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.

The banks pumped so much money into the housing market (with not so much as a whimper from the government) that it blew up in their faces. The depressed housing market exposed questionable lending practices at every level of the industry, from the solo mortgage broker to the largest of investment banks and their partners in crime, the rating agencies.

Thousands of mortgage brokers are now looking for work, as are the Chief Executive Officers of Citigroup Inc. (NYSE: C)'s Chuck Prince, and Merrill Lynch & Co,, Inc. (NYSE: MER)'s Stanley O'neal. The difference between the two groups, however, is the multi-million dollar severance packages. The ex-CEO's may have seen their reputations damaged but not their bank accounts. I wonder where they bank - offshore perhaps?

The sad housing market is old news by now, although it keeps getting sadder. The real issue now is, how do we put trust back into a banking system that has proven itself so flawed? We have been seeing almost all of the banks write down the value of their holdings on a daily basis. Now what? The banks essentially were crushed by a Frankenstein monster of their own creation. Any stock portfolio that includes financial stocks has been poisoned for the next year at least.

For most of our lives bankers have been represented to us as conservative creatures, dressed in pin-stripe suits, nary to part with a dollar and certainly adverse to taking any risk. This image was cast in our movies, television, and novels. Unfortunately, with events playing out as they are today, this carefully-crafted stereotype couldn't be further from the reality.

Mr. Drysdale, who managed Jed Clampett's millions in the Beverly Hillbilly's television show of the '60s is just that -- a TV character. If you look back over the last few decades it has all been a facade, and the government has participated in this fraud by loosening banking laws and allowing these institutions to wander farther and farther from rational and safe behavior in pursuit of the highest returns they could get without limit.

If you are old enough, you might remember back three decades when the banks were seeking these high returns in South America, when inflation and interest rates tempted them and they all took a big bath. Then a decade later in 1989 the commercial real estate market collapsed amid over-valuations, and many banks and thrifts collapsed along with them...right into the arms of the Federal Government, which was forced to take them over with yet another bailout. This took about five years to turn around and things were brighter by early 1995.

Several stories have been written lately recommending large bank stocks like Citigroup (NYSE: C), Bank of America Corp (NYSE: BAC), JP Morgan Chase & Co (NYSE: JPM), and Wells Fargo & Co. (NYSE: WFC); all great companies, all good investments paying nice dividends. However, when I search for value I am still finding a preference for the smaller banks with greater organic growth opportunities and the ever-present potential of being a take-over target.

In my last few stock screens Popular Inc (NYSE: BPOP) popped up and I did not give it much thought since we are overweighted in financial stocks, but last week I took a deeper look at BPOP, and yesterday started writing this story. This morning a limit order came through so I must disclose that I am now writing about a stock I bought at $17and as a shareholder have a financial interest in it, not just as a writer. But then I rarely recommend investors consider acquiring a stock that I would not buy myself.

The following metrics will give you a brief overview of the value from a trailing 12-month perspective. The data comes from AOL Money & Finance. Popular is the bank holding company for Banco Popular de Puerto Rico, the largest bank on the island, with some 200 branches. On the U.S. mainland, subsidiary Banco Popular North America serves growing Hispanic communities in six states through more than 140 branches.

In Part 1 of this series, I found two possible candidates for my Dow value picks, Alcoa Aluminum (NYSE: AA) and American International Group (NYSE: AIG). Here we review the next five DJIA stocks, searching for further value in light of the frequent new Dow highs. Lately, the Dow seems to be benefiting from the number of companies with growing international business, its higher than S&P average yields (2.3 vs 1.8 as a whole), and the safe haven nature of large caps in a precocious market.

AT&T (NYSE: T) -- Like most of the Dow stocks, T pays a high yield, currently 3.5%, and like the others it pays it consistently. This company is the aggregation of SBC, Pacific Bell, Nevada Bell, Bell-South, AT&T long distance and Cingular Wireless. It is the only one of today's five stocks that I have owned (separately as AT&T and SBC), but I do not own any shares of AT&T now and I do not care to. After all of the expansion done by mergers and acquisitions and only limited internal growth, I am not sure what the upside is.

How much pricing power will the new AT&T have, given ongoing competition in each segment of its business from other wireless carriers, cable television, and VoIP? Considering all of the recent M&A activity, it seems to have relatively low debt and huge cash flow. It also has a P/S, P/B, and P/CF in the lower range of most stocks. But a P/E over 20 is too high given that I do not see where future growth will come from. It seems to me for every competitive battle AT&T might win on one front they may lose an equal amount on another. All things considered, this stock seem fairly priced with limited near-term upside.

I have now completed reviewing half of the stocks in the Dow Jones Industrial Average in search of value. To my surprise five of the first fifteen seem to be value propositions, five appear to be fairly valued but upside potential does remain and the last five -- who knows? Serious Money: Whittling away at the Dow -- MMM, AA, MO, AXP, & AIG: Part 1 was published this morning. Parts 2 through 7 will follow daily.

After months of rising stock prices and new Dow record highs being reached on a regular basis, I was not expecting to find that there was any value left. I have been relatively optimistic since last year posting DOW 14,000 here we come! but the rate of increase has accelerated beyond what I envisioned.

James Cramer of the TheStreet.com early in the year wildly projected that the Dow would reach 14,000 this year. A year ahead of my own more tempered view, and I definitely thought he was going out on a limb at the time. Now it would seem easily in reach and perhaps what I thought was sticking my neck out was too conservative.

Perhaps it was the years of stagnating stock prices for Microsoft (NASDAQ: MSFT), J.P. Morgan Chase (NYSE: JPM), Citigroup (NYSE: C), General Electric (NYSE: GE), 3M Corp (NYSE: MMM) , International Business Machines (NYSE: IBM) and others that finally built up a head of steam and came alive in the last six to eight months. That and global expansion that all the large cap stocks are able to capitalize on. Well, investors and the sun are shining on the Dow so enjoy the ride and be ever watchful.

Those of you who are new to BloggingStocks can check out my other stories and read Chasing Value or Serious Money to find more potential opportunities and verify my track record as well.

In the April 16 issue of Barron's (subscription required) Jack Willoughby commented on the current perspective of Citigroup (NYSE: C) CEO, Chuck Prince regarding the "delayering" of the company and the fact that it is laying off about 5% of its workforce over time, with some jobs moving overseas. While I was critical of this move in the Sunday Funnies: Citigroup is all fired up, and earlier this morning went even farther in my criticism of the company with my post, Break up Citigroup as soon as possible, I wanted to add one final thought.

The article points out that the reduction in workforce only represents 5% of the company staff now. By the time these cuts are made and some workers shifted overseas, the company could very well have a larger workforce, especially given its planned acquisitions and new branches. This is still further reason to split up the company. It is still too bloated, too slow, and it desperately needs the added agility that a smaller, more focused organization offers.

It seems to me that Citigroup will have to keep cutting and honing the company to greater profitability at a more rapid rate, But I wonder if and when major shareholders will lose their patience. Has Prince been given a time limit? I have no idea. So what will the Board do first?:

1. Split up the Company
2. Announce more layoffs and transfers
3. Ask Prince to resign
4. Something more surprising
5. None of the above

How much patience do smaller shareholders have? Perhaps Citi's 4% dividend yield and safe haven status will keep everyone pacified for now. Perhaps this is just the fate of ultra large cap stocks, Citigroup is now capitalized at $261 billion with only a few larger. Citigroup closed at $53.09, down 33 cents.

Disclosure: I do not own shares of Citigroup or hold any options.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.

Citigroup (NYSE: C) should be two companies -- at least.

The break-up I envision would separate investment banking and corporate financial services from retail banking, lending, insurance and brokerage services. The investment banking sector is going to advance much faster in the next ten years than the retail sector, and the two have nothing in common.

Citigroup is not too big, it is too disoriented. CEO Chuck Prince is trying to sculpt Mount Rushmore with a pocket knife and given another 200 years maybe he could do it. But he does not have that much time and nobody will be around to see the result, even if it could be done. You can find the case for this in my recent post Chasing Value: Bear Stearns - cheap and growing.

Some investment banks might even be prospective merger and acquisition targets for a new leaner and meaner Citigroup partner. Bear Stearns (NYSE: BSC), which I own shares in, is small enough to be in play and there are others.

Chuck Prince at Citigroup Inc. (NYSE: C) has been under increasing pressure to 'do something' to increase shareholder value after years of no price appreciation in the value of the company despite many attempts including the buying and selling of many companies, reorganizations, expansions, contractions and numerous meetings with major shareholders to express his ideas and get theirs - and still nothing. Some have suggested breaking up the company which is currently the largest financial institution / bank in the United States, but that does not seem to be in the cards. Now to be fair other ultra-large cap stocks (Citi is $254 billion) have made little progress in growing share value over the last few years and some have gone down; General Electric (NYSE: GE), Johnson & Johnson (NYSE: JNJ), Wal-Mart Stores (NYSE: WMT) and 3M Co. (NYSE: MMM) to name a few.

• Melly Alazraki reported on Wednesday that Investors awaited Citigroup Inc.'s restructuring announcement today. The originally expected 15,000 jobs, was yesterday reported to have increased to 26,000. Well, the Citi released its plan and it contains 17,000 job cuts, or 5% of its workforce as the company seeks to lower annual expenses by $4.6 billion in the next three years. However, the 26,000 jobs reported yesterday said "fired or reassigned," and indeed Citi announced that "more than 9,500 jobs will be moved to lower-cost locations."

Every big company has some "dead weight." However, where did they discover these people they say they no longer need, hiding under desks? Sleeping in the closets? Not the executive washroom prey tell?! How did all these "dead beats" hide for so long? What will the costs to the company be in the short run? Most importantly, firing lots of people is not necessarily any more of a strategy than proposing a troop surge in Iraq. They both can have an impact but I'm not sure it equates with being a strategy. The strategy should be to sell or spinoff any enterprise that is under performing immediately and expand those that are performing well, even if it means you do not remain the largest bank. No magic there -- it's the Jack Welch formula, it works, try it!

Furthermore, here is the leadership question; has Citigroup been operating inefficiently for years with too many unnecessary people and just now come to that realization? - not good, or have they decided that they will struggle along with less people and offer less in services internally and to their customers? - also not good! So I think I have to pay homage to my dad again, who often reminds me that "the fish stinks from the head" -- It's time to go Chuck!

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out my other posts for BloggingStocks here.

Under the category of more nonsense from analysts, you can file this morning's downgrade of FedEx Corp. (NYSE: FDX) as reported by Kevin Shult.

• FedEx was downgraded to Hold from Buy at Citigroup which lowered its target to $120 from $132 to reflect expectations for slower earnings growth in the next few quarters combined with ongoing uncertainty on the timing of an economic recovery.

So here is what I think is the nonsense part: Notice that while Citi does not recommend you buy FedEx, it has still given it a 12 month price target of $120 per share. While I am typing away, FDX is trading at just over $105 per share so if Citi is correct about the $120 figure, buying right now would result in a 14.28% gain plus a small dividend yield of 0.335% for a total annual return of 14.62%. I guess Citigroup thinks beating the 70-year market average by over 4% is meaningless.

I hope this drives the stock price down a few bucks because I own FedEx and would like to own some more! Then, before you know it, Citi will upgrade it based on valuation.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.