Many investors are calling brokers or turning to blogs and asking, "Is it time to buy the financials? Aren't they all safe now? Aren't they cheap?"

The bounce started with the rescues of Citigroup (NYSE: C), so let me begin right there.

The recent bailout of Citigroup is deemed to be in the billions; but the future potential amount needed at Citi, and the other banks, is in the trillions. The difference can be seen in page 21 of Citigroup CEO Vikram Pandit's town hall presentation to employees on November 17. Page 21 is a perfect metaphor for all that has gone wrong and continues to be wrong in the financial system. The page is purposely obscure. I know of no journalist or published analyst who spent any serious time -- and that means more than five seconds -- considering the math presented on that page.

Using household terms such as "QSPEs" and "VIEs," Pandit revealed that Citi has more than $1.2 trillion dollars in off-balance sheet assets. These off-balance sheet entities are similar in structure to Enron's SPVs (special purpose vehicles) Citi and other banks created, and in the past backed, and they hold assets of unknown quality. I can only assume if their value was known, and anywhere near par, they would be on the balance sheet.

Page 21 has two graphs. One is a bar chart for QSPEs (qualifying special purpose entities, similar to Enron's SPVs) that describes in very succinct terms various chunks of assets. First: $667 billion in mortgage-backed securities, which has a tag "Citi does not bear credit risk. Unlikely that majority will come on balance sheet." If there is no credit risk, why not put them on the balance sheet or tell us what they are?

It's been almost a year since December 12, 2007, when Vikram Pandit took over as CEO of Citigroup (NYSE: C). His performance has been outstanding -- and not in a good way. During the last four quarters, Citi lost $20 billion. Sure Pandit has plans to fire 52,000 people and he's raised at least $45 billion from the U.S., along with guarantees on $277 billion worth of Citi's bad assets. But he botched the acquisition of Wachovia (NYSE: WB). And Citi stock has fallen 81% wiping out $138 billion in stock market value.

By contrast, John Thain, who took over as CEO from the Bank of America (NYSE: BAC) subsidiary Merrill Lynch, was far more agile as things cratered around him. Arguably, Thain had an even worse hand than Pandit when he took over Merrill Lynch because his predecessor had loaded it up with mortgage-backed securities at precisely the wrong time. But Thain could see Merrill's stock plummetting as it got trapped in a short play. And he salvaged shareholders' investment by selling to Bank of America.

Now CNBC's Charlie Gasparino reports that Pandit has about half a mistake more to make before he's out of a job. But this is not a problem for Citi shareholders as long as its board can convince Thain to leave Bank of America where he has taken on a sub-CEO role so he can get back into the big saddle at Citi. Count me among those shareholders who would be happy to see Pandit exit stage right as Thain enters.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup stock and has no financial interest in the other securities mentioned.

Citigroup (NYSE: C) got a bailout from the government, but is the deal big enough to save Citi? This deal sounds like an interim solution rather than a permanent one. That's because after losing $20 billion in the last year, Citi has $2 trillion in on-balance sheet assets; another $1.23 trillion in off-balance sheet assets; and $36.8 trillion in derivatives. It is likely that the losses from these financial WMDs could exceed the amount Citi got from the government.

What does Citi get? Under the terms of the deal, Citi gets $20 billion in cash from the government (on top of the $25 billion it already received); Citi must cover the first $29 billion in losses of a $306 billion pool of assets -- the government picks up 90% of the remaining losses with Citi covering the other 10% from its mortgage-related assets; and Vikram Pandit gets to keep his job. The Treasury Department will use TARP to cover the first $5 billion of losses; the FDIC will take on the next $10 billion; and the Fed will assume any additional losses.

What does the U.S. receive? The U.S. gets $27 billion in preferred stock yielding an 8% interest rate. And that preferred stock comes with warrants to buy 254 million shares at $10.61 each. Citi must also pay no more than a penny a share dividend for three years -- down from 16 cents recently. The U.S. also negotiated executive compensation restrictions.

Citigroup (NYSE: C) recently revived advertising slogan is reassuring: "Citi never sleeps." The idea is that since it operates in 100 countries, there is always a Citi employee on the job. But even if you have 300,000 employees, a company can only survive if those people are doing the right things when they're on the job. If not, Citi might never sleep, but it could take a dirt nap.

Citi stock has lost half its value this week and, at $4.71, is down 92% from its September 2000 high of $57.50. Prince Alwaleed said it was dramatically undervalued -- and that was yesterday morning before it lost 26% of its value. I suggested yesterday that the Prince may have miscalculated. How so? If you think that value can be measured by comparing the stock price to potential earnings growth, then I think the Prince overestimated the earnings growth part . For instance, its global cards and consumer lending business makes up 67.3% of net revenues, and global cards shrank 40% in the third quarter.

Since the prince has so much of his diminishing wealth -- his investment fund was down 63% as of yesterday -- tied up in Citi stock, he may have decided that people's memory of his 1991 investment killing based on buying at split-adjusted $2.98 -- will draw in buyers. But things are different now. Citi has posted huge write-downs in four consecutive quarters of losses totaling $20 billion; nine of its investment funds have collapsed this year; it will lose money due to write-offs of consumer loans, commercial real estate, and mortgages; and it has trillions of exposure to derivatives and illiquid assets.

Citigroup Inc. (NYSE: C) shares are lower today, dragged down by the overall market. However, it has been reported that CEO Vikram Pandit and another big shot at C have recently purchased a combined one million shares of the bank's stock. These guys may just be making a big show of confidence, but it is still roughly $9M on the line in these transactions. If you think that insider buying means the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on C.

C opened this morning at $9.76. So far today the stock has hit a low of $8.79 and a high of $10.11. As of 1:55, C is trading at $9.19, down 0.26 (-2.8%). The chart for C looks bearish and S&P gives C a neutral 3 STARS (out of 5) hold ranking.

For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $5 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 10.1% return in just five weeks as long as C is above $5 at December expiration. Citi would have to fall by more than 45% before we would start to lose money. Learn more about this type of trade here.

C hasn't been below $8 at all in the past year and has shown support around $8.25 recently.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in C.

Citigroup (NYSE: C) CEO Vikram Pandit faces much of the blame for the bank's falling share price. He has not sold off enough under-performing units. He has not cut costs enough. He has not articulated a strategy for where the company plans to make its money over the next several years.

And, the write-downs keep coming leading to billions of dollars in losses each quarter. Some analysts expect that to continue well into next year as Citi take charges for its consumer credit portfolio.

Pandit is turning to a tried and true way to make himself look better. He is firing large numbers of people in an attempt to keep his job.

According to The Wall Street Journal, "Starting this week, Citigroup is handing out pink slips to at least 10,000 employees in its investment bank and other divisions throughout the world." Other workers will have their compensation cut, and more lay-offs are expected.

Pandit's need to fire more people can be put at his own feet. He has shown no skill in buying other banks to raise his deposits base the way that Wells Fargo (NYSE: WFC) has. He lost the opportunity to buy Merrill Lynch (NYSE: MER) to bring in their capital and more investment banking skill.

Pandit should be in the line of the 10,000 people packing up their desks and leaving.

Douglas A. McIntyre is an editor at 24/7 Wall St.

The New York Times reports that Morgan Stanley (NYSE: MS) CEO John Mack approached Citigroup head (NYSE: C) Vikram Pandit on Wednesday about a merger. It quotes Mack as saying "We need a merger partner or we're not going to make it." Fortunately, Citi rejected Mack's advances -- I say fortunately because Citi has enough problems of its own without taking on Morgan Stanley's. Why is Morgan Stanley, which just posted a $1.43 billion profit, in such desperate straits?

It's a brilliant negative feedback loop that short sellers are exploiting to enrich themselves as Wall Street collapses. Here's how it works: the hedge funds sell the stock of 'Bank A' short -- borrowing the shares at a higher price and hoping to pay back the stock loan with shares repurchased in the market at a lower one. As the Wall Street dominoes tumble, investors ask who's next and they sell the shares of the next domino to fall.

That decline leads ratings agencies to lower their debt ratings on a bank which boosts the rates it pays in the $62 trillion market for Credit Default Swaps (CDSs). Those higher rates force 'Bank A' to come up with billions in cash which it doesn't have -- raising fears of a collapse and further depressing 'Bank A''s stock price. And the cycle begins anew until 'Bank A' finds a merger partner or goes bankrupt. This short-selling work is very profitable, but it is also destroying the global financial system.

In the expectations game, Citigroup (NYSE: C) $2.5 billion loss is great news for Wall Street. Bloomberg News reports that the analysts it surveyed expected a $3.67 billion loss, or 54 cents a share -- so Citi's results were $1.2 billion better than expected. But there were wide variations on what analysts expected Citi to lose -- from 51 cents to 67 cents.

This reminds me of the story of the boy who comes home from school to tell his mother about a grade he got on a test. Rather than bow his head in shame, he walks into the kitchen with head held high and a big smile on his face. And he announces: "Great news mom! I got a 70!"

The key reason for Citi's loss is the $7 billion in credit-related write-downs it took. These included reductions in the stated value of its subprime mortgage exposure and its investments in monoline insurance companies including Ambac Financial Group Inc. (NYSE: ABK) after they lost their AAA credit ratings. Analysts expected write-downs as high as $12 billion.

Citigroup Inc. (NYSE: C), the beleaguered financial giant with a completely ineffective CEO at the helm, will report quarterly earnings (or losses) tomorrow. Most likely, we will see yet another company taking steep losses due to bets on mortgage-backed securities and other goofy investments. When Citigroup kicked former CEO Chuck Prince out the door, his replacement was even more strange. Citigroup is floundering to this day, although I have no doubt the banking and investment giant will recover.

Citigroup's shares are currently at the lowest level since the company was formed a decade ago. It announced the sale of its German banking business for $7.7 billion just last week, and now analysts polled by Zacks are expecting a net loss of $0.42 per share when the finance behemoth announces quarterly results this Friday. Reuters estimates that losses could go as high as $0.60 per share. Regardless of the loss, either would be quite a drop -- over 134% to be exact -- from the company's year-ago EPS figure of $1.24.

What will Citigroup do? Well, it will continue digging itself out of the hole it's responsible for, just like every other finance company that bet the shaky farm on every Tom, Dick and Harry getting a $600,000 mortgage with a $50,000 annual income. In addition to selling off some assets in Germany, Citigroup is shedding some Japanese assets as well as saying it may be two or three years before its returns come back to favorable levels.

Do you own Citigroup shares? If so, are you holding on for the long run or have you sold them already?

The New York Times reports that Citigroup (NYSE: C) CEO Vikram Pandit is trying to buck up his troops with speeches on values. Since taking over last December 12, Citi's stock has lost over 50% of its value and has accumulated $45 billion in losses in the last year.

A few days after he started as CEO, I suggested that Citi might be a buy if it hits $15. I am sorry to say it, but I was wrong. We're at $15 today and I would not buy more at this price. With analysts expecting Citi to lose 31 cents a share when it reports on Friday, it seems to me that the downside risks to the stock weigh heavily. That's because it's missed estimates the last two quarters and Zacks thinks it could lose as much as 51 cents a share. But what worries me the most is what the Times reported about what appears to be a missing sense of urgency about how to fix Citi.

It describes how he spent time at a meeting in Armonk, NY, pushing "60 top managers to build on his seven rules, which he unveiled in the last few weeks. Those rules include items like "client connectivity," "transparency" and "product excellence."" Not surprisingly, in my view, the Times reports that "some Citigroup insiders roll their eyes at what they see as dull platitudes."

Citigroup (NYSE: C) CEO Vikram Pandit was a famous hedge-fund manager. After Citi bought his company, he was in a position to move into the top job. It is lucky he was moved into the corner office months ago as one of the funds Citi picked up from the company he sold them is being closed.

According to The Wall Street Journal, "Mr. Pandit personally reaped at least $165 million when Citigroup bought Old Lane in July 2007." Nice work if you can get it.

The news may say little about Pandit's money management skills as he has been away from the running of the fund, Old Lane, for some time. It does, however, put the spotlight on him once again at a time when his ability to run Citi is being questioned by the company's shareholders.

Pandit was brought in as an agent of change, no matter how awful and overused that term is. So far, he has done absolutely nothing to deserve that description. Yesterday, Citi stock fell below $20 for the first time since March. Investors had hoped he would begin to sell of some of the bank's less critical assets to build the the capital base of the firm.

Instead, he has acted pretty much the same as his predecessor Chuck Prince. The share price points to that.

Douglas A. McIntyre is an editor a 247wallst.com

MAJOR PAPERS:

• Investors are taking their money out of hedge funds more now that at any time over the past 10 years, according to the Wall Street Journal. Firms are bracing for the end of June when the next big wave will hit.
• First it was a demand for management changes, and now shareholders, including one time director Eli Broad and fund managers Shelby Davis of Davis Selected Advisors and Bill Miller of Legg Mason Inc (NYSE: LM), are again upset with American International Group Inc (NYSE: AIG) and want changes in the boardroom as well, the Wall Street Journal reported.
• The Wall Street Journal reported that Citigroup Incorporated (NYSE: C) will close Old Lane Partners, a hedge fund co-founded by CEO Vikram Pandit.

OTHER PAPERS:

• Spotlight Capital is increasing pressure on Chico's FAS Inc (NYSE: CHS) and said it has been in touch with 25 major shareholders in order to oust CEO Scott Edmonds and unseat board member John Burden, who are accused of having a conflict of interest, the New York Post reported.

WEB SITES:

• Advanced Micro Devices Inc (NYSE: AMD) denied reports certain of its new dual-core chip, code-named Kuma, have been canceled, according to CNet. A spokesman for the company said that the launch of Kuma, scheduled for the second half of 2008, remains on track.

Citigroup Inc. (NYSE: C) is unmanageable. That's my conclusion after trying to understand its latest quarterly report. The concept behind this 100-armed corporate octopus is that people like to buy all their financial services in one place and therefore it makes sense to be able to sell them a full line of products from stocks to bank accounts. But I suspect that customers don't want all their financial eggs in one basket, so the concept is fatally flawed.

Moreover, its financial performance reveals that Citi is a complex mess whose many different businesses do not diversify its earnings streams. According to its quarterly report, Citi lost $5.1 billion. Most of the losses came from its Securities and Banking (-$6.4 billion), Alternative Investments (-$509 million), and U.S. Consumer (-$476 million) units. Two bright spots were $1.3 billion in earnings from International Consumer and $732 million in Transaction Services.

But wait, there's more in its huge, risky portfolio. Citi has $40 trillion in derivatives -- enormous bets on interest rates and currencies. And it has $1.2 trillion worth of off-balance sheet entities (remember Enron?). Nobody really knows what these are worth or how much they'll cost. And that doesn't even get us to the $262 billion in Level 3 assets -- illiquid, difficult-to-value securities -- which are 2.1 times Citi's $128 billion in capital. That's a pretty thin cushion for future write-downs.

MAJOR PAPERS:

• Harris Corporation (NYSE: HRS), concerned about its future growth, may see limited opportunity and may consider selling itself, the Wall Street Journal reported. If it does decide to sell, suitors could include Raytheon Company (NYSE: RTN), BAE Systems Plc (OTC: BAESY) and Northrop Grumman Corporation (NYSE: NOC).
• The Wall Street Journal reported that, in an attempt to toughen its regulation standards, SEC chairman Christopher Cox said earlier this week the agency would push Wall Street investment houses will have to reduce borrowing and rely less on short-term financing.
• As part of plans to reduce costs and restore profit growth, people close to the situation said that Citigroup Incorporated (NYSE: C) is likely to today identify up to $400B in non-core assets that could be sold. Additionally, the Financial Times reported that Citigroup CEO Vikram Pandit will confirm his pledge to cut the bank's cost base by about 20% at a meeting with analysts today. Sources familiar with the matter believe Pandit will dismiss calls for a break-up of the company.

OTHER PAPERS:

• According to sources, the New York Post reported that the ax may fall as early as next week on some investment bankers at The Bear Stearns Companies Inc (NYSE: BSC).

MAJOR PAPERS:

• Three years into its $35B takeover of Nextel, the Wall Street Journal reported that Sprint Nextel Corporation (NYSE: S) is considering selling or spinning off the troubled unit. Few details were available and a deal is not imminent.
• The Wall Street Journal also reported that pressure is mounting on Citigroup Incorporated's (NYSE: C) CEO Vikram Pandit to show that he can turn around the troubled bank. Executives believe Pandit, who has been praised for his cautious and deliberate approach, has been taking "too long" to make crucial decisions.

WEB SITES:

• According to a person close to Google Inc (NASDAQ: GOOG), Reuters reported that Google and Yahoo! Inc (NASDAQ: YHOO) are still "hammering out the intricacies" of a potential advertising and search deal. The source said no final agreement has been reached yet.
• ABC News learned that if Rupert Murdoch does not testify in a lawsuit accusing one of his companies of "corporate espionage," it may cost News Corporation (NYSE: NWS) hundreds of millions of dollars, a federal judge overseeing the trial said. News Corp has denied any wrongdoing, and lawyers maintain Murdoch had no direct knowledge of the unit's alleged hacking into EchoStar Corporation's (NASDAQ: SATS)/DISH Network Corporation's (NASDAQ: DISH) security code and posting it on the Internet.