You Gotta Love a Proactive Government

Okay, so I thought I'd just stay off the blog for a while and see how things shape up. No, I'm not going to rant about all the Clinton cronies that Obama has filled his cabinet with, that's a whole other can of worms. I'm still going to sit back and watch all that play out and wish him and his very partisan administration good luck in turning things around.

I'm also going to apologize to those who are waiting for my comments about this "The Last Eight Year's of the Horrible Bush Administration" BS. That's also a very touchy subject with me and will require a lot of work to present the opposing view. One of the key arguments of that commentary is the fact that the Dems were just as much at fault for the last 8-years (actually only 2-years) as anybody in the Bush administration. Yes, capitalist greed also played a huge part in the meltdown but it was primarily our grossly out-of-touch politicians who set us up for this mess. And, yes, I will get back to that mess soon.

What got me back to the old Blog Slog today was a couple of recent news events that grabbed my attention. Now, most of you may well know that I vehemently oppose all this government bailout stuff. And, yes, that too, is also a whole other can of worms. What I want to throw out here today is a very interesting tidbit that may just get you thinking about just how hosed things really are around here...

Okay, so on Thursday, Reuters runs a report that the Saudi Prince, Alwaleed bin Talal, planned to up his stake in Citigroup (another major US financial institution). Siting that the company's shares were terribly under-valued. Okay, so just maybe he's read too many Warren Buffet "Value Investing" books.

http://www.reuters.com/article/businessNews/idUSTRE4AJ45G20081120?feedType=nl&feedName=usbusinessearly

The point is, if we're really in deep doo-doo like our illustrious Treasury Department say's we are, why would one up their stake in a company that has seen its share value fall by $48.7 billion this month alone. How does this past and future sheep herder know that Citigroup has hit the bottom?

Well, I didn't think much of that other than, yes, how does he know? So, on Monday I see another news report that our illustrious government has given Citibank a massive $20B bail-out. I found that pretty interesting since the previous reports on Citigroup had emphasized that the company had not yet requested Federal financial assistance. So, did they suddenly fly to Washington (0ver the weekend) and ask for a bailout? Don't see any record of that. In fact, I can't find any record of Citigroup even mentioning their interest in a bailout.

http://www.reuters.com/article/businessNews/idUSTRE4AJ45G20081124?feedType=nl&feedName=usbeforethebell

So to recap, on Thursday the Saudi billionaire decides to up his stake in the company substantially. On Monday the Feds deliver a $20B check to Citigroup executives. Well, that's a very nice coincidence don't you think? Shoot, I should have figured that one out and up'd my stake in Citigroup.

So, let's see, what would that have done for me? Well, Citigroup's shares rallied Monday up 58%. Sweet! Now, if you up your ~4% stake in a company with over $1 Trillion in assets, by over 1% on Thursday, and its shares go up Monday by 58%, I'd say that's a pretty savvy investor, wouldn't you?

So now, how did the Saudi prince figure out they had hit bottom? Well, apparently even Citigroup didn't know they were going to get $20B from the Feds. Yes, their share price was down around $5, and they had at least $306B in very risky debt assets, but with over $1 Trillion in total assets, surely they could get themselves out of the mess. Or so they thought they could.

They apparently didn't ask for the money but some nice folks at the Treasury Department thought they should get the money anyway. I really like a proactive government. I'm now confident that if I run my business into the ground some clerk or aid in the U.S. Treasury Department will see my predicament and shoot me out a check to keep me going. That's why I faithfully pay my taxes, yes, indeed.

So who tipped off the Saudi prince?

An interesting question. Why does our government know that a company has to have $20 Billion even though the management of that company hasn't even asked for it? Why does a company with over $1 Trillion in assets need a government hand-out?

Is it me or does this sequence of events seem a bit sketchy to you also? I hope I'm wrong in my conclusions here or that the media just didn't report things right. However, the facts seem to be correct and the question remains...

What the hell is going on here? All of this is wrong...horribly wrong!

Okay, enough of the blog slogging.

Happy Thanksgiving...at least in the historical spirit anyway. :(

Steve