Citi’s New Financial Product: Reality Distortion Field

by Johnny Debacle

Citigroup (NYSE: C) announced first quarter fiscal earnings. The results were incredibly good and the stock has subsequently surged almost 10%. WSJ article on Citi’s Q1 release:

The loss of $5.11 billion, or $1.02 a share, was deeper than Wall Street had expected and took the bank’s total loss over the past two quarters to nearly $15 billion.

Citigroup’s first-quarter revenue plunged 48% to $13.22 billion amid the write-downs. Analysts polled by Thomson Financial had expected a loss of 95 cents a share on revenue of $12.77 billion. A year ago, Citigroup reported net income of $5.01 billion.

They also announced, via brain-wave subversion transmitters, that they have developed a Reality Distortion Field, a device long-rumored to have been in the possession of Steve Jobs but which has only actually been developed and effectively utilized by Citi.

Recommendation: If you can get the financing to buy a large truck, which may be difficult since no banks are lending money to anyone at the moment (but don’t worry, their future results will still be killer because the business of banks is not actually the loaning of money to people and stocks don’t consist solely of a company’s future earnings), we recommend backing that truck right up to the biggest pile of Citi stock you can find. The Write-Down Rally has been one-upped by the Write-Down AND Miss Expectations Rally.

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  1. Juan
    April 18th, 2008 | 9:54 am

    Wonder if the market will pause to enjoy the view as it rockets past the moon today…

  2. T-will
    April 18th, 2008 | 10:59 am

    Sometimes I think I’m crazy, but then I come here and realize that there’s still a small group of sane people left in this world.

  3. NeuroAZ
    April 18th, 2008 | 11:31 am

    No no… you’re crazy.

  4. April 18th, 2008 | 11:33 am

    Did it become illegal to not buy shares over there or something?

  5. HAM05
    April 18th, 2008 | 12:23 pm

    @twill – interesting though bc i know im crazy and come here to bask in the knowledge that there are other crazies, like me, still left in the world. semantics i guess.

  6. April 18th, 2008 | 12:27 pm

    Hogging the comments board now, but I need to share this thought with potentially sympathetic minds:

    In 1945 Nazi Germany, do you think that the news of each massive advance eastward by the Allies and westward by the Soviets was reported positively? Surely it was an indication that the advances had gone as far as they could go, no?

  7. April 18th, 2008 | 1:04 pm

    Maybe I’m an idiot but I non-sequiturred on the Nazi Germany analogy. Perhaps spell it out in a language like English, the plain kind.

  8. Size
    April 18th, 2008 | 3:27 pm

    T-will, I’m glad I’m not alone. You expressed my thoughts exactly.

    Did it become illegal to not buy shares over there or something?

    No. Not yet. But Barney Frank and the other congressional geniuses are working on it. This is the anticipation rally.

  9. T Double
    April 18th, 2008 | 10:22 pm

    This clearly the “Costanza Effect” of the drop earlier this year.
    “If all of my trades have been incorrect, then buying an opposite stock, say ones with huge losses, with losses even greater than anyone expected, would have to be correct.”

  10. April 19th, 2008 | 5:56 am

    Do not forget about the great news to the economy. 9,000 more unemployed surely means that the market should rally 2%.

  11. Coop
    April 19th, 2008 | 4:02 pm

    My finance job keeps me too busy to follow the markets, so could someone please tell me what these rallies are all about? I mean I am being serious, why do things like the pop in citi keep happening? There has to be at least some rationale behind it, its not like EVERY person on Wall street is a dumb monkey just randomly buying and selling? any help?

  12. Sunset Shazz
    April 19th, 2008 | 9:30 pm

    Quotes entirely relevant to investing:

    “If we don’t sell, it is only a paper loss.”

    – Qiu Jiaxin, 27-year-old Chinese School administrator, sitting on a 65% loss on his Western Mining Co. position (WSJ 4/19/08).

  13. Peter
    April 20th, 2008 | 9:31 am

    That’s the problem. If fund managers would be randomly selling/buying monekeys, they could beat the indicies.

  14. April 20th, 2008 | 1:32 pm

    Debacle, lets extrapolate an even more important macro strategy here from recent events, the emergence of Quantum and Particle Physics-based strategies. Long Schrodinger, straddle on his Cat.

  15. RichL
    April 20th, 2008 | 5:33 pm

    It all makes imperfect sense. The market moves in ways that are least convenient to the largest number of participants.

    I learned this week that Wachovia had unprecedentedly bad results in 1Q with their Pick-a-pay mortgages, and that MGIC felt they needed less reserves. SLM reaffirmed estimates, while saying that their funding costs were problematic.

    There is some possibility that you shouldn’t believe everything you hear in conference calls

  16. born to lose
    April 20th, 2008 | 6:18 pm


    I think we’d do better to Strangle Schrodinger’s Cat. That way, we could know it’s strike, unfortunately we’d likely get the expiry wrong.

  17. April 21st, 2008 | 1:24 am

    Born to lose,

    I’ve gotta brush up on my quantum physics, but couldn’t a straddle be much more then a vol play, as the underlying asset could both increase, and decrease simultaneously?

  18. born to lose
    April 21st, 2008 | 9:47 am

    What? Oh…you must be talking about a derivative strategy.

    I just meant to strangle a cat.

  19. Coop
    April 22nd, 2008 | 11:28 pm

    Analyst – thats called a “quantum hedge”
    I pioneered it back in the 80’s

  20. April 23rd, 2008 | 11:55 am

    @ Coop

    Does James Simons know about this? Or David Shaw for that matter? Is there a Quantum Capital LP out there, if not I smell a fantastic marketing opportunity…

  21. dumpy12
    April 24th, 2008 | 8:19 am

    there is a Quantum Capital. his top holding is MMM. or at least the sum of the wavesigns that appear on a macro level to be MMM.

  22. April 25th, 2008 | 6:01 pm

    @ 21

    I’m glad I’m not the only (former) science geek hahaha