Comments on: Pulse of the Housing Market

By: Chad Brand

Chad Brand — Sat, 15 Mar 2008 14:54:00 +0000

Correct me if I'm wrong, but I don't think I ever said that excessive leverage was a non-issue. I did say that Citi was not going under, and I stand by that opinion. You really can't compare Citigroup and Bear Stearns. Well, actually, you can compare Bear with Citi's investment banking division only if you want, so that part of Citi could very well go under.

My point about Citi was that they have 4 businesses, and 3 of them are doing just fine. If you value those 3, and assign a value of zero to the investment bank, you can get an idea of how much Citi would be worth if they shut down their investment bank at some point, due to the current issues.

Since Bear isn't a bank, they are much more exposed to liquidity problems because they can't get money very easily. Hence, JPM and the Fed had to devise a plan to get them capital.

I have not been keen on the investment banks in this environment, and continue to stay on the sidelines despite their obviously contrarian characteristics. They simply have too many illiquid assets, hence it is too difficult to value them and have any confidence in such projections, in my view anyway.

By: Anonymous

Anonymous — Sat, 15 Mar 2008 00:48:00 +0000

Hi. I had been having a discussion with you about the financial stability of Citigroup. Your main argument was that there was no change of citigroup going under and that the whole credit crunch was just silly fear driven selling. I wonder what your opinion is now that Bear Stearns had to get funding from the Fed just to stay in business. Do you still think excessive leverage is a non-issue?

By: Anonymous

Anonymous — Fri, 14 Mar 2008 11:50:00 +0000

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