Brother, Can You Spare 400 Billion?

Click the below link for musings about Citigroup’s $400 billion garage sale.

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Courtesy of the AP:

Citigroup Inc.’s new chief executive plans to stick with a global banking model after months of intense review — but only after shrinking the company by about one-fifth first.

The three-year game plan, revealed Friday, includes getting rid of more businesses, mortgages, real estate operations and jobs.

The bank aims to shed between $400 billion and $500 billion of its $2.2 trillion in assets and grow revenue by 9 percent over the next few years as it tries to rebound from massive losses tied to deterioration in the credit markets.

Ah, yes, Citigroup.

Selling off non-core assets is a time-honored and proven method of unlocking shareholder value. In fact, with the sole exception of buying back shares, non-core asset sales and similar divestitures are the best methods for boosting the value of a business — especially a mature business.

Even though its share price has jumped way up from its Lemming-induced, intra-year lows, Citigroup remains an obvious buy target. Hell, Citi is such an obvious buy target that you’d have to believe in the tooth fairy, or in so-called “Operation Chaos,” not to realize in five years Citi’s share price substantially will be higher than its current price.

Morals of the story:

1. Ignore the Lemmings of Wall St.
2. Blue-chip companies selling at discounts to book value must be purchased.
3. Intelligent investing is a marathon, not a sprint.

Goring The Sacred Cows