Citi's SIV Move Gets Mixed Reviews On Street
Futures drop about 6 points on CPI stronger than expected. Elsewhere:
1) Following HSBC and others, Citi said that it's bringing its $49 billion in SIV assets on its balance sheet.
Taking this exposure onto their balance sheet can be viewed as a surprise--they had previously indicated that they would not take on any exposure beyond the $10 billion in liquidity funding they provided to the SIVs.
However, many believe the move adds transparency and is a positive. Lehman said, "this action also removes its SIV uncertainty and shows its new CEO is decisive."
Bears on Citi, like CIBC World Markets, think otherwise, saying the action "will further imperil its fragile capital ratios going into the fourth quarter and surely pressure the company to continue to raise capital, sell assets, and cut its dividend."
Most on the Street believe the move was important for strategic regions. Merrill Lynch noted that "the "super-SIV" seems stalled and C clearly wants to avoid more reputational damage and a fire-sale of securitized assets."
Moody's cut its long-term ratings of Citi's debt, saying it believes the firm's capital ratios will remain low and the firm will neeed to take sizeable writedowns of it subprime portfolio.
2) Dollar rallying again today; the Fed’s less than expected rate cuts may be a help here.
3) Black and Decker down 8 percent pre-open, saying "business conditions in North America have been worse than the corporation had anticipated." Expecting $1.03 for the fourth quarter now, analyst consensus was $1.60.
4) United Technologies affirms its 2007 earnings, and gave 2008 guidance of $4.65 to $4.85; analyst expectations are at $4.85.
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