Here We Go Again

That man ---> is Andrew Hall and the financial markets need him to hang in there. He runs Phibro LLC, an energy trading firm owned by Citigroup that constitutes a large part of Citi's commodity principal trading activity.

According to the Wall Street Journal, he is having a good year.

Phibro routinely adds several hundred million in trading profits to Citi's bottom line and last year Hall took home over $100 million. If his numbers hold up, Hall wants to make sure he gets what is owed him by contract - another $100+ million. Nobody in Washington and almost nobody outside Manhattan want to see him get it is my guess.

My view is that we need to know what the rules are. Are we honoring contracts or not? Do the true money makers need to move to China or the Cayman Islands?

If Citi signed the deal, they need to pay him. If the government doesn't let that happen, let's get that info out there asap.

Why This? Why Now?

According to every financial journalist who is awake, Citigroup is in advanced talks to sell its wealth management (retail brokerage) business to Morgan Stanley for a few billion.

Wealth management is not that difficult once you have scale and not too cyclical so it's going to beg the question why Citi needs to do this now. The market doesn't need another round of "Citi in trouble...balance sheet worse than expected" chatter but it looks like it's going to get it.

Citi and Now Merrill

Citi and Merrill are making the buyers of auction rate securities whole, even though the product was in no way guaranteed. This whole mess is, well, a mess.

The financials are clearly in the crosshairs as the regulators are breathing down their necks. They sold a too-good-to-be-true deal and the buyers are getting off the hook. Cash is cash. ARS's are not, were not.

The fact that the financials are willing to roll over on this is sad. My view is that the regulators are taking way too much liberty. If it turns out that the brokers lied when selling this paper, then that's another story but I was at one of these firms for years and they never rolled over on anything.



Long MER