Citigroup: The fall of a giant

Unbelievable.

Citigroup, once the world's biggest financial services firm, still with 300K employees worldwide, will announce their 4Q 2008 earnings Friday. It is expected to be dismal. Their stock today hit a low of about $4.50 a share. They are planning to cut themselves down to a third of their formal glory.

And all this, while receiving TWO bailouts from the US TARP fund totaling $45 Billion.

As a former employee (I left over a year and half ago), I am amazed. When I joined the company, it's stock was at about $35/share. Its future looked bright and landing a job at the company meant a lifelong career, if you played your cards right.

Today? People still want to go, but that lifelong career option is quickly fading.

However, Citigroup is representative of many companies in the US. Sure, while the CDS issues and general stock market malaise has contributed to Citigroup's downfall, just like the other failing/failed companies (GM, AIG, Chrysler, Lehman, etc), the root causes of the problems came from within.

Its management never fully integrated any acquisitions. Management was paid to maximize annual profits, and they did. Unfortunately, too often, annual profit maximization led to wild speculation and taking on mountains of undeterminable risk.

And so the government came up with a great plan: keep management in power but give them more money.

No.

The problem isn't the lack of money. The problem is the lack of management.

Why doesn't anyone see this?

Simple Math

What's happened with basic math skills in the US?

Recently, I have seen a number of obvious bad deals hocked by cashiers who truly believed they were a good deal.

For instance, I wanted to buy coffee for my house, so while I was at Dunkin' Donuts, I saw a sign that said, Buy 1lb, Get 1lb Free - $9.99.

I approached the counter to buy it. While the cashier was directing me toward the coffee area so I could pick the flavors, she says, "You know, we have another great offer. Buy 2lbs and Get 1lb Free."

I asked, "How much is that?"

She replies, "$16.99. Do you want it?"

I looked at her oddly, doing the calculation, 9.99/2 = about $5 each, and 16.99 / 3 = about $5.60 each, over and over and finally I just shook my head and bought 2 pounds after thinking a good minute about rather my math skills were really off.

Is this some devious ploy DD is trying to trick customers? I don't think so. I truly believe someone thought this would be a great promotion without thinking through the logic.

An extra twist of Inspiration

I stopped blogging for two months, not because I was particularly busy or ran out of things to write about. Rather, I became extremely disillusioned about why I bother blogging. While perhaps my finances and my knowledge provide some voyeuristic pleasure and maybe some money-making investment advice, the blog itself stopped having purpose to me.

Why am I writing it? I don't think I ever knew to begin with, and I probably won't ever fully figure it out. But today, listening to a podcast of Democracy Now's December 22, 2008 show about how a Utah college student, Tim DeChristopher, successfully, peacefully, and on his own disrupted the government auction of 150,000 acres of wilderness by posing as a bidder made me realize that very simple acts, that I could be performing, could make huge differences.

Tim, an economics student, saw an opportunity to disrupt the auction while standing outside pondering the effectiveness of protesters pounding the pavement, even though the real decision makers were inside. He took the initiative, passed himself off as a potential bidder, and then began to bid on land. Early on, he only tried to raise the prices of land, but later, as he grew more confident, he began to acquire them for himself.

Tim didn't have the money to actually buy the land. The auction didn't even finish. He was arrested by federal agents when auction organizers realized he wasn't a real bidder. But it didn't matter. The auction was over.

I want to start blogging about these stories. I may not have the opportunities, or the courage, or perhaps the means to be the story, but at the very least, I can start talking about them.

I quote Tim from his interview:

For all the problems that people can talk about in this country and for all the apathy and, you know, the eight years of oppression and the decades of eroding civil liberties, America is still very much the kind of place that when you stand up for what is right, you never stand alone.

Yes, I know this is extremely idealistic and perhaps a romanticism of civil disobedience. But this is certainly a stark contrast to my daily, very realistic and cold job performing financial analysis.

This is what I want to try for the rest of the year. Finance + Inspiration. Something for others and a purpose for me.