Last week saw another nauseating milestone in the ongoing economic crisis. The price for one share of Citigroup is now the same as a McChicken sandwich: A buck and some change.
For many, it's the ultimate wake-up call. Once you can order shares of the world's largest bank from the financial "dollar menu," there's no returning to that warm river of denial. In the words of one recent business post: "The Curtain is Drawing. The writing is on the wall for shareholders and executives of Citigroup and Bank of America Corp." (InvestmentNews)
It took a 90%-plus crash in the value of Citi shares to get the mainstream experts to think about the unthinkable. They said the world's leading banks and investment firms were "too big to fail." They said the write-downs were an "isolated event." They said the original October 2008 passage of the $700 Billion "Emergency Economic Stabilization Act" would stimulate recovery. That was several months and many trillions of dollars ago.
(Hard Times In the Citi: The latest Financial Forecast Service reveals whether the financial flameout has finally run its course. Act now for a risk-free subscription)
WHAT about seeing the "writing" on that wall when the ink was still wet?
Here, the real "plunge protection team" emerges: Elliott Wave International's analysts and publications that pointed readers to the bearish writing on the wall:
April 2004 Elliott Wave Financial Forecast made the case for a "mounting liquidity crisis focusing on the financial sector" and wrote: "As the markets fall to levels that are not even considered by Wall Street's current trading strategists, firms will be forced to reel in these bets… which will only intensify the decline as it seals the fat of many firms. The repercussions will be widespread."
Soon after, the September 2005 Elliott Wave Financial Forecast stepped in with this compelling chart of share prices in the world's leading bank, brokerage firm, and insurance company and wrote:
“Banks seem to be blind to the danger of overpriced collateral as they continue to stuff their balance sheets with mortgage-backed assets… Lenders are still behind the curve, but once they see the writing on the wall, the rug will get pulled out from under the economy in a hurry.”
In the January 2007 Elliott Wave Financial Forecast, the point of no return had been reached. “2007,” we wrote. This would be “The Year of the Financial Flameout.”
Flash ahead to today: The March 5, 2009 Short Term Update presents the following snapshot of Citi shares since our original commentary was published in 2004.
As for whether the powers that be can continue to shoulder the colossal debt, the March 6, 2009 Short Term Update offers this meaningful detail: "The head of the FDIC… stated that the insurance fund will run out of money this year unless Congress acts. So, the agency that is supposed to bailout those depositors who need bailing out due to a banks insolvency is itself in need of a bailout."
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