Citibank FINALIZED the deal to make the US Government the largest shareholder in the company with 58 billion dollars worth of common shares converted from government holdings of preferred stocks. Remember the difference? Common shares: these are actual "ownership" in the corporation. The shares fluctuate in value as the corporation falters or succeeds. There is not a responsibility of paying out a guaranteed dividend. Preferred Stock: This is more like a "loan" than "buying into the company" like buying common stock. Preferred stocks require that the corporation pay out a specified amount to the holder of the certificate. SO: the feds just gave up what is essentially GUARANTEED income from their Citibank holdings...to gain "ownership".
http://www.marketwatch.com/story/citi-finalizes-us-exchange-sets-rights-offer

The good: Citi is no longer responsible for the burden of paying out the dividend on the preferred shares that the feds owned...so this can free up some money and improve their bottom line. The Bad: WE the people are now DEEPER into the banking system...and the shares of all who currently owned Citi Stock will be severely diluted. Also: we (the USA Govt) are giving up $2 billion dollars in dividends with this deal...


Bonds tanked again today as investors fled to commodities. The dow lost 24 points and the FNMA 4.5% dropped 56 basis points. 30 year fixed rates are currently in the 5.625 range and will likely come up a little in the morning. Again: printing of money is being blamed for fear of inflation and simple over supply is also cited as a possible reason for the pricing deterioration.

Oil popped up to a 7 month high and closed at $71.33/barrel.

Interesting note today: Every Wednesday we see a report for the level of inventory for oil and distillates (gasoline, jet fuel, etc.). Today's report showed that we have much LOWER inventory than what was expected. This is part of the reason oil has spiked...we are seeing less inventory vs. the demand. To see this report: http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/current/txt/wpsr.txt



Have a great eve,