• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

“Full and complete support to Citi management, led by Vikram Pandit…”
-Prince Alwaleed

We have a leadership crisis in the US Financial System. The longer it takes to see it for what it is, the more protracted this bear market is going to be. Seeing the Street go back to the old well gives me a headache.

I completely disagree with the Saudi Prince’s current view of Vikram Pandit. The “New Reality” of seeing our US Financial System recover in 2009 and beyond is going to be predicated on winning back what the old boy network of Wall Street lost – credibility. Vikram Pandit’s senior management team is simply a Morgan Stanley redo of all that is imploding today. This reactive management team is no different than that which Hank Paulson led at Goldman or Dick Fuld oversaw at Lehman. Their names are different; their process is the same.

Sound judgment, accountability, and trust are at the heart of my definition of leadership. Take those coordinates on your moral compass and add a proactive risk management approach and you have yourself a winner to “completely support.”

There is not a Great Depression in this country, but there should be in the board rooms of ‘Investment Banking Inc.’ Franklin D. Roosevelt called the actual Depression “a result of the lack of honor of men in high places.” Think about that.

To believe in the illusion of the yellow brick road that the Prince painted this week requires a serious dose of groupthink and then an injection of narrative fallacy. It’s amazing what a five day rally in the stock market can do to the mind of the financial media. Don’t invest alongside their momentum chasing. Once they are done squeezing the shorts in Citigroup’s stock, I will be considering a short sale of this ex-Morgan Stanley management team.

The Pandit “Bandit” not only plugged Citigroup shareholders with an $800M sale of his hedge fund, Old Lane, but he then proceeded to make his partner at Old Lane, John Havens, head of Citigroup’s investment banking unit! I couldn’t make this up if I tried. These two didn’t know how to manage the risk in their own hedge fund, and now Alwaleed is signing off with “full and complete support” in their leading one of the world’s largest banks? Wow… do we ever live in interesting times.

After seeing oil prices drop 64% from their peak, and Citigroup’s shares lose over 80% of their value, you don’t need a major in economics to understand how self perpetuating Alwaleed’s financial motive is here. After Pandit saw the $8.4M in stock he bought get cut in half in less than 2 weeks, you don’t need to wonder about his either.

In the immediate term, Citigroup’s stock still has upside to $10.27/share. That’s 11% higher than where Pandit and Havens bought insider stock in mid-November. Notwithstanding that they made these purchases in front of one of the largest corporate bailout’s in the history of America, investors are best served watching what these pirates do versus what they say.

Somali pirates got the better of some of the Saudi Prince’s oil. Don’t let these ‘Investment Banking Inc.’ pirates of a broken Wall Street past get the best of you.

Keith R. McCullough
CEO / Chief Investment Officer