Citigroup, Inc. (C)

Why I am long Citi and other large financials.

Citigroup is one of the surviving large, mult-national banks left standing, and they are HUGE. Citi has a physical presence in over 100 countries around the world and they do business in over 140. This company processes on average over THREE TRILLION DOLLARS a day. Citi is too large for the world economy to allow to fail. Imagine the disruption their failure would cause to world commerce. They MUST NOT fail, and they will not fail. Our government, and governments around the world, simply will not let that happen.

These large financials blew it, and under all normal measures should be allowed to go BK. However, due to systemic risk the governments of the world have been creating conditions (mark-to-market/fantasy, large credit spreads) that will allow these companies to earn their way back from the abyss. And I am glad it is playing out this way because the alternative is far worse.

In 1929, the Treasury Secretary stated words to effect of, "Liquidate the banks, liquidate the businesses, liquidate the workers...", and the US government stood back with a hands off approach for the first couple of years of the crisis while banks and businesses failed en masse. Many today believe this is the approach that we should have used today; believing that the market would self-correct and heal faster than if there was intervention. Well, we all know how that worked out. It led us straight into the Great Depression. I am very glad that we are taking a differnt approach this time. Read Galbraith's book, The Great Crash of 1929.

So yes, I am long Citigroup. They will earn their way out and eventually return to profitability. And the large number of outstanding shares will eventually be reduced. This will take years to play out, but I believe that the stock value will once again rise into the high dollar values. I don't mind waiting for those kind of returns on my investment.