Why Citigroup Is Trading Down Today
Jun 19th 2013 1:19PM
Updated Jun 19th 2013 1:20PM
Except for Wells Fargo, all of the Big Four banks are trading in the red today, with Citigroup down 0.50% about two hours after the opening bell. Thank general investor nervousness over Ben Bernanke's looming speech to the markets today.
The beginning of the end?
The subject of the Fed chairman's remarks will be the results of the two-day Federal Open Market Committee meeting, ending today. Investors are fearing the beginning of the end of quantitative easing, the bond-purchase program the Fed put in place last September to boost the nation's economy.
By most accounts, it has worked: The rate of unemployment is down; GDP growth is solid, if not stellar; and the housing market is booming again, which has traditionally contributed as much as 18% to the country's GDP. With results like that, I understand why investors are worried, though I don't believe they should be.
Foolish bottom line
There's also the (so-far) small matter of a Citi trader in London being criminally charged with rate rigging of the LIBOR, or London Interbank Offered Rate. The LIBOR is the basic rate used around the world for trillions of dollars in transactions: from car loans, to mortgages, to derivatives.
Last year, scandal erupted over the rigging of this rate for financial gain. But so far, this issue isn't gaining wider traction as a general problem for the bank itself. And truly, today's down stock performance revolves around the fate of the Fed's direction on interest rate policy more than anything else.
Analysts are mixed as to whether or not Bernanke will announce the tapering off of monthly bond purchases, but in the end, it really doesn't matter. What does matter is the state of the particular companies you're invested in. So long as their fundamentals are solid, and your investing thesis for them remains intact, there's no reason to sell off regardless of what the Fed announces. And Citi investors are on solid ground, I think.
The company has come a long way since the financial crisis and only continues to improve its overall situation. It's balance sheet is healthy, much healthier than Bank of America's . And look what investors in that superbank are facing: the threat of being hit with tens of billions more in payouts as a result of bad mortgage-backed securities issued by its Countrywide Financial unit.
On top of everything else, I believe the recovery has enough legs to stand at least a little on its own right now, and that's all a Fed taper would ask of it. So don't worry about what the Fed has to say. And I wouldn't worry about this London trader, at least for right now. Citi is a good place to be invested, and that's what counts.
Looking for in-depth analysis on Citi?
Then look no further than our new premium report. Inside, Motley Fool senior banking analyst Matt Koppenheffer cracks the superbank's code: revealing how it makes money, how profitable it is, and what areas investors need to watch going forward. He'll also give you three reasons to buy and three reasons to sell. And with quarterly updates included, this premium report could quite literally be the last source of investment research you'll ever need on Citigroup. For immediate access, simply click here now.
The article Why Citigroup Is Trading Down Today originally appeared on Fool.com.Fool contributor John Grgurich owns shares of Citigroup. Follow John's dispatches from the not-so-muddy trenches of high-finance and big-banking on Twitter @TMFGrgurich . The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America and Citigroup. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a gripping disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.