1. Dancing Fool

Citi ( C) showed off some fancy footwork this week.

The New York banking giant warned Monday that third-quarter earnings will fall 60% from a year ago. Profit will be weighed down by rising credit costs and charges tied to this summer's credit crunch. Citi took writedowns exceeding $3 billion on its leveraged-buyout, subprime-mortgage and bond-trading positions.

"Our expected third-quarter results," CEO Chuck Prince said Monday, "are a clear disappointment."

Of course, disappointment has been a recurring theme at Citi since Prince took over four years ago. The stock has lagged behind that of the bank's peers, prompting investors to periodically call for Prince's scalp . Prince has responded by repeatedly promising the bank's performance will improve -- a tack he tried again Monday.

"We see this quarter's overall poor trading performance as an aberration," Prince said. "While we cannot predict market conditions or other unforeseeable events that may affect our businesses, we expect to return to a normal earnings environment in the fourth quarter."

Not everyone shares Prince's rosy outlook, given sharp declines in the mortgage and leveraged-buyout markets that drove so much of the financial sector's recent profit growth. But Prince isn't one for caution. Back in July, as some observers were worrying about the overheated debt market, Prince cavalierly brushed off questions about Citi's bulging loan book.

"As long as the music is playing," Prince told the Financial Times, "you've got to get up and dance."

The music has stopped, but Chuck Prince is still doing the hustle.

Dumb-o-Meter score: 93. "When the music stops, in terms of liquidity, things will be complicated," Prince told the FT in a bit of eerie prescience.

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