This blog post originally appeared on RealMoney Silver on Jan. 15 at 7:40 a.m. EST.
"I'm glad they didn't go down in vain." --Walt Deemer, technical analyst for The Putnam Management Company (1975)There were few surprises in the series of Citigroup ( C) announcements this morning. The dividend cut was expected by this observer:
"Citigroup halves its dividend, and the shares briefly trade in the mid-20s. Asset sales and writedowns leave the bank crippled, and, in late 2008 (after another capital infusion by Abu Dhabi), Citi is merged with Bank of America ( BAC). Its new name is its old name, CitiBank!" -- Doug Kass, Jan. 2, 2008, "20 Surprises for 2008"
Cramer: Expect More Doom at Citi
"This isn't my Gnome, but a low-level source of mine is referencing a possible $15 billion capital infusion at Citigroup to be announced as early as today." -- Doug Kass, Jan.11, 2008, RealMoney Columnist ConversationBack in the mid-1970s, I was working for Larry Lasser (director of research) and The Chief (who ran the aggressive funds) at Putnam Management Company in Boston. Larry and The Chief were tough to work for, but never in my career did I learn so much as under their tutelage. And I will forever be grateful for that. At that time, Walt Deemer was the technical analyst at Putnam. He was deeply respected, having learned his craft from the best there ever was: Bob Farrell at Merrill Lynch ( MER). In 1975, General Motors ( GM) cut its dividend, and two of Putnam's portfolio managers, in total panic, wanted to sell the stock. In fact, they were apoplectic after the announcement. Walt, a man of dry wit and strong technical moorings, remarked in the halls of Putnam that morning (repeatedly so all could hear), "I'm glad General Motors stock didn't go down in vain." Walt turned out to be very right on General Motors' shares. (He usually turned out right!) After the dividend cut, the shares subsequently doubled in 1975 and added another 47% in 1976.
|GM 45-Year (NYSE) |
Click chart for larger image.
|Source: Yahoo! Finance|
"When the time comes to buy, you won't want to." -- Walt Deemer (sometime in the 1970s)Yesterday, I documented the logic surrounding my suggestion that the financials -- via the Financial Select Sector SPDR ( XLF) -- finally had value. Buy Citigroup today, and put the shares away in a drawer for a year or two.