From Bad to Worse

The market free fall continues. This morning the retail numbers were terrible. Citigroup's results and announcements accelerated the decline. Citi had an opportunity to throw in the kitchen sink this morning but it does not appear to have done so. Citi announced an additional $18B in write-downs and slashed the dividend by 41%. Citi also stated that it would have a reduction in force of 4,500.

None of these moves was sufficient. Citi had an opportunity to really be aggressive and it seems that they were not. The Street believes that more write-downs are likely. When a new CEO comes in it is a chance to make a clean sweep, however ugly, and then beginning to build his own legacy. The Street thinks that the layoffs should have gone deeper and that the dividend cut should have been more aggressive.

Two themes appear to be in play. First, the failure to throw in the kitchen sink may be a function of promoting from within. I had previously written that it was a mistake to promote a new CEO from within. This limits the transformational power of the new CEO. I also suspect that the dividend not being reduced further may have been due to a negotiation with Citi's Middle East major investor - an investor that can not be too happy these days.

After the bell tonight Intel announced earnings that did not meet analyst expectations. The stock, which was already down substantially, took a 16% hit. That is when you know things are bad. When a slight miss by a bellweather makes a move down like that it means that the bottom is not here yet.

Will the Fed make an aggressive move before their scheduled meeting on the 30th? It would be interesting if the Fed cut rates by 50 basis points on Friday morning, blowing the shorts out of the water on January options expiration.