From an investors point of view, the positive news about Citigroup (NYSE:C) and the alleged turnaround of the company is worrisome, as there is far too much hype about the great job chief executive officer Vikram Pandit has done at the company, when there is very little to back up the optimism.
That is reflected in the various analysts following the stock as well, with a variety of them grading the company at different levels, reflecting the contradictions existing within the company.
I think the reason for all the positive talk is an effort by the government and the media to help Citigroup survive, otherwise it really make little sense based on the fundamentals of the company, which are still on very shaky ground.
If you want to compare the company to where it stood about 18 months ago, then the assessments being made about it could be understood, but the problem is they are being made in comparison to a failed company that wouldn’t have survived if taxpayer funds hadn’t been used to bail it out.
So from that reference point, anything would be better than that, but we have to understand that can’t be the reference point we use as to the health of the company, but rather the reference point we need to use is a healthy financial company.
In that regard Citigroup is still very fragile, and while the necessary steps are in the process of being taken to right the ship, it is far from being able to be called a turnaround, as any disruption would unveil the extraordinary weaknesses the company still has, and I think the leadership there knows it.
As far as the recent increase in the share price of the company, that is relatively meaningless, and in reality most of the institutional investors have stayed out of investing in them, although there are major exceptions like John Paulson and his fund.
Share price over the short term has nothing to do with the condition of a company, but how it performs over a period of years. The fact the share price has risen nicely in 2010 is only a snapshot of what some investors think about the company, or day traders trying to push it up for their benefit.
To conclude Citigroup is a healthy company would be the equivalent of saying someone in the middle of chemotherapy treatments is ready to run a marathon. While there may be some short term improvement, there is a long way before they will be declared healthy. Citigroup is in the same place, and only time will tell how badly their health really is, and it’s premature to declare a turnaround, as many will be disappointed if and when the next economic struggle comes, as they’re still extremely vulnerable to any disruption.
