Prizzo Skeezy readers down with the Countrywide (CFC) debacle will recall Bank of America (BAC) provided them with a two billion dollar capital injection (like a meat injection, except with cash money and no messy clean up) a few months ago. As part of that operation, BAC gained the right to convert the shares at a strike price of $18.00. This seemed like a great deal for BAC, since CFC closed at $22.02 on the day the deal went down. CFC, much to my amusement*, closed at less than half the strike price yesterday.

So what’s a middle eastern retard with too much money and not enough brains to do? Why blow $7.5 billion on convertible Citibank (C) securities, of course - similar to the deal discussed above. Except these fucking morons didn’t even buy securities with an in the money strike price! Unfortunately for our Abu Dhabian friends, they will be paying between $31.83 and $37.24 for shares that closed at $30.32 today. The clue meter is reading ZERO up in this bitch. [UPDATE: As usual, Smoove did a slacktastic job of analysis. Market Ticker notes the actual strike is between $20 - $25 when the interest on the coupon is factored in. However, the basic premise of Smoove’s argument, paying good money for a stake in a soon to be worthless company is dumb, holds - Ed.]

Now this might be a good investment, if C was not on the express train to insolvency. Currently, C is having problems maintaining their target capital ratio because of write downs on fucked mortgage investments. This is about to get worse, because C has a fuckton of off balance sheet SIVs (think Enron) that are losing value faster than the Falcons lose football games. When** C has to pull the SIVs back on their balance sheet, the liabilities will roach their Tier I capital ratio. The Feds require 6 percent, and C is at 7.3 percent right now, down from their target of 7.5 percent. Never mind all the Level 3 mark-to-myth dreck with (likely) highly overstated book values C has floating on their balance sheet right now. I highly recommend C change their ticker symbol to F - for fucked.

I wish I was still short C, but I closed my puts for an easy 60 percent profit in October. Had I waited, I would be rolling in the dough right now. However, as the ubiquitous they say, no one ever went broke taking profits.

notes:

* Of course I am shorting those fools.
** Don’t think it won’t happen - our friends at Holy Shit Buffalo is Cold gave up and did it today.