'Wall Street' Articles

Citibank Bailout: “Six-Figure-Taxpayer/Citi Field”

[New York. November 26, 2008.] The New York Mets and Citigroup Inc. [NYSE:C] are still claiming that the $400 million naming rights package will be honored, yet, Citi has watched its stock price drop from its 52-week high of about $35 to almost $3 per share. Of course, this forced the government’s hand to take more taxpayer money to save another private corporation.

Two years ago, when the naming agreement was entered into, Citi was trading at over $50 per share. At that time, I would not have complained about the naming rights agreement — the largest of its kind — which provides that Citi would pay $20 million a year for 20 years (with options for another 40 years) for the right to name the new stadium “Citi Field.” Now, this deal just looks like a joke in light of Citi’s near failure and subsequent bailout. Some suggest that the stadium should be called “Citi/Taxpayer Field.” I disagree. The way I see it, “Six-Figure-Taxpayer/Citi Field” is more like it. The more words to emphasis who is really for this naming right, the more the word “Citi” disappears in just another useless advertisement.

Let’s do some simple math: As of this afternoon, Citi’s stock closed at $7.05 and there are approximately 5.5 billion shares outstanding. Thus, Citi has a market capitalization of less than $40 billion (Finance 101: market cap = stock price x shares outstanding). I will not even go near Citi’s income statement — it just hurts too much. Now, if you compare that market cap with the government’s interest, you see (with some logic bends) who is really paying for the naming rights of the ballpark in Queens. I do not care where you get your bailout information from, no one disputes that it trumps the $40 billion. If you are curious, the government is directly investing $20 billion and backing over $300 billion in loans and securities.

Considering that those taxpayers making in excess of $100,000 annually pay the majority of this government’s taxes (and will be paying more of it based on the result of the 2008 Election), I think they should get some love.

My vote: “Six-Figure-Taxpayer/Citi Field.” With this name, Citi will probably attract a total of 10 new customers — down from the 50 customers they would have added with Citi Field. Wait, did they really agree to pay $20 million per year? Those 50 customers better all print the name Walton on their bank application.

As an aside, I am not sure if any of you New Yorkers noticed but no other major New York sports team has “sold out” their stadium’s yet — the Yankees play at Yankee Stadium, the Rangers and Knicks play at Madison Square Garden, the Giants and Jets play at Giants Stadium and the Islanders play at the Nassau Veterans Memorial Coliseum. Of course, when one finally does sell out, it goes to a failing bank. It was easier when only minor league teams like the Brooklyn Cyclones, the Staten Island Yankees and the Long Island Ducks played in corporate sponsored stadiums — KeySpan Park, Richmond County Bank Ballpark and Citibank Park (sound familiar?).

Add comment November 26th, 2008

Did the 2008 Election Deflate the Stock Market?

[New York. November 23, 2008.] At the start of this past Friday’s trading day (Friday the 21st), there had been 12 trading days since the 2008 Election. During that time, the Dow Jone Industrial Average (DJIA) had dropped to its 5-year low. On November 4, 2008 (Election Day), the DJIA closed at 9,625.28. On Thursday November 20, 2008, it closed at 7,552.29 (down 21.5% in 12 sessions) and was settling near the 7500 level on Friday the 21st before the last minute 500+ point run to end the week.

In short, in the 12 sessions that followed the Obama-Biden victory, the DJIA has sounded as follows — Down 500, Down 400, Up 250, Down 75, Down 200, Down 400, Up 550, Down 350, Down 200, Up 150, Down 450 and Down 450. This was indeed an ugly stretch and it is far too easy to blame this run on the results of the election. However, even a Republic should admit it is too early to do so.

Although it feels like ages ago, when the DJIA left the 5-digit world in early October 2008 and dropped to about 8,000 in late October, there was press blaming all kinds of stimulus (or lack of stimulus) for that move. However, leading up to the 2008 Election, the DJIA fought back to pull within less than 400 points of 10k. Now, unfortunately, we are back in the low 8,000’s (following a few days under 8,000). Do we have enough to get back over 9,500? 10,000? 14,000?


On the other side of the world and during a similar period, it should be noted that since the start of the NBA season, the San Antonio Spurs have played 12 games. In those games, the Spurs has six wins and six loses — an ugly stretch for an organization that is accustomed to winning at a 70% rate in the Popovich era. What do the Spurs have to do with the market? Very little. However, there are two paths that this market can take and it is not all that different from the Spurs. After a odd summer, in which Manu Ginobili was injured and had surgery, the Spurs prepared for a start to the season without him. They started the year with no traction and then lost Tony Parker to an injury. Now, Tim Duncan is the only one of the big-3 left and needs to step up and keep this team afloat while Popovich waits for the injuries to heal. Fans in San Antonio just hope all the injuries heal as planned (or quicker than planned) and Tim Duncan can keep his squad above .500 (a.k.a. 8,000) so Manu and Tony can return and carry them into the playoffs (a.k.a. 10,000).

By January, it should be more apparent whether the playoffs are in the Spurs’ sights. Luckily, when it comes to the markets, you do not need to win a championship to be successful. At this point, most would be ecstatic with an annual visit to the Conference Finals.

Add comment November 23rd, 2008

Starbucks Coffee in China?

This morning.  A normal morning.  Leaving late.  Driving fast.  Minutes before train.  Long line at Starbucks.  So, there I am — with a pounding headache — in need of an espresso buzz.  Not just any espresso — this espresso comes with warm milk (like mom used to make) and an assortment of flavoring choices (from vanilla to white chocolate).  (And an added bonus — the coffee cups are decked out for the holidays.)  So like a fool, I make my most important — and regretted — decision of the day, I pass on the java, make my train and save four dollars…

Could this lifestyle exist in China?  I would never have thought so until this same morning.  While reading a Wall Street Journal — during my brief awake moment on my commuter train — I noticed an article on the cover regarding Starbucks’ initiatives in China.  Wait?  (Are they not Communist?)  I mean, don’t they drink tea?




Tea and coffee are so dissimilar (besides the fact that they are normally hot, sometimes cold, and receive milk and sugar well — okay, they have similarities).  But for me, tea makes me think of being sick and snobbish people — whereas coffee reminds me of the joy of addiction and fifteen-minute coffee breaks.

How can Starbucks pull this one off?  Then again, they have convinced so many that a Venti White Chocolate Mocha Latte is worth $4.50 and 630 calories.  Obviously, they are doing something right.  Why not make one billion Chinese the next focus — since they are already the largest coffee shop in the rest of the world!

As for some history (and I thank the Starbucks website for much of this info), the first “Starbucks” was founded in Seattle, Washington back in 1971 by two teachers and a writer (I do not think he had a blog) — selling mostly coffee beans.  Then along came Mr. Howard Schultz — with his olive oil voice and espresso drinks — who was initially rejected by the trio, but, started his own coffee chain in 1985, Il Giornale.  Finally, in 1987, the original three sold to Schultz, and the current Starbucks was born.  Immediately, this new Starbucks expanded outside of Seattle.  It opened in Los Angeles in 1991 (breaking 100 total stores that year).  In 1992, the inevitable initial public offering [NASDAQ:SBUX].  In 1994, it finally opened in New York.  And then in 1996 (a year it broke 1,000 locations), it opened in Tokyo — its first step towards world coffee shop domination.  (I like to think of that scene in the film Outbreak, with the map of the United States and all the little red dots, starting from Cedar Creek or in this case, Seattle.)

Allegedly, there are currently more than 12,000 Starbucks locations around the world (if you count stores not owned directly by Starbucks — e.g, Barnes & Nobles).  Although, that number may sound a little high — I have to believe it since, if I tried, I could easily pass about 20 Starbucks locations during a 20 minute stroll through midtown Manhattan.

But can it spread through China the way it appears to have spread everywhere else?   Actually, to be fair, it should be noted that it has not worked in Italy.  Has Starbucks avoided the great boot?  With the love for coffee in Italia, I would have thought I would see the Starbucks label on the 2006 World Cup trophy.  But, I would be wrong.  I guess the Italians “really” love “their” caffe.  (And my biggest shock – Milan, Italy’s “city,” not a Starbucks to be found.)  Okay, back to China.  (Forza Azzurri.)

Could Starbucks really bring tea drinkers over to the dark side?  That is left to be seen.  But, after witnessing its success in the United States and abroad (especially in London), it is hard to deny Starbucks’ appeal.  (Not to mention a member of the current board of directors has his number 24 hanging from the Madison Square Garden rafters — that has to account for something.)

I’ll be sure to stop in for a “Grande Skim White Mocha” on my next trip to Shanghai.

1 comment November 29th, 2006



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