Already, we’ve written about NY’s budget hell. Adding to the pressure, estimated tax payments came in too heavy earlier in the year, necessitating $800 million worth of rebates through October. According to the NYT:
Why am I excluding preferred capital? A great question from reader Mark. GE and GS are both on my leverage chart, and not only an I excluding the preferred capital they raised from Buffett, I’m excluding the TARP capital injections as well. Those represented increases in “bank capital,” and yet I’m not including them in my calculation of equity in the chart. Here’s why, from the Treasury’s press release announcing TARP:
As I noted in my last post, I was being charitable when I calculated leverage ratios for the big banks. Citigroup, for instance, has $165 billion of “Other Assets” listed on their most recent balance sheet. The company deliberately does NOT provide additional disclosure regarding what’s in that bucket, not in the quarterly OR annual filings. But an enterprising Bloomberg reporter seems to have tracked down at least one other intangible item lurking there, the same one that Fannie/Freddie counted as “capital”: Deferred Tax Assets (hat tip JL).
The Citigroup Death Watch continues, according to the Journal:
The sell-off in Citigroup shares has led executives to start laying out possible contingency plans. In addition to pondering a move to sell the entire company to another bank, executives have started exploring the possibility of selling off parts of the firm, including the Smith Barney retail brokerage, the global credit-card division and the transaction-services unit, which is one of Citigroup’s most lucrative and fast-growing businesses, the people said.
—What if there’s no such thing as a risk-free asset?—
The foundation of so-called “modern” portfolio theory is the concept of diversification. A well-constructed portfolio should have a mix of asset classes—e.g. stocks, bonds, CDs—and a mix of securities within each asset class—e.g. large cap and small cap stocks. There’s no way to guarantee that a particular stock or bond will make you money, so better to keep your eggs in multiple baskets. Or just buy a mutual fund.