Why Citi says investors should stay away from silver

Citi’s taking cues from investor bets on silver, and right now, those bets are going against the white metal.

I haven’t been able to locate a copy of the research note that Citigroup Inc. (NYSE:C) sent to investors on Monday, but Marketwatch did. According to them, Citi’s taking a bearish stance on silver.

Indeed, the company expects silver bullion prices to fall 10 percent to $27 an ounce in 2013. They expect prices to stay roughly where they are in 2012 around $30 an ounce. Without getting our hands on a copy of the research note, it’s hard to say why they’re so bearish on silver, but we do have hints.

“The culmination of changes has resulted in a preference for base and precious metals over the bulk commodities,” the bank wrote (per Marketwatch). “Within these various commodities the conviction calls are in palladium, nickel, and gold on the bullish side and copper and silver on the bearish side.”

That means the bank’s taking cues from investor bets on silver, and right now, those bets are going against silver. There could be a lot of reasons for that. Citi specifically mentioned slower growth in China, which will dampen industrial demand for silver behind the great wall. In addition, there are several factors the bank didn’t mention: the dollar’s relatively strong, inflation’s in a downtrend and silver production is on the rise.

I wouldn’t count the white metal down and out yet, though. As Chris Poindexter points out at Townhall.com, the Fed can’t sit still on a strong dollar for long.

“The longer the dollar strengthens, the less competitive our exports become and that threatens the jobs recovery and feeds our massive trade deficit,” Poindexter writes. “It’s likely the Fed will be forced to consider additional easing. … I still expect gold and silver prices to recover somewhat this week but we won’t see any big moves until clearer guidance emerges on U.S. currency policy or some other news dumps us out of this narrow trading range.”

I agree. There just aren’t any major drivers for silver right now, and that means the fast money is looking elsewhere. It’s almost enough to make the contrarian in me start buying more silver. Right now, though, I’m more focused on mining. Stay tuned to our site for updates on the breakout we expect to see in gold and silver mining stocks.

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Why Bank of America stock (NYSE:BAC) got crushed

It’s clear investors feel like Bank of America’s the ugliest house in a pretty crummy-looking neighborhood. Here are five reasons why.

It’s not often that one of the 30 largest stocks in the country drops 20 percent in a day. That’s what happened to Bank of America Corporation (NYSE:BAC) yesterday, though. The Dow component stock crumpled from $8.17 a share to $6.51 and it shed another 1.5 percent in after-hours trading.

Year-to-date, Bank of America stock is down 51 percent. But the bad news just doesn’t seem to be going away for America’s largest bank holding company. Here are five reasons the stock got crushed yesterday:

1) The mother of all lawsuits. American International Group, Inc. (NYSE:AIG) filed suit against BAC yesterday seeking at least $10 billion in damages for alleged fraud at the bank and at Countrywide Financial, a mortgage origination company that Bank of America acquired in 2007.

2) Did we mention the other lawsuits? AIG is just the latest in a string of high-profile lawsuits against BAC. Freddie Mac, Fannie Mae, BlackRock, Inc. (NYSE:BLK), PIMCO and Goldman Sachs Group, Inc. (NYSE:GS) have also filed suits against the bank. And no one’s sure just how much it’s going to cost BAC to defend itself (not to mention how much it will cost if the bank does have to pay for damages one day).

3) Stock dilution, anyone? Bank of America maintains its stance that the company won’t have to issue more shares in order to cover costs associated with ongoing litigation. If the lawsuits keep coming, though, BAC might not have a choice. Win or lose, lawyers need paid.

4) Jumping ship. Regulatory filings released yesterday showed that hedge fund manager David Tepper of Appaloosa Management LP took a carving knife to his stake in BAC last quarter. Tepper pared off 42 percent of his holdings in the bank, narrowly escaping the guillotine that dropped yesterday. The news of Tepper’s move added fuel to an already fiery sell-off.

5) Downgrade central. In just two trading days, Bank of America shares were downgraded three times. On the heels of downgrades from Standard & Poor’s and Wells Fargo, the most recent thumbs-down comes from CLSA analyst Mike Mayo (per TheStreet). Mayo cut the stock from “buy” to “outperform” (which almost seems meaningless considering the stock’s loses year-to-date). Still, it’s yet another vote of no-confidence for BAC.

All told, yesterday’s 20 percent plunge in Bank of America’s share price wiped out $16 billion. Other banks didn’t fare much better, but it’s clear investors feel like Bank of America’s the ugliest house in a pretty crummy-looking neighborhood. For the year, BAC is down 51 percent. Citigroup Inc. (NYSE:C) is down 41 percent YTD, Wells Fargo & Company (NYSE:WFC) is down 26 percent, and JPMorgan Chase & Co. (NYSE:JPM) seems heroic having lost just 20 percent since the start of the year.

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World’s largest economies in 2050 will look very different

India’s ascent to economic supremacy will be driven by a surging working age population, which will grow more than 40 percent between 2010 and 2050. That should make India the world’s largest economy by 2050.

China’s forecast to overtake the U.S. as the world’s largest economy in just nine years. And by 2050, India will take the crown pushing the U.S. into 3rd place, according to a report by Citigroup, Inc. (NYSE:C). India’s rapid ascent to economic supremacy will be driven by a surging working age population, which will grow more than 40 percent between now and 2050.

“Developing Asia and Africa will be the fastest growing regions, in our view, driven by population and income per capita growth, followed in terms of growth by the Middle East, Latin America, Central and Eastern Europe, the CIS, and finally the advanced nations of today,” Willem Buiter, chief economist at Citigroup, tells USA Today.

Charting the future of the world’s largest economies

Here’s a graphic I’ve put together illustrating the economic changes we’ll see in the coming years:

World's largest economies in 2050

Regardless of how the next 40 years play out, you’re going to want to buckle up. It’s going to be a bumpy ride. “Expect booms and busts,” Buiter says. “Occasionally, there will be growth disasters, driven by poor policy, conflicts, or natural disasters. When it comes to that, don’t believe that ‘this time it’s different’.”

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3 reasons U.S. stock market forecast for 2011 is bullish

Here are three reasons why we’ll probably see another banner year for stocks in 2011 despite high unemployment and restrained consumer spending.

If 2010 taught us anything about investing, it should be this: stocks markets don’t follow the overall mood of an economy. You would think last year’s double-digit unemployment, crumbling housing prices, massive economic stimulus plans and fears of a double-dip recession would have forced down equities. Instead, the S&P 500 rose more than 12 percent last year.

Stock markets are always looking ahead, though, and forecast appears rosy in 2011. Here are three reasons why we might see another banner year for equities:

1) Hot money. The Federal Reserve’s quantitative easing program is designed to pump more money into the financial system. In theory, this money will spur lending by banks, which would allow businesses to expand and start hiring with abandon. In reality, employers are still wary of hiring or investing in expansion. That leaves a whole lot of fresh cash sitting on the sidelines. Why sink it into government bonds when you could dump it into high-yielding blue chip dividend stocks?

2) The double-dip is dead. Fears over a double-dip recession have all but disappeared. That should be a warning sign for contrarian investors, but it just might encourage the bulk of the public to re-invest in stocks. “The investing public in the United States has been massively underinvested in equities, with U.S. equity mutual funds experiencing three consecutive years of net redemption,” Chen Zhao writes in the Financial Post. “Once investors regain confidence in the economic recovery, they will likely move their capital away from bonds into equities.”

3) Booming exports. A falling dollar has made U.S.-produced goods more attractive on the global marketplace and that contributed to some 2 to 3 percent of the annual U.S. GDP growth last year. Exports through November of 2010 grew 17 percent over 2009’s numbers, according to U.S. Commerce Undersecretary Francisco Sanchez. More exports means bigger earnings for American companies.

It’s also important to remember that it’s becoming increasingly difficult to think of an American company as an American company. More than half of Citigroup Inc.’s (NYSE:C) revenue comes from outside the U.S., for instance, and other banking giants like JPMorgan Chase & Co. (NYSE:JPM) are eagerly expanding into the Asia-Pacific region.

So while 9 percent of Americans are unemployed, the country’s biggest corporations will keep churning out record profits on the back of a weak dollar. That might not be good for Main Street, but it’s probably good for Wall Street, and I imagine that will keep the cash spigot flowing in Washington – no matter what the consequences are in the years to come.

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Bank of America (BAC) to rise 50 percent per year over next three years?

WikiLeaks or not, I remain bullish on Bank of America (NYSE:BAC) as the Fed’s money-printing policies make it easy for lending institutions to profit on near-zero percent interest rates.

Despite a recent downgrade of Bank of America Corporation (NYSE:BAC) stock by Keefe Bruyette Woods, analyst Richard Bove of Rochdale Securities has called for BAC to hit $32 per share in three years. That’s a downward revision of Bove’s May prediction for banking stocks when he said shares in Citigroup Inc. (NYSE:C) and BAC could sextuple by 2015.

“While his official price target is $19.25, he also states in the report that he believes Bank of America will ‘more likely’ return to its historical price of 1.5 times book value, which would be $32,” BusinessInsider.com reports.

Shares in Bank of America have markedly underperformed Citigroup over the past six months as news sources speculate BAC could be the target of an upcoming WikiLeaks document release. Bank of America shares have lost 20.5 percent in value since June, while Citigroup shares are up more than 17 percent.

WikiLeaks or not, I remain bullish on banks as the Fed’s money-printing policies make it easy for lending institutions to profit on near-zero percent interest rates.

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Are we in the midst of a double-dip recession? The proof is in the pudding

86 percent of small business owners fear a double-dip recession is just around the corner. They’re putting their money where their mouths are, too, no matter what the ECRI says.

According to a recent survey by Citigroup, Inc. (NYSE:C), 86 percent of small business owners fear a double-dip recession is just around the corner. They’re putting their money where their mouths are, too, with 75 percent of small business owners already prepared for a double-dip. The proof is in the pudding, although, the head of Small Business Banking at Citibank, Raj Seshadri, is trying to put positive spin on the survey results. “Yet we are encouraged to see businesses adjusting to the economic environment and preparing for additional challenges — so they are ready to expand and grow when conditions improve.”

If nothing else, though, the ECRI recently rose to a two-week high. The index’s growth rate rose to negative 9.9 percent from negative 10.1 a week ago. New numbers from the Economic Cycle Research Institute are due out today. A reading of negative 10 on the ECRI typically points to a looming recession.

Citigroup realizes they’ve been over-charging Gold clients

Got $50,000? If you have it in a Citigroup (NYSE:C) Citigold account as of Nov. 1, you won’t have to pay monthly fees anymore. Yipee.

Got $50,000? If you have it in a Citigroup (NYSE:C) Citigold account as of Nov. 1, you won’t have to pay monthly fees anymore. Yipee. Smaller banks would be falling all over themselves to land clients who keep $50K in their bank accounts, but Citigroup thought it would be a great idea to charge high-net worth individuals to get an exclusive banking account that promises “invitation-only movie premieres, closed door pre-sales events, members-only clubs, and many of the top-tier restaurants in every time zone.”

It’s not a good sign for one of the top five biggest banks in the US. It’s an admission, in fact, that Citigroup needs to do something to stop the blood-letting. They’ve slipped to fourth place in bank deposits among the country’s biggest banks after they lost out on their bid for Wachovia Corp. Wells Fargo & Company (NYSE:WFC) landed Wachovia instead, and they quickly jumped up on the list of big banks.

Still, will cutting the fees for big fish be enough to lure back customers? A lot of analysts say probably not. If Citigroup’s plans in China come to fruition, though, it probably won’t matter. Who needs American clients when you can get Chinese?

Citigroup pulls shank on HSBC

Citigroup (NYSE:C) has raised the stakes in China where they’re taking on HSBC (NYSE:HBC) and Standard Chartered (LON:STAN) for supremacy.

Battle lines are being drawn between two of the biggest banks in the world: Citigroup, Inc. (NYSE:C) and HSBC Holdings, PLC (NYSE:HBC). It’s an American bank vs. a European one, and the fight’s over an Asian country: China.

China opened up to foreign banks in 2006, and ever since that time, just about every banking giant in the world has been struggling to get a foothold there.

“We have aggressive consumer banking expansion plans and want to open branches as fast as regulators in China will let us,” Citigroup’s co-chief in Asia, Stephen Bird, told Bloomburg.

Citigroup has just 29 outlets in China. That puts it in third place behind HSBC (102) and UK bank Standard Chartered (LON:STAN), which has 59. Citigroup’s just announced they’re putting more chips in the pot, though, with aggressive plans to hire 12,000 more people in the country over the next three year.

What does it mean for investors? Better performance. In 2008, Citigroup posted a 46 percent revenue increase. 2009 stats aren’t available, but in general banks have clocked more than 20 percent returns on equity in China. That’s far better than their returns in developed markets like the U.S., and it just might prove to be the savior for a fallen giant.

Top five biggest bank stocks in the U.S. by market cap

The roiling financial markets in the U.S. have knighted new winners and demoted the old guard. What are the top five biggest banks in America?

The roiling financial markets in the U.S. have knighted new winners and demoted the old guard. What are the top five biggest banks in America?

Bank of America Corporation (NYSE:BAC) $132 billion
JPMorgan Chase & Co. (NYSE:JPM) $149 billion
Wells Fargo & Company (NYSE:WFC) $129 billion
Citigroup Inc. (NYSE:C) $111 billion
Goldman Sachs Group, Inc. (NYSE:GS) $72 billion