A tale of two Citis

Ellis Mnyandu is writing for Reuters today about the propects of the New York stock market as seen just before the open. He says the market's direction is down because Goldman Sachs has downgraded Citigroup.

Goldman Sachs downgraded Citigroup, a Dow component, to
"sell" and said the No. 1 U.S. bank may have to write off $15
billion for debt losses over the next two quarters.

Of course, Goldman is the genius who helped to create and sell a lot of the toxic stuff the banks are having trouble ingesting. But that wasn't the genius part. The genius part was in then shorting the sector because Goldman just knew that stuff would lead to tears.

(Digressing a bit, Guambat was directed by David Gaffen to this take on the genius of Goldman:

It does well at its job and there are many institutional factors that make that possible. It does not, however, produce genius that is immediately transferable to other forms of economic and political leadership.)

Mnyandu continues his Reuters story,

Goldman also cut its profit estimates for Citigroup through
2009, saying the bank would likely take additional hits from
securities linked to subprime mortgages and other investments.
"It's been guess work as to how big a writedown Citigroup's
going to take," said Marc Pado, U.S. market strategist at
Cantor Fitzgerald & Co. in San Francisco.

"Goldman has sort of been viewed as the smartest person in
the room. They went short the mortgage market. They seem to
have a good grip on what's going on. So for them to come out
and say there's more to come, I think that's why it's
undermining Citigroup and the financials."

So, Goldman, being short the sector probably ain't too unhappy that Citi goes down on its Citi downgrade.

But Mnyandu takes careful note that not all analysts share Goldman's view of Citi. He points out,

Citigroup's Tobias Levkovich upgraded the U.S. banking
sector to overweight from market weight, saying the shares'
valuation was compelling.

Wouldn't it be comforting to know that Wall Street analysts have only their own disinterested interests at heart in their analytical recommendations. (No question mark: that's rhetorical.)

David Gaffen takes a closer look at the details and timing behind Goldman's downgrade of Citi in his WSJ MarketBeat blog. He notes,

Analyst sentiment right now on the stock is middling. Six analysts have buy ratings, eight have hold ratings and four recommend selling shares.