Why We Don't Trust Markets -- My Morning Rant

On Tuesday, I had some harsh comments on Citigroup's claim to seemingly miraculous profitability, and the market's uncritical acceptance of the bank's story.

So imagine my chagrin this morning when Bloomberg ran a story that Citigroup executives had pocketed a quick $2.2 million U.S. on the rise resulting from the announcement. And the profits were on shares purchased last week -- i.e. prior to Tuesday's announcement by CEO Vikram Pandit. Surely this is insider trading.

The hapless American taxpayer has watched countless billions thrown at these institutions to avoid financial Armageddon. While this may be necessary, surely the same government that grants these gifts has a moral obligation to investigate, and where necessary prosecute this type of behavior. Bernie Madoff will be a guest of the state for the rest of his life, why not these guys (and they are guys) too.

In my Tuesday comment I said that Citigroup's actions bespoke desperation. I was wrong. If Citigroup executives were long on this trade, one wonders if they had short positions as well when the stock dropped 95% over the past five quarters. In fact, one wonders whether they, or their "masters of the universe" colleagues in general are capable of subordinating self interest to any greater good.

This is The Market on Drugs

Citigroup, the troubled U.S. banking giant, is today reporting a profit for the first two months of this year, the first since 2007, with significantly increased revenues. And this, believe it or not, is driving up markets.

Read the fine print!

The "profits" being reported are before provisions for "credit losses, writedowns and additions to loan-loss reserves". In other words, they are not profits at all. Further, those of you not battling significant memory issues might recall that this is the same Citigroup that the U.S. government bailed out to the tune of $45 billion, holds a 36% stake in and is offering to buy tens if not hundreds of billions of toxic assets from. Yet their share price is poised to slip below a dollar.

Yet Bloomberg's headline reads U.S. Stock Futures Rally as Citigroup's Profit Outlook Drives Banks Higher. This isn't reporting, it's cheerleading. It points to a willingness by the business press to trade integrity for the smallest scrap of good news. In other words it smells like desperation.