Citigroup (NYSE:C) announced yesterday that it is selling off its Hedge Fund Business to Skybridge Capital LLC. which specializes in startup hedge funds.  The business has been sitting in Citi Holdings, a recent implementation into the Citigroup structure with a number of other assets that Citigroup is trying to sell off or wind down due to the events of the recent financial crisis.  Many of these assets were part of the Sanford Weil acquisition strategy which was implemented in the late 1990’s at Citigroup and bloated the company.  This plan created too many limbs and different strategies which were impossible to grasp and manage over the years and did not help Charles Prince, who in all honesty was not qualified to run such a huge financial conglomerate, never mind a bank. The deal was being talked about since February but seems to be entering final stages.  No actual terms were released.

This is a perfect example of what Citigroup needs to do to reposition itself and strengthen itself as a bank first and foremost again. It is also a far cry from recent testimony at banking related hearings from Charles Prince and others.  The assets which the company determined as not part of the company plan have all been sitting in the Citi Holdings side of the house, awaiting buyers or liquidation.  As the company continues to shed these riskier assets and moves back towards the core banking business it first started out being, investors and customers will begin to see the benefits and financial rewards of the newly re worked and streamlined entity.  In effect, Citigroup is returning to its roots; not a moment too soon and a long overdue decision in my opinion.  CEO Vikram Pandit and future  management will have more transparency and a better stronger management team as a result.

The market seems to be welcoming this news with open arms, and for good reason.  Citigroup appears determined to reverse the issues that bogged it down and nearly sent it to a similar fate as Lehman Brothers.  Citigroup coming back off the mat should be viewed as a good thing, however, shareholders need to stay on top of the situation with all the different situations taking place, from raising cash through new bond offerings for general corporate purposes to new IPOs (Primerica) (NYSE:PRI) in efforts to divest itself of some under performing or non essential assets which came with the merger that occurred through Weil, knowing what is currently going on can lead to some solid profits in this equity.  Primerica (PRI) is up since its initial public offering price of 15 dollars and is trading near the 26 dollar level.  Alas Primerica has apparently gone full circle; and Citigroup intends to totally divest itself of Primerica moving forward.  Continued cautious optimism is advised, as Citigroup continues to return closer to its roots with US Government backing and support as well as continued growth  abroad with obviously improved confidence domestically among retail and institutional shareholders.

Disclosure: Currently no position in C or PRI

As a precursor to covering Citigroup (NYSE: C) stock, I feel a little history lesson is due.  The history lesson will help to bring us up to today in terms of where they have been, and where the company is headed in the future.  I have been in and out of this stock several times over the years, and have family who have worked for and retired from the company.  There was a time when my family lived and breathed First National and Citibank; a time when this company showed genuine care and passion for what it did and its employees did.  The company no longer holds its employees in high regard, but that will be gone into more in future articles.  I believe it is important to know as much about the company you invest in as possible.  That was never truer than it is right now.  For now, let us look at the history of one of the largest Banking conglomerates ever.

The history of Citibank starts with the City Bank of New York, which was chartered by the State of New York on June 16, 1812, with $2 million of capital.  The Bank began its growth by serving a group of New York businesses and merchants, and opened for business on September 14 of that year. Samuel Osgood was elected as the first President of the company.  The company’s name was changed to The National City Bank of New York in 1865 after it joined the new U.S. national banking system, and it became the largest American bank by 1895.  It became the first contributor to the Federal Reserve Bank of New York in 1913, and the following year it inaugurated the first overseas branch of a U.S. bank in Buenos Aires, Argentina.  The Bank was active in plantation economies, such as the Cuban sugar industry.

The 1918 purchase of U.S. overseas bank International Banking Corporation helped it become the first American bank to surpass $1 billion in assets, and it became the largest commercial bank in the world in 1929.  As it grew, the bank became a leading innovator in financial services, becoming the first major U.S. bank to offer compound interest on savings in 1921.  Several years later in 1928 they began offering unsecured personal loans; this was followed by customer checking accounts in 1936.  The bank changed its name to The First National City Bank of New York in 1955, and the final innovation through that period of growth became the negotiable certificate of deposit in 1961.  The bank then proceeded to shorten its name in 1962 to First National City Bank on the 150th anniversary of the company’s foundation.

First National City Bank entered the leasing and credit card sectors soon afterwards, and its introduction of USD certificates of deposit in London marked the first new negotiable instrument in the market since 1888.  In another stroke of genius the bank introduced its First National City Charge Service credit card; popularly known as the “Everything Card” in 1967 and eventually known as Mastercard.

In 1976, under the leadership of CEO Walter Wriston, First National City Bank and its holding company First National City Corporation was renamed as Citibank, N.A. / Citicorp.  Shortly afterward, the bank launched the Citicard, which pioneered the use of 24-hour ATMs.  As the bank’s expansion continued, the Narre Warren-Caroline Springs credit card company was purchased in 1981. John S. Reed was elected CEO in 1984, and Citi became a founding member of the Clearing House Automated Payment System, or CHAPS clearing house in London.  Under his leadership, the next 14 years would see Citibank become the largest bank in the United States, the largest issuer of credit cards and charge cards in the world, and expand its global reach to over 90 countries.

On April 6, 1998, a merger between Citicorp and Travelers Group was announced to the world, creating a $140 billion dollar firm with assets of almost $700 billion dollars.  The deal would enable Travelers to market mutual funds and insurance to Citicorp’s retail customers while giving the banking divisions’ access to an expanded client base of investors and insurance buyers.

At the time of merger, Travelers Group was a diverse group of financial concerns that were brought together under Chief Executive Officer Sanford Weill.  Its roots came from Commercial Credit, a subsidiary of Control Data Corporation that was taken private by Weill in November 1986 after taking charge of the company earlier that year.  Two years later, Weill orchestrated the buyout of Primerica; a conglomerate that had already purchased life insurer A L Williams as well as stock broker Smith Barney.  The new company took the Primerica name, and employed a cross selling strategy, leveraged so that each of the entities within the parent company aimed to sell each other’s services.  Its non-financial businesses were spun off.

In September 1992, Travelers Insurance formed a strategic alliance with Primerica that would lead to its consolidation into a single entity in December 1993.  Travelers had suffered from poor real estate investments and sustained significant losses in the aftermath of Hurricane Andrew, by all accounts.  The group became Travelers Inc.  It offered Property & casualty and life & annuities underwriting capabilities which added to the business.  Meanwhile, the distinctive Travelers red umbrella logo, which was also acquired in the deal, was applied to all the businesses within the newly named organization.  During this period, Travelers acquired Shearson Lehman a retail brokerage and asset management firm that was headed by Weill until 1985, and merged it with Smith Barney.  Finally, in November 1997, Travelers Group, renamed again in April 1995 when they merged with Aetna Property and Casualty, Inc. made the $9 billion deal to purchase Salomon Brothers, a major bond dealer and investment bank.  At this point, we arrive at the merger, which will be covered more in depth with part 2 of the article tomorrow on King of All Trades.

Disclosure: Long C

Today was a day that reminded me just how predatory and evil some Wall Street movers and shakers can be. The negative slant and bias regarding SIRIUS XM and its stock was out there in all its glory with no less than 8..yes that’s correct 8 articles out of 10 bookmarked on YAHOO….all spewing negatives about SIRIUS XM. You’d think it was the only stock in the world that traded with that type of coverage; coverage by the way from Jim Cramer’s own thestreet.com (TSCM) and Realmoney. Take a look for yourself;

• XM SkyDock Receives Design and Engineering Award From Consumer Electronics AssociationPR Newswire(Tue 5:01pm)
• [video] Sirius Bonds — Not Commonat TheStreet.com(Tue 2:00pm)
• Sirius Mailbag: Time to Get Rid of Stern?at TheStreet.com(Tue 1:35pm)
• Martha Stewart Living Radio’s ‘Thanksgiving Hotline’ Launches on SIRIUS XM RadioPR Newswire(Tue 12:51pm)
• What Sirius’ Earnings Really Tell Usat TheStreet.com(Tue 12:44pm)
• [$$] How Are the Mortgage Insurers Still Viable?at RealMoney by TheStreet.com(Tue 12:40pm)
• [$$] Use Sirius Bonds to Play the Other Sideat RealMoney by TheStreet.com(Tue 10:59am)
• [$$] A Siriusly Unattractive Investmentat RealMoney by TheStreet.com(Tue 10:32am)
• [$$] Sirius XM: Radio Ga Gaat RealMoney by TheStreet.com(Tue 8:33am)
• Avoid Sirius; Try Some ETFs Insteadat TheStreet.com(Tue 8:33am)

 To make things even worse Jim Cramer himself is now going against his own word, and covering SIRIUS XM, a company he said was worthless and should be giving all common stock to the bondholders. He has stated that he is bullish the company and service, but not the equity. This is a 100 percent radically different opinion than Mr. Cramer had right before the merger, calling this stock a “$5 stock”. Adding only a 40% dilution to that figure, but adding in improved metrics as well, now the stock is “worthless”, according to Cramer. If anything, ration would dicate that it is at least worth 40% of $5, plus synergies realized, improved revenue, and critcally acclaimed new products. Investors of Sirius XM radio have been critical of Mr. Cramers complete 180 in this issue. Here is the free excerpt Jim Cramer lets you read to tantalize you to subscribe to his service, a service that has  its own set of critics by the way……

I have highlighted the important parts of his little fear job for readers. Ironically, if you remove the first sentence, it could almost read as making a bullish case for the equity and company, for the better the company performs, so increases the value of the bonds.

Use Sirius Bonds to Play the Other Side

By Jim Cramer

About this article:

If you like Sirius, do not play the common stock. The bonds are the best bet. Not that long ago, in the summer, Barclays put out a terrific piece about the 3.25% Sirius converts due 2011. These converts, which currently sell at 88, could be a great play on any turn, because they will get paid off at a nice gain. Barclays likes it because there is no other Sirius debt due ahead of it, and if it gets in trouble, Liberty Media, the new investor that injected capital, will make that debt good, because bankruptcy wrecks the principal asset that SIRI brings to the table: its gigantic operating loss. I am also drawn to the 9.625% notes that mature in 2013, a piece of paper that has zoomed in value since the decent quarter Sirius posted, and which trades more actively than all other bonds….

Mr. Cramer, you seem to have forgotten some numbers in your little excerpt. Try these on for size along with a couple of quotes:

                                  Sirius XM 3rd Quarter Results

Net Subscriber Additions of Over 102,000

 EPS, Excluding Charges, ($0.00) vs. ($0.05) YOY

EBITDA on track for over 400 million for 09

CEO Mel Karmazin quote:” We are focused on increasing EBITDA and FCF, as well as shareholder value”

Board Member and Liberty CEO Greg Maffei quotes “Our Sirius investment has performed very well” and “We consider Sirius XM to be the anchor of our LCAPA stock portfolio”

I would debate Mr. Cramer on his comments regarding SIRIUS XMs principal asset being it’s NOL carry forward…which although a nice asset is not the main or the biggest reason to own shares of SIRIUS XM. The biggest reasons to own SIRIUS XM common shares are the improving metrics and Business Model. The undeniable synergies created when these two companies merged, and the free cash flow, and EBITDA growth, coupled with subscriber growth and additional revenue streams, which all bode well for the company’s dynamic recent turnaround and the future. I just have to ask though, as I am sure many other folks who read this stuff do…why the street.com….and Jim Cramer are so interested in SIRIUS XM, and more specifically…why they are so interested in writing several days worth of negative articles in one day…which by itself should be looked at with questioning minds and skeptical eyes. As a matter of fact during the run to the second quarter conference call, Cramer said the stock should be given to the bondholders and that it was worthless. Scott Moritz of thestreet.com also managed to push the idea not once but twice that SIRIUS XM was on track to lose 2.1 million subscribers this year, apparently Cramer is doing a 180 degree turn and giving somewhat limited coverage on SIRIUS XM now.

Jim Cramer said himself that you are not supposed to foment the idea that a company is doing badly, but I guess that only applies to Hedge funds, and not lying corporate miscreants and malcontents. Yes Jim there are still enough sheep out there to keep you relevant, however more Sheep dogs are now around to protect those sheep from wolves like yourself. It is more than obvious what Cramer and his cronies are attempting to portray. This entire negative campaign is about getting you and me, the common stock holders of SIRIUS XM to sell our shares on fear of bad news and get out leaving any future gains and cheap entry to those who write the sort of negative articles with little or no facts and alot of purposeful omissions in the details and to Hedge Funds, Institutions and wealthy investors that have missed the boat to this point. The choice to be made belongs to you the retail investor. The SEC filings and recent events are all available for review right up to the Q3 filing of the 5^th of November. (http://investor.sirius.com/ ) I would suggest that ANYONE who has an interest, take the time to review and read those filings. Once you do, you will most likely be glad to have read this article. I am a Sirius XM subscriber and investor, and I write these articles to help you get to the bottom of the pile of steaming garbage that is disseminated in the mainstream media and on some blogs. Best of luck to all, and do your own due diligence.

Disclosure: Long SIRI

Following Liberty Media Corporation’s 2009 investor meeting last week on the 16^th of October, I was pleasantly surprised to discover Sirius XM Radio CEO Mel Karmazin was scheduled to speak.  Once the meeting got underway though, I truly was not prepared to hear what either Greg Maffei of Liberty or Mel Karmazin of Sirius XM Radio (SIRI) laid out during the meeting.  Rest assured, Sirius XM Radio’s relationship to Liberty Media and John Malone is a two-way door.  Liberty Media gets 40% of the company with exclusive content and can leverage it over multiple possibilities; which I believe they are preparing to do in earnest.  Mr. Maffei’s statements were like music to my ears when he said they were looking for opportunities regarding SIRIUS XM in other markets.  To me it seems that this all is coming together and turning into global expansion with recent news of Liberty buying the debt of Worldspace and also now looking to purchase the hard assets of the company. This action could be seen as removing the hurdle of Spectrum licensing overseas that would be expensive and virtually impossible for SIRIUS XM to procure. More details are sure to come from this developing story as details continue to emerge. As Worldspace seeks to re start asset sale processes with Liberty Satellite Radio LLC, a unit of Liberty Media. Liberty Satellite Radio LLC is in fact a holding company that Liberty Media owns and has used in the past. This ties closely with Sirius XM’s rumored, though not confirmed partnership with APPLE (APPL) and could bring a whole new loyal following as well, likely adding more multi-subscription households.  All this would give lots of those potential subscribers an opportunity to purchase all of the exclusive available channels including, but not limited to, Oprah Radio, MLB Home Plate, NFL Radio, NHL Home Ice, Mad Dog Radio, The Foxxhole comedy channel, and National Public Radio with the purchase of a new SKYDOCK and the possibility of an XM best of SIRIUS package. Seems like a no brainer.

Purchasers will also gain access to a variety of Sirius XM music channels, including E Street Radio, The Grateful Dead Channel, Eminem’s Shade 45, Radio Margaritaville, Siriusly Sinatra, and many others. All told, a subscriber will be able to listen to a huge variety channels, as well as exclusive “SIRIUS XM only” concerts and special programming.  Additionally any music track can be purchased from iTunes while listening to it in the Sirius XM app which can only help add to the applications already great popularity. The iPhone SKYDOCK application just might be a lot more important than we originally speculated.  To me it seems that this all is coming together and turning into global expansion with recent news of Liberty buying the debt of Worldspace and also now looking to purchase the hard assets of the company. This action could be seen as removing the hurdle of Spectrum licensing overseas that would be expensive and virtually impossible for SIRIUS XM to procure independently.  More details are sure to follow from this developing story as details continue to emerge.  As Worldspace seeks to restart asset sale processes with Liberty Satellite Radio LLC, a unit of Liberty Media. Liberty Satellite Radio LLC is in fact a holding company that Liberty Media owns and has used in the past.

Suffice it to say there is a lot more to what is going on than meets the eye, or what is constantly rehashed over and over again in the Mainstream Media. The real battle has begun, as Sirius XM Radio continues showing signs the company is finally using their heads when it comes to growing a subscription base not tied to the Auto industry or expensive specialized Satellite Radio equipment. It would appear that the trio of APPLE, LIBERTY and SIRIUS XM could be just the thing the doctor ordered for Sirius XM Radio.  The combination of these three companies has indeed sparked some interesting fireworks in the recent past and will in the near future.  The internet version of Sirius XM Radio is just fingertips away from anyone who has either an iPhone or iPod touch.  Now the Apple’s iPhone and iPod touch users may also take advantage of a docking station which transforms their devices into a full fledged satellite radio as well.  The missing puzzle piece in all this is the company’s effort to take advantage of iPhone and iPod touch user numbers in Mexico, The Caribbean, Central and South America and overseas in Europe, Asia, Africa and Australia.

Before continuing, let me also inform readers that Mel Karmazin once again spoke to the rumors of a reverse split in the near future, stating very emphatically that it was not in the cards.  Mel also spoke of Free Cash Flow (FCF) and how that is one of the major focuses of the company at this time, which leads on to wonder what’s in store during the upcoming Q3 Conference Call.  He also went on to say that if you look at the history of companies with lots of FCF, there is a common theme….stock repurchase.  To me that is an incredible comment from a CEO who seems to grow more and more confident as the combined company continues to improve even in a down economy.  The SIRIUS XM conference call for Quarter 3 is now scheduled for 5 November at 8 AM. Surely we will hear more good new at that time.

Let’s continue on the Global Expansion theme with Liberty Media.  Liberty Global is the leading international cable operator offering advanced video, telephone, and broadband internet services.  They operate broadband communications networks in 14 countries, principally located in Europe, Japan, Chile, and Australia.  Liberty Global’s operations also include significant media and programming businesses such as Chellomedia in Europe.  Liberty Global connects 16.7 million customers to the world of information, communications, and entertainment.  As of June 30, 2009, Liberty Global’s networks passed approximately 34.5 million homes and served more than 26.6 million RGUs, including approximately 15.3 million video subscribers, of which 7.2 million were digital cable and DTH subscribers, 6.4 million broadband internet subscribers, and 4.9 million voice subscribers.

Liberty Global’s UPC Broadband (UPC) division is a leading provider of cable television, broadband internet, and voice services in Europe, serving approximately 9.2 million customers throughout 9 countries.  UPC is the largest cable television operator across the majority of the markets in its footprint. In Western Europe, UPC operates cable networks in the Netherlands, Austria, Ireland, and in Switzerland through the Cablecom brand.  In Central and Eastern Europe, UPC’s operations span five markets: Poland, Hungary, Czech Republic, Romania, and Slovakia. Chellomedia is Liberty Global’s European-based content division, and a leading international provider & distributor of TV channels, content, and digital services.  Chellomedia has a strong focus on theme based TV channels, rights aggregation, channel distribution, and channel sales.

Liberty Global also operates in Japan and Australia.  In Japan, their operations are conducted through Jupiter Telecommunications Co., Ltd. (J:COM), a subsidiary of LGI/Sumisho Super Media, LLC. The Australian operations are conducted through AUSTAR United Communications Limited (AUSTAR). Rounding out the Global reach in South America and the Caribbean is primarily through VTR GlobalCom S.A., an 80% owned subsidiary, and wholly owned subsidiary Liberty Cablevision of Puerto Rico. Liberty Global also has ownership interests in two Latin American content businesses: MGM Networks Latin America, a joint venture with MGM, and Pramer S.C.A., a 79% owned subsidiary, both of which produce and distribute programming to the Latin American market.

As you can see, this all is an exciting turn of events for Sirius XM Radio if Global expansion is truly on the table as it appears to be.  The distribution network and licensing appears possible now through Liberty.  Repeater networks were already in place in Sweden, Germany and Italy from deals put in place by Worldspace.  Even a Satellite radio agreement with FIAT had been brokered and agreed to prior to Worldspace going into Bankruptcy.  I would think that if all the iPhones and iPod Touch devices throughout these countries and markets were capable of receiving the Sirius XM internet feed in the not too distant future or the full SATRAD feed from the SKYDOCK, that sub growth would be a given with the possibility of well over 24 million total subscribers between auto and retail just being a formality at that stage. If the premise of my article holds true, and I am doing some speculating here, but doing so with the knowledge of who the players involved are, and some very recent comments and facts, there are some very exciting days just ahead for Sirius XM Radio.

Disclosure: Long SIRI

As the current share price of SIRIUS XM bounces around in the mid to high .50s heading into the Q3 Conference call, many would say it’s just bad timing regarding the price, the economy is still bad, auto sales are still slumping post Cash 4 Clunkers though it did provide a much needed boost and, people are still unemployed in large numbers and scared for their jobs. Having recently lost my job….I can relate to all the uncertainty. While that is all true, and some of it is reflected in the current state of the price per share, there are very positive signs that the Media in general has chosen to pretty much ignore recently.

We saw an upgrade on the EBIDTA forecast for the year from 300 million dollars to over 400 million dollars, from a company which was nearly bankrupt according to their CEO and many media reports back in February. This is not an insignificant achievement by any standard, yet it has also been virtually ignored in the main stream media. More recently, we have seen a used Car program meant to take advantage of all those inactive chipsets that are out there from the past. The release of the iPhone application during the latter part of Q2 provided plenty of media chatter as it was hotly anticipated and rose quickly on initial launch in the ranks of iphone apps, remember all the comments from media outlets folks, about Pandora and Slacker being competition. Funny how it died down isn’t it! More recent announcements of the SKYDOCK , which turns your iPod touch or iPhone into a full fledged satellite radio capable of receiving all XM channels as well as best of SIRI, and other new equipment related to the future of SATRAD would have one drooling thinking of loftier numbers for the company and the share price. We have heard and read about re financing of high interest debt at lower rates, including re payment of Liberty’s loan which was at a high 15% rate. Finally, we have seen the merger synergies providing real savings and adding value to the company each quarter since December.

So what’s not to like……..well let’s start with the current state of the auto industry….lack of sales hurts in perception and reality right now as SIRIUS XM has yet to show the ability to generate a substantial subscriber base beyond the currently weak Automotive world. Higher saturation among Brands and Models should help the bottom line auto numbers and take rate. That said it is also quite probable that the iPhone app is continuing to be positive step in the retail direction, especially now with the SKYDOCK.
There is also some negative info to look at such as the specter of still looming large debt payments past 2011. One would think that the company will continue to refinance some of that debt at a reduction of the interest rate it is currently tied to. Of course the preferred move would be to pay off some of that debt and further de leverage the balance sheet. As we look to the future of the company we need to be balanced as much as possible, and grounded in reality. I believe in this company, I believe in the exclusive content, and I believe in the business model, but it all means nothing if the correct steps with regard to the future are not taken. Recent chatter has been flowing regarding a partnership between Apple and SIRIUS, though there has been no official word from either side and no press release to confirm. The SKYDOCK will however be available in Apples retail stores around the country as well as Best Buy and Radio Shack stores. As an investor, I am excited about recent success and keeping a watchful eye on future moves the company makes. Defeat is not an option, Mel Karmazin knows this better than anybody.

Disclosure…….Long SIRI