Citi Cockroach #2 (or is it #3?) Plenty more where that came from...

And now, from my mates over at Merrill Lynch, more cockroaches scurrying around... Knocking the Asian markets down further this afternoon, analyst Guy Moszkowski is slashing his f'casts for Citi.

"Cutting again; big writedowns seem likely
Based on continued deterioration in US residential and commercial mortgage
markets, corporate debt markets, and key investment-banking categories, we are
reducing our Citi estimates for 2008. Our 1Q08E falls to ($1.66) from $0.55; our full-year estimate falls to $0.24 from $2.74. In particular we are forecasting
another very large writedown of Citi’s subprime-related exposures. This is
consistent with our view of the company’s excess-capital-raising exercise,
outlined in our report “Replacement Cost” dated 2/21/08."

Interestingly, this is probably a worse day for the HK/China (ie H shares) market than yesterday, when markets opened sharply down and then stayed there (bothered and bewildered) - and kind of hoping for a short squeeze... Which never came. Tried a squeeze again this morning after a nothing day in the US with a 1+% open, then proceeded to slide 3.2% steadily throughout the day (4.7% for H shares.) Volumes picked up in the afternoon relative to the morning session, maybe as hopes for a rally subsided.


China's NPC is opening tomorrow - maybe a chance for a squeeze again tomorrow? Maybe...

BUT word is that most hedge funds are running very low net and gross exposures... and sitting on a lot of cash. (One fund we know of has double digit billions of USD in cash!) Yes, a lot of the shorts are very concentrated in a short (pun) list of names (eg a third of outstanding shorts in HK are in financials) - but that seems to be the exception.

So squeezability? After a 2 day fall like what we've just suffered? Well, maybe... but I would maintain a low net and not close out too many shorts.