Citigroup and Back at the Farm

Citigroup, and its ilk, are currently showing the value of barnyard analogies when it comes to the financial market. We have chickens, and when you do see a baker's half-dozen of poultry on a continuous basis, you recognize the practical meaning of popular saying. Most people saying that chickens come home to roost have no just how literal that is. Let chickens out, and they wander about, eating all sorts of odd things, poking their beaks here and there. But when night comes, they come back to the coop to roost, perched up on anything high and sending droppings everywhere below.

Who let out the financial fowl that are fouling the markets over which they sit? Shareholders. Yes, CEOs of massive institutions should have known better than to think their companies could get a free lunch, and that risky behavior was safe. Boards should have reigned in these people far earlier. Underlings should have had the courage to warn about the insanity of pretending that an enormous downside didn't accompany the upside glittering in the sky.

But all of this ultimately sits on the shoulders of investors: institutional, large individual, and so-called retail. Greed prompts the desire to get every last penny available in the world, and self-delusion says that it's possible. There's another farm-related analogy of seed corn. Farmers haven't traditionally sold all the corn they raised because they knew they needed seed for the next year. So they hold back some corn to provide the germination basis for next year's crop. In financial terms, you can't pull out every penny from a program, a market, a company, or an industry. If you do, you've drained your financial seed corn. Money is necessary for everything, from fueling all the moving parts in the financial chain of events to having the buffer necessary when things go terribly wrong, like keeping grain in the silos. When you've taken every earning possible, something is going to turn upside down, and suddenly you'll be in debt, and the only place to take the money is from your own pockets.

Citigroup former CEO Prince (a telling name, eh?) may be paying a personal price, but so are the investors. The question is whether anyone will learn from this, or will it become another lesson in a line that fertilize fields empty because no one is paying attention to them? It reminds me of another analogy: you can lead a horse to water, but you can't make it drink.