SAN FRANCISCO (MarketWatch) -- Citigroup Global Markets issued a 37-page research report Wednesday recommending investors dump their shares in General Motors Corp. and Ford Motor Co.
To many out there on Main Street, this looks like a serious grasp of the obvious.
It's also another example of why confidence in Wall Street has ebbed nearly as low as the two struggling carmakers' share prices.
Specifically, shares of GM
(GM General Motors Corporation
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GM) are down 82% over the past 12 months, trading at a 56-year low.
And shares of Ford
(FF
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F) are down 73% over the same interval.
Until Wednesday, Citigroup had labeled both stocks a hold.
The report goes to great lengths to explain mounting pressures on the companies. Chief among them: what the Citi calls intensified caution, deteriorating global credit conditions, and unappealing valuations.
"After maintaining a cautious stance on automaker stocks throughout the past several months, we believe the risk-reward balance has tilted decidedly negative on both absolute value and relative value versus underperforming suppliers," Citi writes in its note.
Huh?
This is the byzantine language of Wall Street. It raises serious questions about analysts' perception of reality and their ability to communicate to those millions of Americans who make up the investor class -- those whose retirement hinges on fast-shrinking 401(k)s.
Why cloak simple stock recommendations in impenetrable prose? Unless analysts are writing for themselves, they need to say in layman's terms why Ford and GM are now a bad bet.
Another obvious problem is the timing of the note. If these guys are so astute, why did they wait until Ford and GM were grinding along at historic lows before deciding they should be jettisoned?
Investors with only a rudimentary understanding of the market could see months ago that these companies are in the fight of their lives. How else to explain their share prices?
When all is said and done, Citi's note looks like a backside-covering maneuver, far too late to do any good and perhaps even harmful.
Common shareholders' growing distrust of Wall Street, and the reckless abandon that has plunged the world's economy into its worst crisis in decades, is well founded.
You have to wonder if this latest report won't be read by the skeptics as an inadvertent buy signal.
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