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For more than a decade, Citigroup and USB have been priced in a very similar fashion by the stock market.

Same business, same tight-fisted management, and so on.

Statistically, their stock prices have been very closely correlated. They move together.

To see this is the case, a picture might help:

All of this changed during the past year in which Citigroup is up 75% and USB is down 25%.

At today's close, Citigroup was priced at $58.39, or 22.9 times ttm earnings of $2.60.

At the same time, USB was priced at $21.77, or 10.13 times ttm earnings of $2.08.

With Citigroup dollars now worth $1.75, and USB having fallen in price to $.75 on the dollar, Citigroup can now buy USB
for only 40% of the share-per-share dollar price of one year ago.

This yawning gap will not persist.

Citigroup is going to buy a regional bank.

None is cheaper, nor better situated than USB.

You read it here first.

Best wishes,
Mark Hirschey
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