Citadel on the verge of blowing up

Another leveraged hedge fund, is in trouble. Last month, they forced a retraction from a blogger who stated the fund was down over 25%.
http://aaronandmoses.blogspot.com/2008/10/barakett-brothers-blow-up.html

Now they are down over 40%, and selling multi-billion dollars worth os stock, and this time it is covered by the WSJ. Now that Citadel is on death watch, the banks that lent them the money are now asking for a bailout!

Hedge funds are selling billions of dollars of securities to meet demands for cash from their investors and their lenders, contributing to the stock market's nearly 10% drop over the past two days...

One of the biggest hedge funds, $16 billion Citadel Investment Group, is being asked by several major banks to post additional collateral to cover big losses on its investments, according to people familiar with the situation.

Citadel, which is run by Kenneth Griffin, was until recently considered a possible savior for troubled Wall Street firms. But his biggest hedge fund has fallen nearly 40% this year, prompting the firm to hold conversations with lenders including Goldman Sachs Group Inc., Deutsche Bank AG and Merrill Lynch & Co. that finance Citadel's trades.

Citadel executives say the calls for more cash are a normal part of business when securities they hold fall in value, and they emphasize they have significant amounts of cash to satisfy their lenders. They say they have met all the demands for collateral. Rumors that the firm was having problems led it to hold a conference call two weeks ago in which it said it was holding 30% of its capital in cash and Treasurys and had $8 billion in credit lines it has yet to tap. The firm also said some of its businesses are doing well this year, that it has reduced risk and its use of borrowed money, and that performance has improved recently.

Lenders are hoping regulators would orchestrate a settlement among the companies involved in Citadel's loans if necessary, according to a person familiar with the situation. "Citadel is a valued client, and we continue to do business with them as usual," said Ed Canaday, a Goldman spokesman.
http://online.wsj.com/article/SB122602205734807307.html?mod=testMod

Citadel is blowing up, and Wall Street thinks it's the Obama election that is knocking down stocks. He'll have his first press conference today, and then we'll actually see what the market thinks.

But with rate cuts across the board, you need to be a buyer at these levels, and not a seller.