By the logic of the US stockmarket, the stumbling giant Citigroup bank and its 352,000 employees (soon to be 300,000) is worth exactly $667 million, give or take a few million. That’s after deducting the $US25 billion injected into the bank last month by the US Treasury from the market cap at the close overnight of $US25.667 billion.

That was after another day when the banks shares were attacked by the shorts, who drove it down 26% to $US4.71, after touching a new low of $US4.39. The close is the lowest since 1994 (the bank has had a chequered past). Six days ago the bank was valued at $US52 billion, so its value has halved, helped by the shorts, mostly in the past two days.

It’s more evidence that the process of shorting is destructive and an easy way for wayward brokers, stock exchanges and hedge funds and their mates to make money, at a time when making money is tough and the hedge fund industry is collapsing. It’s illogical to think that shorting adds value: the millions of people in super funds in this country whose money is invested in the likes of Fairfax, News Corp, Primary Health Care and the host of other non-financial shares whose value has been short-circuited since the ban came off on Wednesday, would be wondering where the upside is in shorting.

Citigroup is now lobbying the US Government to re-introduce the ban on shorting that was lifted in October. The market fell while the ban was on because of the shock from the collapse of Lehman Brothers; that has helped continue to drive the market lower, helped by the rapidly approaching recession and now the prospect of deflation. Short sellers in the US, like here in Australia, have merely ridden that trend lower; they haven’t been ‘price discovers’ as their mates in the media, academic circles, stock exchanges and financial advisory circles claim. They have merely been parasitic investors, if you can call them that.

If the market is right and Citigroup has no value (as established by the shorts) then consider the fallout. It means no bank around the world has value, nor has BHP, nor has GM, nor has Telstra, Wesfarmers. Because if Citigroup has no value and collapses or is rescued by the US Government, then the blow to sentiment and confidence would be such as to render the phrase “economic recovery” and another, “stockmarket rebound” redundant.

Bloomberg claimed the reason Citigroup fell was as “concern intensified that the U.S. recession will generate losses and weaken demand for financial services.”

Well, that has been apparent for quite a while and US investors have been very aware of the coming crunch on earnings and the like. Citigroup has raised about $US75 billion since December by selling assets and equity stakes, including the $US25 billion injection from the US Treasury.

Citi has lost about $US20 billion in the past year as bad loans increase,d write-downs were taken on CDOs and other dud investments stemming from the subprime mess. But now banking analysts surveyed by Bloomberg claim Citi’s loss this quarter will be $US673 million; looking at its performance in the past year, that’s more a case of a bank poised to rebound a little, recession or no recession.

The suspicious mind thinks, when will the hedge funds get set for the upswing in Citigroup’s price after driving it so low? Some might call it “market trading” others “investment strategy”: the uncharitable cynics would call it market manipulation and a rort.

But if Citigroup is worth nothing, then we are all stuffed. So much for the claim that the stockmarket is “efficient’. It’s no more efficient at the moment than the NSW Government is at running a train.