Condor Options

Each week, Barron’s publishes something called the “Citigroup Panic/Euphoria Model.”  Long worthy of derision, this particular metric looked most ridiculous back in October 2007 when, just as equity markets were topping, the Citigroup model just barely – finally – drifted up from the “panic” zone to give a neutral reading of zero.  Starting in January 2008, the model began to register more dramatic swings, and we noted back in April that since the model seemed to have been significantly altered, we would reset our expectations and evaluate it again at some point.

We don’t know anyone who would argue with the conclusion that there was quite a bit of panic last week – on just about any qualitative or quantitative measure you choose.  Except, that is, for the Citigroup Panic/Euphoria Model, which measures current market sentiment at 0.3.  That measurement is not the absolute peak of euphoria, but it is still soundly within the same zone, and is clearly at odds with every other indicator for measuring the attitudes of market participants (not to mention, um, reality).

Not to worry, though, we may have figured out the cause of this divergence.  Surely the Citigroup Panic/Euphoria Model must be derived from an internal poll of Citigroup employees!  This explains the current relative elation, as countless workers express relief that their jobs, their firm, and their equity will survive until at least the next deregulation-induced financial crisis.

We kid.  But seriously, “Citigroup Investment Research – US Equity Strategy”, what gives?