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I have a new crush, and her name is Meredith Whitney, banking analyst at Oppenheimer.
In a time when it is easy to make fun of analysts and be skeptical of their work, Mrs. Whitney has provided us with sharp, "intellectually honest", on-the-money revelations about the mess in the financial sector. In my eyes, she stands well above all the other nonsense and chatter that passes as analysis out there. She is a true queen of the scene. And for her recent work, I cannot help but be smitten. If you ignored the chatter calling for a bottom in financials every few weeks, and ignored the recent chatter claiming March was THE bottom, and simply listened to Queen Meredith, you would have saved yourself a lot of pain and perhaps made a few coins on the side being short. The vicious selling we have seen in parallel with the half-truths about balance sheets should finally be enough to convince you that what we have is a mirror image of the collapse in tech stocks from 2000 to 2002.
Quuen Meredith's downgrade of Citigroup back in November raised a ruckus: the stock fell down 7% on the day, and a lot of folks were either incredulous or piping hot mad. Since then, she has made numerous appearances on CNBC and has been oft-quoted by journalists looking for commentary on the financial sector. She downgraded the financial sector some 30 times between November and March. Even after the cataclysmic sell-off in March she provided a very bearish outlook on CNBC where she said "even the financials I like, I don't like." I posted that video a while back, and I highly recommend it if you have yet to see it. In this interview, Meredith stated that the end to her downward revisions is nowhere in site! She claimed at the time that banks will be forced to sell assets at firesale prices as they continue to refuse to sell and write-down losing assets on the way down. She also warned that folks who think these stocks are cheap are in for a rude awakening given that the end game will be to value these banks to tangible book. I find it fitting that this interview was with CNBC's Maria Bartiromo who broke the news of Lehman's financing the night of March 17th and told the folks on Fast Money that this deal would put the critics to rest and firm up the company. She chastised them for being so critical and skeptical of the move (as financial stocks rose from their with teflon power, most of them did indeed get back on board with the financials). I think she nearly jumped for joy when LEH popped 46% the next day. Three months later, another financing, and a 36% drop from that close, and I wonder what the reaction is now?
Anyway, you can bet I will be following this crush more closely as the credit crunch continues to unwind. Queen Meredith's latest pronouncement? I think CNBC's headline from May 20 tells the whole story: "Oppenheimer’s Whitney Sees Credit Crisis Well into '09." I suggest you take a quick read. I sure hope that I am paying attention when Queen Meredith finally gets constructive, maybe even positive, on the financial sector. Even had we just paid attention those short few weeks ago, we all could have saved a wagonload of cash. Finally, on the flip side, I am noting that JP Morgan (JPM) is now right back at its March, 52-week, and 3-year lows. JPM head honcho James Dimon was lauded as a shrewd operator after negotiating a steal of a deal with the Fed to swallow up Bear Stearns. Folks were itching to buy the stock then. Is it an even better buy now?Hmmmm.... I wish I could directly ask the Queen (=smiles=)
Oh yeah, and a quick side, for a long time, folks dismissed the decline in homebuilder stocks as immaterial to the market. Eventually, the sub-prime mess nipped us in the butt and spread like a virus. We now have General Motors (GM) incredibly sitting at multi-decade lows. And no one really cares because America is a "service economy." Before the stock market crash of 1929, the stocks of automobile manufacturers dropped precipitously, warning of future financial malaise even as the 20s boom partied into its final hours. Let's hope that this time is VERY, VERY different...
Be careful out there...!