I Would Not Own Banks Stocks: Meredith Whitney

I Would Not Own Banks Stocks: Meredith Whitney

By: CNBC | 11 May 2009 | 04:14 PM ET
Banks are overvalued and the government enabled them to have better first quarter earnings than they should, well-known analyst Meredith Whitney told CNBC.

Meredith Whitney

"At a core basis, I would not own these stocks," Whitney said in a live interview. "Their business models are not going to come back."

Whitney, a former analyst at Oppenheimer who has her own firm, is renowned for calling out the problems with banks' toxic assets before the issue became widespread.

"This is the great government momentum trade," Whitney said on why bank stocks had seen some improvement lately. "But the underlying core, earnings power of these banks is negligible."

Whitney also said that consumer spending is still going to remain slow. "There's a massive retraction in consumer liquidity," said Whitney. "Credit contraction is happening at an accelerated pace. Consumer spending is going to be less than people expect going forward."



She cited Bank of America [BAC 12.94 -1.23 (-8.68%) ] as an example of credit contraction. "They cut more than $200 billion in credit card lines in the first quarter of this year," said Whitney. "Consumers are not going to spend money."

Whitney also said that the rules of trading have changed because of the government's role. "For investors, you invest on what you know to be the rules of the game," said Whitney. "But with the government involved, no rules apply."



Whitney said the changing rules create a big problem for investors going forward. "The biggest danger here is having the retail investor shut out for a period of time because they don't know who to trust on market values."

 

the only important thing is what Cramer says.

 

They were making fun of Roubini on Fast Money today. Either the 15 minutes for Roubini, Whitney, Taleb, ... are up or they're going to get even more positive noteriety.

Could Whitney be the next Elaine Garzerelli, who parlayed a lucky sell call shortly before the 87 crash into a 15 year career as a frequent CNBC/Bloomberg guest - always being introduced as the girl who called the 87 crash. Needless to say, she never had a correct call again.

 

Whitney is bang on with her calls. She speaks like a trader. Very refreshing.

 

Whitney will be proven right eventually, market doesnt seem to care how the banks will look like in 2y, all they care is about the next earnings report, in a few years is likely banks will be massively regulated, have higher capital requirements, be forced to IPO risk taking subs(BAC might have to unload MER when they reinstate glass steagal),etc

 

The big banks will be Zombies for the next decade, just like they were in Japan.

 

Sorry, put this on a different thread below. Anybody else see the interview? As soon as I saw her face on the TV I blew out of all my stocks. Was the right move, didn't make me money but I saved losing a bunch.

 

I'm pretty sure she gets trotted out there for the sole purpose of blowing out the weak longs in financials and suckering in more shorts. Gives the big boys an opportunity to buy back in at better prices.

 

I know some of you guys say that some of this stuff is staged by CNBC. I am starting to believe it. Almost like how they set up that ugly chick in UK talent show that sang great, like it was a shocker. Totally staged.

This seriously pissed me off though. They knew what Whitney would say. I knew what she would say. Why do it at 3.45pm? Thats my question. The other baffoon on CNBC said right after, "Oh Maria great interview, oh no look . . . the market is selling off on Meredith's comments, well whatta ya know? You're a market mover Maria!"

 

I wonder how she gets reimbursed for the 6 points of S&P downward movement she raised the probability of happening ?