Courtesy of CNBC:
Airtime: Tues. Sept. 28 2010 12:12 PM ET
The financial challenges states face could be the next systemic risk within the financial markets, according to Meredith Whitney, CEO of the Meredith Whitney Advisory Group.
An hour with, IMO, the best financial analyst on the street. Enjoy!
Courtesy of CSPAN:
Our guest on Q&A is Meredith Whitney, CEO of Meredith Whitney Advisory Group LLC. In 2007, she was the first financial analyst to predict major losses for Citigroup, one of the nation’s largest financial services companies. Program from Sunday, September 5, 2010.
…After reviewing the data, the S&P/Case-Shiller Home Price Index Committee believes that, for the present, the unadjusted series is a more reliable indicator and, thus, reports should focus on the year-over-year changes where seasonal shifts are not a factor. Additionally, if monthly changes are considered, the unadjusted series should be used….
this is unlike any other housing drop, in terms of severity and government intervention, so any series cannot capture where prices are going..
…On an unadjusted basis, prices dropped 0.9 percent in February, worse than the estimated 0.3 percent decline and following a 0.4 percent downturn in January….
…The report suggests more price erosion is possible before prices start rising on a sustained basis, S&P said. The price improvement can be attributed to momentum from the federal homebuyer tax credits, which expire on April 30, and prices could be pressured further by foreclosure sales….
More on falling prices from First Logic via Calculated Risk:
…On a month-over-month basis, the national average home price index fell by 2.0 percent in February 2010 compared to January 2010, which was steeper than the previous one-month decline of 1.6 percent from December to January…
Best financials analyst on the street Meredith Whitney’s latest comments on financials and housing via CNBC:
Beleaguered banking giant Goldman Sachs has lost much of the edge it had over competitors due to the recent government charges and is a stock investors should avoid, analyst Meredith Whitney told CNBC.
…(GS) faces a future in which its brand has been tainted and it will lose business to small competitors, said Whitney, who doesn’t have a “buy” rating on Goldman or any of the other big banks…
…The company’s stock should trade around book value, Whitney added, which would place the price just above $120….
Reasserts the double dip in housing-
…On other issues, Whitney called proposed new financial reform regulations “squishy” but said the result will be banks shrinking their balance sheets and consumers forced to seek predatory lenders for credit.
She also renewed her prediction that the housing market would see a double dip as more inventory is forced back onto the market.
Update 2: Bloomberg on Whitney’s call:
The S&P 500 Financials Index slumped 1.5 percent, the most among 10 industries, after the House vote and as analyst Meredith Whitney said the biggest U.S. banks may face declining values on home-loan bonds with government backing as the Fed prepares to end its $1.25 trillion purchase program.
Bank of America Corp., JPMorgan Chase, Citigroup and Wells Fargo increased holdings of so-called agency mortgage-backed securities by 44 percent from the third quarter of 2008 to the second quarter of 2009, Whitney said in a note yesterday to investors. Those increases came as the Fed began buying securities backed by Fannie Mae, Freddie Mac and Ginnie Mae in an attempt to keep mortgage rates low and spur housing demand, she wrote.
JPMorgan fell 1.2 percent to $42.21, while Wells Fargo slid 3.1 percent to $26.82 and Citigroup lost 1.7 percent to $3.97.
Update: Ms Whitney wrote an excellent op ed in the WSJ last month outlining what we can expect in the financial sector and consumer going forward. Read it here. ‘Main Street represents the foundation of this country. Reviving it should take priority over any regulatory reform or systemic overhaul.’
Meredith Whitney is IMO the best bank analyst on the street bar none.
She put out two notes to clients last night, ABSOLUTE MUST READS:
1) Ain’t Gonna Happen, where she argues that “normalized” earnings for banks is a fallacy, that it’s more likely we will see protracted consumer deleveraging, fewer consumers who qualify for credit, and dramatic regulatory change, which will negatively impact earnings for a protracted period, and
2) The Great Exit: The Biggest Market & Bank Risk Over the Next Four Months, a long note on the importance of the Fed’s agency MBS purchase program, where she argues that uncertainty over when the program will end (now scheduled for end of Q1 2010), and who the substitute buyer for the Fed will be, means that “prices will go down meaningfully and rates will go up meaningfully.” She argues that it is possible the mortgage market will again shrink notably: “We believe this represents one of the larger risks to the banks and overall market over the next several months.”
Market Closing Update: Meredith’s call gave us an incredible boost, leading financials higher DOW up 180 to 8327, S&P up 21 to a nifty 900 and NAS up 35 to 1791…but Meredith only applied the good news to Golden Slacks, this is a relief rally built on air, but hey smoke em if you got em, every up day is a good day…
MiM considers Whitney and Tilson the 2 people who know WTH they are talking about on the financials and what is coming for the banks and the markets…Golden Slacks will make a bundle, again…and the vaunted stress tests did not consider the level of unemployment we are hitting and the level of toxic mortgage assets still on the books of the banks….
…(thanks in part to FASB changes that removed the impetus to sell the bad debt for what it is worth not what they want it to be worth, we are getting more foreclosures now b/c banks are not willing to take the immediate write downs of a short sale or a modification with principal writedown,
(foreclosures take longer to process and banks are SITTING on TONS of inventory, not taking reasonable offers to avoid taking writedowns!!! foreclosures can take 18 months and banks are playing for time and anecdotally, banks are rejecting FULL PRICE OFFERS from homebuyers and selling at HIGHER PRICES to INVESTORS AGAIN, recreating the entire cycle, utter morons!
TOTUS is doing some more arm twisting in a meeting on July 28th with Geithner anf Donovan of HUD and the top 25 mortgage servicers…let’s see what comes of that, methinks the idiot banks should do some more mods before Barney Frank writes new forced loans for them …)
Live! From New York, NY: Exclusive Interview with Meredith Whitney (Taking Stock)