MEREDITH WHITNEY IS NOW CALLING FOR A DOUBLE DIP
16 November 2009 by Cullen Roche
18 Comments
Great interview here from the prescient Meredith Whitney. She is now expecting a double dip recession and has turned bearish again on the banks:
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Comments
Wow, she is REALLY bearish.
I think Whitney need to be more articulate.She also fails to understand that Bernake is committed to fostering a recovery in the economy so I do not see where she concludes that mortgage rates are going up substantially.I don’t see the fed
doing that.Nor does any evidence in the real world bear Whitney out that lending standards by the banks are aS loose as they were in the past.
Whitney had her day in the sun she needs to do some new research and not just rehash the same old story of 13 months ago.
If the fed was not buying U.S. treasuries (directly and indirectly)interest rates in the U.S. would have already exploded. I understand that the fed is buying up to at least 50% of U.S. treasuries. This is basically a collapse of the U.S. dollar.
The day of reckoning is coming. The world will only let the U.S. do this for so long. Already countries are making deals with other countries to accept their national currencies and not the U.S. dollar in trade. This will be like a virus and spread all over the world.
The fed may be able to purchase as many T-bills as it wants with the tap of a keyboard but there is no way it can step up and prop up the dollar when foreigners start to repatriate the currency. The flood of returning money will be unmanageable!
I was wondering how Ron Paul managed to get the fed audit legislation passed…I think the powers that be let it get passed so that the fed would get audited and become the scapegoat for the current U.S. financial mess.
After the audit and shocked revelations, U.S. will default on their debt saying that it was the fed’s fault (not a U.S. government entity). The U.S. government will plead ignorance. Then the world will be informed that the fed’s U.S. dollar (fed-dollar) is not worth the paper it is printed on and a new currency will be born. Before that day, interest rates will sky-rocket as the U.S. tries to attract any foreign buyers it can to the U.S. dollar.
The U.S. Ponzi scheme will be over.
PS: Remember Bernanke’s warning that if audited the U.S would collapse.
R.
Whitney’s track record since March has not been as sterling as Ms. Bartiromo suggests. And all Whitney’s doing here is rehearsing the bear arguments. For the sake of her fledgling firm, she better be right this time.
What makes you say her firm is “fledgling”?
I think Whitney will be right. The more I think about everything the government is doing the more it looks like they are simply papering over the real problems. Who knows when, but this is going to end very badly. I am not in the double dip camp, but I would be willing to bet that we are still debating the credit crisis & the economic issues well into the next election….
At this rate we are going to have $100 oil next summer, 10% unemployment and a bloated S&P.
As painful as it is to watch, the fact is that the market is riding a wave of cash that is swamping all concerns. Financial news that is “not as bad as expected” is a cause for celebration. Good news is a cause for celebration. And outright bad news is cause for celebration because it means the Fed will keep interest rates low.
ALL other concerns are irrelevant as we party like 1999.
I have a lot of respect for this woman. Wish there were more (analysts) like her.
Honest, to the point. Doesn’t try to play both sides as so many do.
I think what she said near the end of the interview is so true: everything has it’s price. Exactly. This is what far too many participants in the market pay no attention to: price. Which is a good thing, because it’s what gives patient investors great opportunities. She isn’t saying the banks are going to collapse, it’s just that she wouldn’t buy them at these prices. Neither would I.
I agree with her. I don’t think we’ll re-test March’s lows. But the S&P is expensive across-the-board. It’s a good bet that better values will be available in 2010.
Whitney is saying nothing more than Karl Denninger at Market Ticker and ZH have been expounding on for a long time. The banks have not fixed ANY of their problems, and thus the issues will keep coming back until they get fixed. The Fed printing money and propping them up only delays the inevitable. Roubini has stood by his original forecast made last December; that unless Bernanke had a very good exit strategy we had a high probablity of a double dip in the middle of 2010. There have been a number of other good analysts such as Marc Faber predicting much the same outcome. It is going to get very ugly, but when depends on how much money the Obama administration through the Fed wants to throw at the issues to extend and delay the outcome.
I have a lot respect for her too Spider. I have a lot of respect for a great many of the very smart people who have been saying the market’s overvalued since August. If all these smart people, who presumably influence, if not actually direct a great amount of investment dollars, then who exactly is doing this buying? Who exactly are these mysterious institutions executing the “carry trade.” They seem to be laughing all the way to the bank while those of us sitting on the sidelines with deflating dollars, or worse, short just about anything OTHER than dollars look like absolute fools.
Can it possibly be just the work of prop desks and their HAL 9000 computer programs?
Sorry — meant that to be directed to svg.
TPC,
IMO, either you are in the double-dip camp or you believe in the recovery (however gradual). The economy (and especially the market) won’t undergo a period of no change. In fact Rosie has loudly and frequently said the market has priced in a strong recovery. If we don’t get it the market will go down and the economy will follow (reflexivity, Soros). I doubt the banks will every “come clean.” The political class won’t allow it, as it would expose how stupid and complicit they are. That means banks will gradually be bailed out at a 20% per year clip for 5 years. This year, contrary to the “nothing has changed” argument, I would guess the banking sector has sold to the Fed 20% of its toxic assets. This likely won’t increase in velocity any time soon because the taxpayers are finally realizing they’ve been had, but the banks will be bailed out. As Buffett says, “they’ll earn their way out.” What interests me more than anything, and I think people lose track of it because of the “liquidity” and “inflation is coming, just watch gold” arguments, is what the real demand story is for industrial commodities: oil (inventory very high), natural gas (this market is dead, utterly, with too much production–I was in the oil business and they simply produce until they fail), steel (no demand, see Nucor’s CEO), aluminum (see Norsk Hydro’s CEO comments about the insane inventory levels of aluminum), and the list goes on and on. We have too much of everything. Using debt we expanded capacity in everything, including loans. Even with C4C we can’t get annualized car demand above 70% of its peak. Without C4C it will likely drop to 50%. I am in the camp that says in 10 years we will be nearly where we were in 2007. The only remedy is a major crash that flushes out all the capacity. It will need to start in Asia (China). If that occurs expect lots of civil unrest, lots of mini wars, and ultimately a lot better world in 2020.
I think we’re Japan for the next 5 years….Lots of bull & bear markets within one long nowhere market….We have to deal with the problem of debt before the foundation can be laid for a sustainable bull market.
Fantastic post Edna, agree with a lot of your points. Overall it seems rather ridiculous that the carnage experienced a year ago, worst since the Great Depression, will work itself out in a year, the sheer audacity of people. We are in stagnation and will be for some time to come. We have gone a few generations to not know if we would have a job, food in our stomach or a roof over our head. Times will get much more dire before they get better. My guess is 2018 will be like 1982 and the start of a new era bull market. Until then sideways to down and we will eventually take out Marchs lows of 2009 by a substantial margin.
Just a heads up guys !
I am still expecting a USD rally – YES A RALLY.
Daily charts of key stock indices are still giving bearish warnings.
Is the bear market rally ending ?
I post my analysis at this forum:
http://www.zerohedge.com/forum/market-outlook-0
Thanks for sharing Grand Super Cycle. There are charts at the bottom of the ocean.
This next bubble cycle will be very different then the last 2 (98-2000, 2006-2008) – the US is in horrible shape this time. It will come from an unexpected corner – its all about fear propagation. Just looking at the last few cycles – Thai Baht, fraud, short ban of 20 stocks, … who would have guessed those?
For more data on where this market might be going, check out What Does The Return Of Dow 10,000 Really Mean? at truthsavvy.com. It ends with this: