Meredith Whitney Gets More Cautious, Mostly (GS)

Meredith Whitney has come out with some key takes this morning that may be raining on the bull’s parade.  For starters, Whitney was just named as the #39on the list of Fortune’s 50 Most Powerful Women.  But after that, the pleasantries slide away and she put on the roar of the bear once again.  In a CNBC interview she panned banks,  noting that the powers driving banks will not be the same in the near future.

On housing, she believes that the drop in  prices is not over and said that housing prices could fall another 25%. She sees a  price drop is inevitable because of a supply jam as well as rising unemployment and exotic mortgage resets.  She thinks Florida has a massive leg down coming in another wave.

She also thinks spending is going to be lower.  She said originally projected that $2.7 trillion in credit being pulled out of the system by the end of 2010.  So far she noted that we are $1.25 trillion of the way there, but consumers are now de-leveraging and are trying to not carry credit card debt.

The banks are taking advantage of inflating assets and riding a steep yield curve that will bring a similar Q3 earnings to Q2 earnings.  But the banks are now getting overvalued and she does not think a similar stock move is coming like we saw after the Q2 post-earnings run-ups.

And as far as the overall stock market and financial stocks, she’s bearish there too and is looking for another leg down in the stock market.  She thinks there will be both positive and negative trading opportunities around the market dynamics.  Her only single BUY is Goldman Sachs Group Inc. (NYSE: GS) which she said “still has a lot of gas in its tank.”

The full CNBC video is broken into two-parts, but the first one is available here from CNBC.

JON C. OGG
SEPTEMBER 10, 2009