Meredith Whitney Gets Bullish, but Not on Banks

By Jeff Cox, CNBC.com, Senior Writer

NEW YORK (CNBC) -- An economy under constant barrage from housing, price inflation, and debt concerns actually has created investment opportunities, banking analyst Meredith Whitney said.

Though she's more widely known for strongly bearish positions -- she notably predicted a wave of municipal bond defaults for this year that has yet to materialize -- Whitney said the beat-down of asset prices is working in investors' favor.

"Fundamentals are not playing into valuations now at all. You've got great companies that are trading horribly, you've got pretty junky companies that are way overvalued," said the president and founder of the Meredith Whitney Advisory Group. "For the first time in three and a half years, I think you can begin to invest fundamentally and make money."

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Whitney is probably best known for delivering a forecast that by many accounts was the first and most important warning shot of the financial crisis to come -- that Citigroup(C) in 2007 had billions of toxic assets on its balance sheet related to subprime mortgage exposure.

Since then, her opinions draw strong market attention as she has become a cultural touchstone from the financial crisis era.

But in remarks at the Delivering Alpha conference run by CNBC and Institutional Investor, Whitney said the current economic predicament is different than the 2008 crisis, and in some ways worse.

"To me this is really scary from a consumer standpoint," she said. "It's not like 2008, which was just jaw-wrenching. This is a constant beat-down with consumers. There is inflation everywhere you look without wage inflation... That does not sit well with consumers, which power the economy."

The battering of confidence has hit financial assets, particularly banks, in a meaningful way.

Yet Whitney believes some of the aversion to risk is overdone, and she sees pockets of opportunities in what she referred to as the "emerging markets within the United States."

It's a concept she has spoken of before in referring to those areas, primarily the agricultural heartland and areas not as severely impacted by the housing crisis. She said those regions can expand even as the broader U.S. economy remains mired in a slow-growth cycle.