Editor's note: Analyst Meredith Whitney released a negative view on banks and the economy in general Monday afternoon, somewhat blunting a sharp rally in stock market. RealMoney contributors took up the story and ran with it.
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Jim Cramer started the ball rolling in Columnist Conversation:
11/16/2009 3:30 p.m. EST Is this why the market dipped? Because Meredith Whitney came on and said that the banks are expensive and too high? Is that what we feared? What edge does she have? What is her standpoint? Bad loans? Bad credit? It is painful to hear her now. I know she called the top in Goldman Sachs and I know she was negative going into the cataclysm. But this is really same old, same old now. The fact that it worked and knocked down Goldman and JPMorgan is rather amazing to me. And is a testament to how stupid the market can be. No humility, no sense that we have had a big rally. No evidence that things are further deteriorating. No talk about the credit improvement at JPM. And, instead, chatter about retail sales? I mean, wait a second, retail sales? Now she's a macro generalist? Her credibility, like Roubini's, is shot... Position: GS, JPM
Timothy Collins weighed in, asking for accountability:
11/16/2009 3:46 p.m. EST You know the game, Jim. It's her job to MAKE headlines. Otherwise, how do her clients know she's working? One of my cohorts said it best here ... this is just an excuse to sell. Any selloff based on her remarks will be short-lived unless they prove to be correct. Now we just need to hold her to the same standards of "owning" her call here. That's what I want to see the media actually do. If she's wrong, then next time she is on, pull out the clip, and say, "Meredith ... what makes you different this time? Why should we listen to what you have to say here?" She has been very right on several occasions. She can't be right on every occasion, but where do we draw the line?
Jim Cramer revisited the subject in his blog:
I Don't Think So, Meredith
11/16/2009 3:57 p.m. EST Meredith Whitney's an embarrassment. She comes on TV with no new information, with nothing other than some valuation calls, some "double-dip" rhetoric and a poorly reasoned rap on weak retail sales, and we listen. I am sure if you are a client of Whitney's you knew you had this one in the bag and the usual suspects -- Goldman Sachs (GS) - Get Report, JP Morgan (JPM) - Get Report and Bank of America (BAC) - Get Report -- got hammered. If I were a hedge-fund manager, I would have loved to have been "in shape" ahead of that interview. I no longer think that Whitney does credible work. She has ignored anything that's happened, anything that's gotten better. She thinks the capital raises basically meant nothing. She talks about how Bank of America was cheap at $3, but not anymore. Was it expensive at $4, Meredith? Is there any evidence WHATSOEVER that JP Morgan is weaker than at any time since the crisis began? Does anyone think that about Goldman Sachs? Does she not acknowledge that there is not only a normalized earnings model for so many banks out there, given the big fee increases, but that the notion of staying as negative as this seems almost foolish? No, make that foolish. I think that you need to buy JP Morgan off this and I think you just got another chance to buy Goldman Sachs. I think this is madness. At the time of publication, Cramer was long BAC, JPM and GS.
Ben Thomas defended Whitney -- to a point:
11/16/2009 4:14 p.m. EST Calling Meredith Whitney an embarrassment seems a bit too much. While she has mostly missed the rally due to being to risk-averse, she did nail a major structural shift in her group (not a small feat). Some might actually admire her conviction vs. others that go on CNBC and give us more flip flop than waffle house.
Rev Shark joined the fray, in his blog and then again in Columnist Conversation:
Why Worry About Whitney?
11/16/2009 4:18 p.m. EST Meredith Whitney made some bearish comments and took some steam out of the market in the final hour, but it was still a tremendously strong day, with around four-to-one positive breadth and new annual highs in the major indices. Volume was mediocre yet again, but, as I discussed earlier, it just doesn't seem to matter. I see some complaints about Meredith Whitney on the site, and my reaction is that we are in a market where fundamentals are irrelevant, so why would anyone worry about what she has to say. When we start worrying about fundamentals once again, then maybe she will have something valuable to say, but for now, the only thing that matters in this market is that the dollar is sinking like a rock and there is a flood of cash looking for a better alternative than 0% interest rates. We are riding a wave of momentum that has nothing to do with news or fundamentals. We have had a number of negative economic stats lately, such as Michigan sentiment and the revision to September retail sales, and they just haven't mattered. This is a market driven by folks who are scrambling to find more long exposure and bears caught in a perpetual squeeze. Of course, analysis like that from Meredith Whitney is meaningless, because this market isn't interested in those arguments right now. She may actually be 100% correct about the problems, but the market just doesn't care, because people are too busy playing catch-up. Sometimes it pays not to think too hard. This is one of those times. ... Using the logic I see here, anyone with a fundamentally bearish argument about this market is an unrigorous goofball and all the bulls are insightful geniuses. Funny how that works when the market is in rally mode.
Jim Gulbrandsen further defended Whitney:
11/16/2009 5:27 p.m. EST She made sense. It's her job to take a view, and she did. There's a feeling of permanence to the contraction in consumer credit and while I'm optimistic (for now), when the market starts going down again in 2010, she will have been right for the right reasons. For the record, I know that she's quite rigorous. This Meredith-hate makes me nervous as someone who is net long...
And Jim Cramer circled back to close the day:
The Facts Don't Support Whitney's Claims
11/16/2009 6:21 p.m. EST We were on the cusp of a 200-point day before Meredith Whitney started blabbing her darned fool head off about double-dips and retail sales and a lack of capital for an industry that she's very worried about. No sooner did I see her talk than I saw headlines all over the place about how she had "turned negative," and I had to laugh. Turned negative? She fought these moves tooth and nail and has never been positive except one moment when she said they could run without her. I find the lack of accountability here mind-boggling. For example she says that banks should trade at tangible book value. OK, let's take her at her word. We would be looking for about a 20% move up in Citigroup (C) - Get Report if that is the case. She says that housing is not improving. I don't know what to do with people who do not see the improvement. I can't throttle them, and I can't send them nasty emails. She talks about all regionals as being bad and now all nationals joining them. Does she really think that JPMorgan's (JPM) - Get Report situation has gotten more precarious? Can she not acknowledge that PNC (PNC) - Get Report has vastly improved? Could she do some work on the regionals I talk about in Getting Back to Even that stand to benefit if she is as right as she claims to be? She talks about how the stocks have gotten divorced from the fundamentals and says that's why there is a big increase in price. Maybe the fundamentals, though, just maybe, are improving. As an aside, I think Whitney had many clients who were short going into this interview. The inability to take down the stocks, as hard as she tried, I believe backfired. Was she irresponsible? She runs a short-selling oriented advisory firm. She did what she had to do. But it was close to a rant where she was simply angry at the market for going higher. She has many adherents here. I can't change that. As I pull a few more of today's arrow's out of my back, I say, once again, that it was shameless. As always, she will not appear where she can be called out on this. What a delight that must be, to have that luxury. She also can say, "Look, in the future, unemployment is going to be very high, so things will go bad," knowing that no one will ever question her about what happens if unemployment has peaked. Put simply, Whitney is bulletproof, and for that she should be eternally grateful to the news media. At the time of publication, Cramer was long JPM.
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This article was written by a staff member of RealMoney.com.