Just when I was wondering where Meredith Whitney had gone, she’s back. But she has a whole new tone to her. In this interview on CNBC, she says she is expecting a monster number from Goldman (GS) tomorrow morning, in 2010 and in 2011. She is well above the street on Goldman. She even uses the word ‘cheap’ when referring to the stock. Is Meredith Whitney a bull now? Have a listen – she also talks about other names and sees Bank of America (BAC) as the one to watch. I like her reference to ‘junk in the trunk’ when talking about JPMorgan Chase (JPM) in the 2nd video below.
Her comments seem a far cry from the bearish Meredith Whitney of yore. What happened to that woman? Maybe she read my post “Marc Faber: “it’s very tough for a forecaster who was ultra-bearish to stay bearish.”
For a view of what Whitney sounded like just a few months ago, see my May post “Meredith Whitney seems onboard with the fake recovery” or my April post “Meredith Whitney: Regardless of stress tests, banks will still need more capital.” She sounds very different today and is singing a tune I first got onboard with in April (“Wells profit forecast is a clear bullish sign”). But, given the huge run up in shares, I do question how much more upside there is to bank shares now despite what are likely to be very good earnings. Let’s see how Goldman’s earnings and shares do and that should be a good test.
You will notice that in the first video she suggests that the disappearance of the likes of Lehman and Bear are good for the surviving behemoths (which increases banking concentration, a point I just made).
UPDATE 1230ET: Whitney makes a point regarding loan modifications that I first made on May 26th (“How refinancing helps the likes of Bank of America and Wells Fargo”) i.e. that the big banks are getting a HUGE incentive to do refis and this will goose their earnings short-term in three ways: a. they get a refinancing fee that goes straight to current income. b. they get an incentive fee due to rules the government made on May 21st, the subject of my May 26th post. c. the banks get to at least delay writedowns because past due mortgages become current and this will decrease their loan loss provisions over the short-term. Nevertheless, home mortgage default recidivism means that re-default likelihood is high and that the writedowns will eventually have to be taken. Whitney seems to be saying this makes banks a good trading play, not a good holding play.