Whitney has also downgraded Wachovia Corp and said the earnings outlook for Wachovia. has ``dramatically diminished''. She also said that she remains negative on Citigroup, Wells Fargo and Bank of America. She said she is particularly concerned about Wells Fargo since it even fails to disclose the data that would make it possible to understand its true financial position.
Whitney said that Wachovia appears to be trying to shrink its balance sheet and that "historically, financials have not shrunk well.'' She said Wachovia last week released charge-off figures that didn't correspond with portfolio values, meaning the bank might be shrinking its balance sheet. ``Your revenues go down dramatically. Effectively, you'd be eroding capital,'' said Whitney.
Oppenheimer & Co.'s Meredith Whitney, the analyst who, very early in the game, correctly predicted Citigroup would reduce its dividend, even when Citigroup denied that they would...
ReplyDeleteA lot of people were speculating about Citigroups dividend, that hardly makes this guy Nostradamus.
Uh, Ms. Whitney is hardly a “guy.” ;-)
ReplyDeleteShe is married to a rather large guy, 6'6" 300lb, former professional wrestler JBL, aka “Bradshaw,” a self-taught investor/finance guy.
Whitney was a) very early with her analysis of (Sep/Oct 2007) Citi, and b) spelled it out in great detail in her research pieces how they were short of capital, their funky off-balance sheet crap, their cash burn, etc, and c) as a result, received death threats by November 2007, presumably from people who were pissed that she had the audacity (they thought) to say something so bold.
During this time, if you remember, Chuck Prince was telling everyone that “everything was just fine.”
Prince was forced out by the board the first weekend in November, 2007.
She was right, she was early and she’s been one of the few people right on the whole sector - ie, she was saying “there’s more crap coming down the pipe” when everyone else was saying “the bottom is in!” and “Buy financials, the worst is over!”
So far she's basically been right once - called the bear and stuck to her guns all the way down to recent lows. However, for market timing to really be useful, you have to be right twice. We're not going to underweight financials forever, and if she tells us to continue to avoid them while they rally then her earlier advice becomes less useful. All in all she's doing a pretty good job, but I would say it's a pretty safe bet that any analyst will eventually fail, because they don't really have any non-public information and market prediction is almost impossible.
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