Monday, November 16, 2009

Meredith Whitney: The Economy Is Headed for a Double-Dip

Stocks are overvalued and the US economy is likely to fall back into a recession next year, bank analyst Meredith Whitney told CNBC.

The US consumer is going through the biggest credit contraction ever—even bigger than that during the Great Depression. "That credit contraction is accelerating," she said. "There's nowhere to hide at this point." Could this be why Goldman Sachs is short Mastercard?

The residential real estate market is likely to worsen and remains a much bigger threat than the commercial property market. The government's mortgage modification program won't result in any major improvement in homeowners' ability to stay above water, she added.

"The scariest thing about the Fed's program is that the money on the sidelines isn't going to support that asset class," she added. "So the trillion dollars of Fannie (Mae), Freddie (Mac) and mortgage-backed securities that the Fed is holding—there's no substitute buyer there."

"I haven't been this bearish in a year," she said.

"I don't know what's going on in the market right now because it makes no sense to me," she said.


  1. I suspect Whitney's last sentence is the most meaningful. The market "makes no sense" to her. Thus her forecast for a double-dip must be senseless.

  2. It's not just Whitney, anyone who has a sense of market history is befuddled, there's never been this kind of government intervention before. Even if you don't like Whitney, you should provide some meaningful discourse to discredit her analysis.

    What's more important is that the problems that plagued us for the past two years are not solved, unemployment is still increasing, 1 out of 4 mortgages are now underwater (11/24/09 WSJ), state and federal deficits are unprecedented. Meanwhile the Fed keeps pumping more money into the system.

    No wonder it doesn't make sense to her.

  3. Who says I am trying to discredit her? I agree with every word she says here.

  4. Robert, Sorry for the confusion was replying to Efinancial, that her analysis is "senseless".