On State and Local Governments

The bottom line is this: Forget about Meredith Whitney. State and municipal governments are carrying a load in operating and pension costs that cannot be sustained through downturns in a secular bear market as the US population ages. These downturns will not be ordinary recessions. They will increase automatic stabiliser spending, decrease tax revenue and crystallise shortfalls in pension programs in a way that is existential for these governments. And that means a spate of defaults will occur

Schroeder: Gist of Whitney’s Muni Forecast ‘Valid’

Alice Schroeder, a former Wall Street analyst and the author of the only approved biography of Warren Buffet, has Meredith Whitney’s back. She says the macro view that Whitney presents on U.S. states and municipalities is largely correct. Her view is that many with a vested interest in the muni market staying afloat are tearing

Some Thoughts on Market Timing

We are now seeing almost all our sell signals go off and we recommend clients hedge portfolios and reduce market exposure. We have advised clients in the past to hedge their portfolios and reduce exposure when all our sell signals have gone off. The last two times all our sell signals were activated was in January and April. In both cases the stock market performed very poorly one month out. We have continued to add new tools to our buy and sell signals. As the following chart shows, the sum of our signals is flashing a warning sign.

These signals typically lead to stock market sell-offs and forecast poor returns one month forward. I could do several letters from people I highly respect who suggest that hedging your portfolio might be wise as we go into the New Year. But this has given you a sense of what I am reading. As for actual timing? This market has been skewed by QE2. Things can remain irrational for longer than we would think. I would urge some real caution. As the guys at Variant note, there will be some opportunities to buy back in.

Muni Bond Crisis: What Kind of Numbers Are We Talking?

Here is a good segment on CNBC that takes another look at the muni issue which Chris Christie and Meredith Whitney raised on 60 Minutes on Sunday.  Benjamin Thompson of Samson Capital says he can’t get the numbers Meredith Whitney used on 60 minutes – 50 to 100 issuer defaults on hundreds of billions of

The Looming State Budget Crisis

States and local governments cannot rely on the Federal Reserve to print money. As they face financial difficulties not seen since the 1930s, this is significant. We see the consequence of this difference on display daily in the sovereign bond market; the United States and the United Kingdom have exceptionally low long-term interest rates despite

Beating Up on Meredith Whitney, Gold Tie to Real Interest Rates and Other Links

On Gold EconomPic: On the Value of Gold Vietnam considers end to gold import ban; global prices rise | beyondbrics | FT.com Correction Could be Coming For Gold – CNBC Why has the price of gold risen 300%? | Kenneth Rogoff | Comment is free | guardian.co.uk Meredith Whitney Is Bloomberg Trying To Start Shit

Mier: Whitney is wrong on the need for State Government bailout

Christopher Mier, municipal strategist and managing director at Loop Capital Markets LLC, talked to Bloomberg’s Betty Liu this past Friday about Meredith Whitney’s report stating that the U.S. federal government may have to bail out some states within the next 12 months. Mier believes the odds of a bailout are "very, very low" because of

Meredith Whitney: Next Shoe to Drop Is Municipal Bonds

Meredith Whitney has a new report out that she has been working on for two years called "Tragedy of the Commons" in which she rates several U.S. states. Based on Whitney’s analysis, problems in municipal finance could be the next systemic risk down the pike (video of Whitney speaking to CNBC’s Maria Bartiromo below runs

Meredith Whitney on C-Span

This is an interview Whitney did on C-Span last week. It runs an hour and therefore gives you a very comprehensive look at her views on the financial sector and the economy. Enjoy

Meredith Whitney Comments on Housing Double Dip

Meredith Whitney was a guest host on CNBC at 8AM ET talking about an anticipated housing double dip. The videos are below. A few comments first.  Whitney was late to the recovery party in 2009 in my view. But I found the recent Rip Van Whitney piece by banking insider Thomas Brown a bit patronizing.

Whitney: The Small Business Credit Crunch

Meredith Whitney sounds off in today’s Wall Street Journal about small businesses. She is worried about the lack of credit they are getting and its effect on the tenuous economic recovery in keeping the unemployment rate high. She writes: [S]tates will approach their June fiscal year-ends and, as a result of staggering budget gaps, soon

Meredith Whitney: First quarter bank earnings are due to marking up assets, not fundamentals

Meredith Whitney talks to Bloomberg’s Jonathan Weil in a wide-ranging interview about the banking sector. This is a good one – the best I have seen – because you get to hear Whitney’s views on the sector’s stocks from a fundamental and a trading perspective. Her view is that the banks do not have the