Is Meredith Whitney a One Trick Pony?
Meridith’s Claim to fame was was writing a pessimistic, but accurate, report on Citigroup, on Oct. 31, 2007, which got her attention from many Wall Street analysts, and news media. To capitalize on her new found glory on February 18th she left her sell side job at Oppenheimer to start her own firm.
She appears frequently on CNBC, Fox Business and Bloomberg News programs.
Here are some of her recent statements from a CNBC appearance
I’m afraid she’ll be eating her words. Her latest screed is nothing more than a aggregation of leftist platitudes. Economics and sociology don’t mix. If main street is suffering that doesn’t mean wall street has to suffer, too.
Some of here statements are just plain stupid such as
expected and you?re still going to have consumers not spend money ?
Huh? Ever hear of the i phone? Who’s buying them? Consumers. How about net books? Consumers. Has she ever looked at a chart or is she too busy putting on mascara?
If her professional duty is to destroy wealth, yes, she’s doing a good job of it. Her initial report triggered this whole bear market costing investors billions, so you can understand why some people don’t like her too much. As this bull market propagates her underwater investors will demand an explanation, and she’ll have no resource but to disclose her ineptness.
On a related note, I’m none too fond of Krugman or Roubini.
How the Day Will End
Being that I am very wise I have an uncanny ability to predict the stock market and economics.
This screenshot was taken today when the DJIA was down .55% at around 10:20 AM pacific time. The squiggles indicate the potential paths the market can take for the remainder of the day. Buy Google AAPL MA POT V BIDU EWZ on this dip and make money.
Debunking Hyperinflation
James Bibbings recently wrote a great article about how inflation isn’t a concern regarding the bailouts and stimulus.
here are some of the more pertinent points:
Due to the incredible level of credit contraction within the US, most of the money being put into the banking system by the government is not making it back into the economy. In general, banks are acting as they should by evaluating the overall lending risks in our economy and implementing tighter (more appropriate) lending standards. Under this regime few are willing to borrow and banks are also now unwilling to lend. Also under this ideology the printing presses could (in theory) run all day and nothing would happen because those who can afford to borrow money don’t want or need it, and those who do need it can’t qualify for it.
Agree. The money being printed is being used to negate toxic assets. Inflation is caused by excess money chasing too few goods, which isn’t the case with regards to the bailouts and stimulus. The money that’s being printed isn’t being circulated in the overall economy, which means no inflation.
2. Hyperinflationists, in general, only point to one side of the monetary argument when they discuss the “printing presses.” In almost all hyperinflationary arguments the discussion of the rate at which global wealth is being destroyed, relative to the amount of currency being printed is never fully reconciled…..This loss of wealth far outstrips the amount of money which has been printed in the US and points us further away from the idea of hyperinflation on a sheer creation replacement basis.
The fed has made it abundantly clear they will print an arbitrary amount of money to bailout the too big to fail, and make the stock market go up. By conjuring one trillion dollars the supposed financial crisis has been fixed. We can stop pretending there are problems with the economy. This recession was a deflationary one (wealth destruction), and fundamental macro economic theory dictates that in such circumstances quantitative easing is the appropriate fed policy to combating deflation.
The stress tests were a success and the bailouts are working as evidenced by the rallying stock market and falling LIBOR rates, as just a few examples.
You can inflate your way to prosperity to combat deflationary forces such as money hording and risk aversion, which explains why money market yields are at historic lows. It worked in 1982, 2003, and it’s working now. Bernanke is the enabler of prosperity though easy monetary policy. If inflation somehow becomes an issue the fed can gradually raise rates like in 2004-2007 or in the 90’s without hurting the overall economy.
Retail Sales Not Such a Big Deal; Debunking ‘Full’ Employment
It’s amazing how a bull market changes everything. Just two months ago there was actually speculation that Geithner would be removed. Now happy days may, in fact, be here again.
Shorts sellers, I’m afraid it’s too early to pop the champagne. Retail sales have dipped negative during bull markets, as was the case in 2003-2007. In addition, we’re talking about really tiny percentages here. A 1/10 percent decline is hardly anything.
This selloff is merely a blip considering that the S&P 500 is still 34% above its low. We’re seeing a massive recovery on a global scale after what was a brief shock to the financial system and stock market back in September/October. A bad retail sales number is hardly sufficient to derail it.
Is Full Employment Good?
Macroeconomics may by the gloomy science, but it’s also the most counterintuitive because what seems ‘good’ from a sociological standpoint is actually ‘bad’ from a macroeconomic one. Here is a post from the Seeking Alpha online investing community of someone who falls for the fallacy of full employment:
When companies cut jobs they are usually cutting the jobs that are inefficient, which is called structural unemployment. Those are the jobs that cost the company more money to too keep on the payroll than is produced in return by the employee. The person who lost his job has the option of either applying for a government handout, improving his technological proficiency (so he find find a job that is efficient), or starting a business to provide services that people need. The first choice hinders innovation and creates inflation. The later two options enable the advancement of society through the development of new technologies. This translates into a higher standard of living, and rise in GDP.
What about buying things? Those who are in the upper echelons of society such as entrepreneurs contribute the most to consumer spending. According to Tobias Levkovich, Citigroup’s chief U.S. equity strategist,
Twenty percent of the highest-earning Americans account for 42 percent of consumer spending, while 20 percent of people at the bottom of the pay scale account for just 8 percent…They buy more expensive versions of the same product,
It is in the government’s best interest to create an environment that benefits the highest earners because they not only create most of the efficient jobs, but consume the most, too. They also pay the most taxes. That’s why Obama should consider, for example, offering tax breaks for companies that ship jobs overseas.
A high job turnover rate gives people an incentive to seek or create employment that advances society. As humanity progresses to a type 1 civilization the baseline unemployment rate will steady rise from 4.5% to double digits. Currently unemployment stands at 9%. It will peak at around 10%, but as the economy recovers the unemployment rate will only fall to around 6-7%, where it will remain despite whining from the welfare liberals about ‘jobless recovery’. However, this high unemployment will not have a detrimental impact on GDP or the stock market.