Posts Tagged ‘Oppenheimer’
Meredith Whitney: Credit Cards the Next Credit Crunch
Wednesday, March 11th, 2009
Meredith Whitney, CEO, Meredith Whitney Advisory Group, fomerly of Oppenheimer, appeared on CNBC yesterday afternoon to discuss Citigroup’s hopeful news as well as her observations about the credit card crunch that she says is the next shoe to drop. She was quite candid, and her comments are worth a close listen. We have also included the piece from Reuters about her warnings of a crisis in the credit card business. To watch the video, please click play:
From CNBC:
Citigroup Will Have To Sell More Assets: WhitneyCNBC.com| 10 Mar 2009 | 04:31 PM ET
Citigroup will have to sell more of its assets to stay in business, well-known banking analyst Meredith Whitney told CNBC Tuesday.
Whitney made her comment after being asked about Citi’s Chief Executive Vikram Pandit saying he was confident about the troubled bank’s survival prospects.
“Citi’s capital position is stronger relative to how it was,” said Whitney. “But I wouldn’t call it strong.”
Whitney, who is founder of Meredith Whitney Advisors, said that the bank has exposures across the board and said that “I’m not optimistic about them.”
“Trillions of dollars of loans have been mispriced by Citi”, said Whitney. “By my math, they don’t make money in any of their businesses.”
Whitney says Citigroup will be forced to sell their “crown jewels” if they are going to get any more bailout money from the government. “They’re going to have a ‘yard sale.’ They will be a smaller and less of an international business going forward,” says Whitney.
Citi split off its prized Smith Barney brokerage on Janury 13th.
Since October of last year, Citigroup has received two federal bailouts, $45 billion of capital from the Treasury Department’s Troubled Asset Relief Program, and a government agreement to cap losses on $300.8 billion of troubled assets.
On the topic of keeping mark-to-market rules, Whitney said that it’s basically a non-factor and that the damage has already been done. Whitney says that the banks don’t want to have it suspended because if for some reason, the market comes back “they don’t get the benefit of the newer market.”
Whitney also said that the government is trying to sweeten deals for the private sector in order to get more cash infusions into U.S. banks. “The government cannot do it alone,” said Whitney. “They need the private sector to come back.”
Whitney also commented on the credit card crisis she’s been predicting. She said that credit cards are the next credit crunch and said that banks’ portfolios continue to shrink and when you shrink the portfolios for the banks, “credit losses eat into earnings and they have to peddle faster to collect on loans and they make less money and lose money.”
Whitney revised her estimate for credit card line cuts to more than $2 trillion inside of 2009 and $2.7 trillion by end of 2010.
Whitney has previously said the credit line cuts would be $2 trillion by the end of 2010.
From Reuters:
Meredith Whitney says Credit Cards Will Be Next Credit Crunch, WSJ.com, March 11, 2009.
March 10, 2009 - (Reuters) - Prominent banking analyst Meredith Whitney warned that “credit cards are the next credit crunch,” as contracting credit lines will lower consumer spending and hurt the U.S. economy.
“Few doubt the importance of consumer spending to the U.S. economy and its multiplier effect on the global economy, but what is underappreciated is the role of credit-card availability in that spending,” Whitney wrote in the Wall Street Journal.
She said though credit was extended “too freely over the past 15 years” and rationalization of lending is unavoidable, what needs to be avoided was “taking credit away from people who have the ability to pay their bills.”
Whitney said available lines were reduced by nearly $500 billion in the fourth quarter of 2008 alone, and she estimates over $2 trillion of credit-card lines will be cut within 2009, and $2.7 trillion by the end of 2010.
“Inevitably, credit lines will continue to be reduced across the system, but the velocity at which it is already occurring and will continue to occur will result in unintended consequences for consumer confidence, spending and the overall economy,” Whitney said.
Currently, there is roughly $5 trillion in credit-card lines outstanding in the U.S., and a little more than $800 billion is currently drawn upon, she said.
“Lenders, regulators and politicians need to show thoughtful leadership now on this issue in order to derail what I believe will be at least a 57 percent contraction in credit-card lines,” she said.
Over the past 20 years, Americans have also grown to use their credit card as a cash-flow management tool, she said adding that 90 percent of credit-card users revolve a balance at least once a year, and over 45 percent of credit-card users revolve every month.
Whitney said the five lenders which dominate two thirds of the credit-card market need to work together to protect one another and preserve credit lines to able paying borrowers by setting consortium guidelines on credit.
(Reporting by Ratul Ray Chaudhuri in Bangalore)
Copyright 2009 Reuters. Click for restrictions.
Tags: Advisory Group, Bailout, Capital Position, Citi, Citigroup, Cnbc, Consumer Confidence, Consumer Spending, Contraction, Credit Card Business, Credit Crunch, Crown Jewels, Global Economy, Government Agreement, Hopeful News, Meredith Whitney, Multiplier Effect, Oppenheimer, Rationalization, Reuters, Smith Barney, Survival Prospects, Thoughtful Leadership, Treasury Department, Trillion, Troubled Assets, Unintended Consequences, Vikram Pandit, Wall Street Journal, Yard Sale, Yesterday Afternoon
Posted in Credit Markets, Economy, Markets | No Comments »
Meredith Whitney: Banks Not Facing the Music
Monday, January 26th, 2009
Meredith Whitney, Managing Director, CIBC Oppenheimer has submitted an op-ed to FT.com, America’s Banks Need to Hold a Yard Sale, in which she opines that America’s banks are not acting quickly enough to liquidate assets in an orderly fashion in order to raise cash for Tier 1 reserves.
Here are a few excerpts:
… it appears as if US banks are setting out to make some of the same mistakes of the past 18 months all over again.
When the we find ourselves in duress, we have to sell stuff. Why should we support the behaviour? Where is our bailout? The banks have had nothing but time, but they do not seem to be facing the music.
Now, when the average taxpayer finds him or herself overextended, he or she is forced to backtrack and, in situations of duress, sell stuff (otherwise known as a yard sale). In these cases, selling a set of snow skis for $15 or a prized record collection for $10 is not desirable but is necessary. Why should the US taxpayer be forced to fund behaviour that he or she would never have the luxury of indulging in?
Whitney posits that what she is indeed writing about is the need for the banks to get on with the obvious need of selling assets, their “crown jewels,” in order to get back on side, and provide relief back to the taxpayer.
The fact is that there is money on the sidelines looking for opportunities to invest. One constant question I get from investors, who need somewhere to put their money, is: if I had to own something, what would it be? I am not very helpful to them at the moment as my answer is that I would own nothing. I do tell them that I believe that later in the year there will be fabulous opportunities to invest in new combinations of businesses that are currently “off the menu” to individuals. What I mean by this is that the system will eventually force disposals of assets: here I am just arguing that we need to get to it sooner rather than later.
Whitney recently shared her views last week on CNBC, that the banks would be needing more funding which would take us into 2010. To watch the video, click the image.
“Banks may need another round of fresh capital this year, says Meredith Whitney, Oppenheimer & Co. director of research.”
So far, Whitney has yet to be proven wrong about the systemic problems, and the banks are dragging their feet about what needs to be done in order to restore stability to the financial system. The longer they take, the harder it gets to reverse the damage.
Tags: Backtrack, Bailout, Cnbc, Combinations, Crown Jewels, Disposals, Duress, Excerpts, Fabulous Opportunities, Facing The Music, Invest One, Managing Director, Meredith Whitney, Nothing But Time, Oppenheimer, Orderly Fashion, Sidelines, Snow Skis, Tier 1, Yard Sale
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Meredith Whitney: Outlook Grim for Banks, Spending
Thursday, December 11th, 2008
Meredith Whitney, Oppenheimer’s influential bank analyst appeared on CNBC to discuss what she says is a “grim” outlook for banks and spending. Click on the image below for the whole interview:
Here are some excerpts from the interview:
“The big banks are going to be on life support for at least 18 months, if not 36 months,” said Whitney. “The big banks will not fail, but the big banks will not grow, in my opinion, for at least another two years.”
She commented that TARP is being used to “fill holes,” but does nothing to stimulate the economy.
“You’ve had massive asset deflation,” she said. “There’s more of this to come.”
“Just over 70 percent of American households have credit cards, but over 90 percent of those households revolve at least one time a year, so they’re using it as a cash flow management vehicle,” she explained. “The banks now are starting to cut those lines back. That will impact spending.”
Tags: American Cards, American Households, Banks, Br, Cash Flow Management, Cash Management, Cnbc, Credit, Credit Cards, Deflation, Eco, Economy, Excerpt, Excerpts, Grim Outlook, Holes, Img, interview, Meredith Whitney, Oppenheimer, Outlook, Tarp, Video
Posted in Economy, Markets, Outlook | 2 Comments »
Video-Rama: Market Maelstrom
Sunday, December 7th, 2008
Another week and another batch of fascinating video clips about bailouts, economic woes and other crisis-related matters. As to be expected, the good-news videos are in rather short supply. A number of the more interesting clips that have attracted my attention are shared below.
Some of my favourites included in this compilation are: “Peter Schiff uses analogies to describe crisis” (first one up) and “Dr Doom [Marc Faber] - Buffett’s approach to investing is dead” (further down). If you want to view only two of these clips, make sure to see these two.
Please post any interesting video links that you would like to share in the comments section.
YouTube: Peter Schiff uses analogies to describe crisis
“Ron Paul economic advisor Peter Schiff uses analogies to describe our current economic crisis. Topics include debt-financed consumption, business cycles, the Federal Reserve, the cronies in Washington, and the modern American service economy.”
Source: YouTube, November 30, 2008.
CNBC: Pimco’s El-Erian on the markets and policy
“An expert outlook on the markets and global policy, with Mohamed El-Erian, Pimco co-CEO & co-CIO.
Source: CNBC, December 1, 2008.
Calculated Risk: Shiller - crisis may run for “years and years”
Click on the image below for part 1 of the interview.
Click the links for the other parts of the interview: Part 2 and Part 3
Source: Calculated Risk (via YouTube), November 28, 2008.
CNBC: Meredith Whitney on the credit crisis and financials
“Meredith Whitney, executive director of equity research at Oppenheimer, discusses the credit crisis and her outlook on the financial sector.”
Source: CNBC, December 1, 2008.
Fox Business: Greenberg on bailouts
“Former AIG Chairman Hank Greenberg discusses the government bailouts.”
Source: Fox Business, December 3, 2008.
Financial Times: Big Three plead for bail-out
“The US auto industry is bleeding cash as the Big Three chiefs plead for a $34 billion bail-out.”
Source: Spencer Jakab, Financial Times, December 4, 2008.
The Big Money: Chatting with Paul Krugman
“This may be the winter of Paul Krugman’s content. President Bush, whose economic policies Krugman has derided from the beginning, is leaving office. Krugman has been awarded the Nobel Prize in Economics. And Norton has just published The Return of Depression Economics and the Crisis of 2008, a substantial revision of the book he originally published in 1999. Listen to an exclusive interview with Krugman by Newsweek senior editor and Moneybox columnist Daniel Gross.”
Source: Daniel Gross, The Big Money, December 1, 2008.
Bloomberg: Wachovia’s Vitner sees “widespread weakness” in manufacturing
“Mark Vitner, a senior economist at Wachovia Corp, talks with Bloomberg about today’s reports on US manufacturing and construction spending.
“The Institute for Supply Management’s November factory index dropped to 36.2, the lowest level since 1982. The Commerce Department said construction spending fell 1.2% in October. Vitner also discusses the outlook for US unemployment and Federal Reserve monetary policy.”
Source: Bloomberg, December 1, 2008.
CBS News: US foreclosure hits unexpected
“A new wave of homeowners who pay their mortgages on time are now facing foreclosure after losing their jobs in the slumping economy.”
Source: CBS News, November 29, 2008.
YouTube: Refinance Index soars 203%
“Homebuilder stocks rose on surge in mortgage applications; Fed actions pushed 30-year fixed mortgages to 3-year low.”
Source: YouTube, December 4, 2008.
John Authers (Financial Times): Investment-grade crisis
“The credit crisis is widely held to have begun in July last year. But for investment-grade non-financial companies, the true “crisis” did not start until three months ago.”
Click here for the article.
Source: John Authers, Financial Times, December 4, 2008.
CNBC: Dr Doom - Buffett’s approach to investing is dead
“Warren Buffet’s investment strategy of buying stocks to hold for a number of years is no longer viable due to the extreme levels of volatility, Marc Faber, editor & publisher of The Gloom, Boom & Doom Report, told CNBC.
“‘The Warren Buffett approach is dead and it’s been dead for ten years and it’s going to be dead for another ten years,’ Faber said Monday.
‘We’ve moved into an environment of very high volatility where you will have up and down moves of like 20% all the time and that is a traders’ market,’ Faber said.
“Faber expects the S&P 500 index to rebound a further 10% to 1,000, but warns that any gains could be reversed just as quickly.
“‘We can have huge rebounds and then huge downturns again and I think the best for the average investor is to play it in relatively small amounts and not gear up and take big risks,’ he said.”
Source: CNBC, December 1, 2008.
CNBC: PIMCO’s Gross on the stock market
“Why stocks purchased at the right price may be good for the long run with co-CIO and founder of PIMCO William Gross.”
Click here for the article.
Source: CNBC, December 3, 2008.
Fox Business: IEA on falling oil prices
“International Energy Agency executive director Nobuo Tanaka explains the conditions behind falling oil prices.”
Source: Fox Business, December 3, 2008.
Fox Business: Reaction to OPEC’s decision
“Andy Lipow, President of Lipow Oil Associates discusses the impact of OPEC’s meeting this weekend on the price of oil.”
Source: Fox Business, December 1, 2008.
Financial Times: Back to austerity Britain
“The Bank of England on Thursday cut its key interest rate by a full percentage point to 2%, the lowest level for more that three decades. Chris Giles, economics editor, tells Richard Edgar that the Bank acted because the fiscal measures in the pre-budget report were not enough on their own and there is likely to be more rate cuts to follow.”
Source: Financial Times, December 4, 2008.
John Authers (Financial Times): Fear of Chinese slowdown
“The Chinese economy is far from decoupled from Europe and the US.”
Click here for article.
Source: John Authers, Financial Times, December 2, 2008.
Tags: Analogies, Bailout, Blog, Bloomberg, Br, Business Cycles, Cnbc, Consumption, Credit, Credit Crisis, Current, Desc, Doom Marc Faber, Dow, Dr Doom, Eco, Economic Advisor, Economic Woes, Economics, Economist, Economy, El-Erian, energy, Equity Research, Euro, Faber, Fed, Federal Reserve, Financial Sector, Financial Times, Financials, FT.com, Global Policy, Hank Greenberg, Img, International, interview, Investment, Investment Strategy, John Authers, Loom, Marc Faber, Markets, Measures, Meredith Whitney, Mohamed El Erian, Monetary Policy, Money, Mortgage, Nobel Prize In Economics, oil, Oil Prices, Oppenheimer, Outlook, Paul Krugman, Peter Schiff, PIMCO, President Bush, Rama Market, risk, Ron Paul, Rose, S&P 500, Service Economy, Slowdown, Stock Market, Stocks, Video, Video Links, Volatility, Wachovia, Warren Buffett, Youtube
Posted in Credit Markets, Economy, Markets, Oil and Gas, Outlook | No Comments »
Meredith Whitney: FT.com Interview
Wednesday, November 19th, 2008
Meredith Whitney, managing director at Oppenheimer and one of the first analysts to predict in 2007 that banks would face enormous write-downs and balance sheet problems as a result of the housing downturn, says the crisis is entering a new chapter in which bank on-balance sheet lending will start to shut down. She expects that there will be an actual contraction in the overall US market for mortgage lending, something she says has never happened before in the US.
To watch this 3-part interview, click on the image below:
Tags: Banks, FT.com, interview, Meredith Whitney, Mortgage, Oppenheimer
Posted in Markets | No Comments »
Whitney: Credit Crisis Will Run Into 2009
Wednesday, May 28th, 2008
Liz Moyer, Forbes
Bank analyst Meredith Whitney says the credit crisis will extend well into 2009, if not beyond. This means more pressure on financial stocks and bank balance sheets; banks have added $25 billion to loss reserves so far, but face mounting consumer credit losses in a second wave of the crisis that some bank executives have acknowledged will be worse than the first, which has cost hundreds of billions of dollars in write-downs and losses.
Wall Street’s originate-to-distribute model, designed to mitigate risk by spreading it around, actually exacerbated those risks. It encouraged banks to loosen lending standards because more loan volume meant higher profits; then it led to over-leverage, and finally to complacency. More and more paper dollars were created for trading on the assumption that housing prices would always go up. The first wave of the crisis affected trading books, but the second will hit lending. As long as housing values were rising, borrowers could refinance in perpetuity to avoid default. Losses mounted when the refinancing option disappeared. Banks relied too heavily on the securitization markets to boost lending to consumers, particularly in the form of mortgages.
In time, some lending will return, but the sky-high revenues of recent years will be hard to reclaim, says Whitney. The banking sector’s pullback in lending will cause further painful losses. Whitney believes banks will have to reserve an additional $170 billion through the end of next year just to keep up with estimated loan losses. “New and unforeseen strains on consumer liquidity will push more consumers into precarious credit positions and cause consumer credit losses to be far worse than what is currently estimated, even by the most draconian of investors,” Whitney says.
http://www.forbes.com/2008/05/20/whitney-banks-credit-biz-wall-cx_lm_0520banks_print.html
Hat Tip: BMS Inc.
Tags: Banks, CIBC, Credit, Credit Crisis, Credit Market, Dollar, Economy, financial stocks, liquidity, Markets, Meredith Whitney, Mortgage, Oppenheimer, Trading, Value, Wall Street
Posted in Credit Markets, Markets | No Comments »
