RSS Feed
Twitter
Facebook
Email
HomeMeredith Whitney’s Outlook on Banking
Posted by Larry Doyle on November 20th, 2009 7:22 AM |
Meredith Whitney
Having provided an overview from three top rated banking analysts in my commentary, “2010 Outlook for Banking,” I welcome the opportunity to offer the thoughts from the most highly rated banking analyst on Wall Street, Meredith Whitney.
Ms. Whitney has become increasingly bearish on the market. Yesterday, Ms. Whitney added further fuel to the fire and provided further specifics to her aggressive call. Bloomberg offers, Meredith Whitney Says Bank Stocks are ‘Grossly’ Overvalued,
Meredith Whitney, the analyst who has no “buy” recommendations on U.S. banks, said valuations on lender stocks are too high and what “scares” her most is the government stepping away from buying mortgage-backed securities.
“The banks are still grossly overvalued,” Whitney said today in an interview on Bloomberg Radio. “People are expecting something great to happen in 2010 and I think they are going to be severely disappointed.” (more…)
Geithner and Congress Take the Gloves Off
Posted by Larry Doyle on November 19th, 2009 2:23 PM |
Do you get the sense that Americans are increasingly fed up with the incestuous nature of the Wall Street-Washington relationship? How so? The gloves came off from both sides of the aisle today in the midst of Congressional testimony from Treasury Secretary Geithner to the Joint Economic Committee.
Despite what you may think about the policy and programs of the Obama administration, the sentiments shared by selected Congressmen are clearly reflective of the mood in the nation today.
No jobs on Main Street combined with massive bonuses on Wall Street is a surefire recipe for an enraged electorate. Washington can spin it however they want and attempt to deflect blame to the prior administration, but real leaders and real leadership are defined by the saying embraced by Harry Truman, “The buck stops here.”
Leaders who accept credit but redirect blame aren’t leaders.
LD
The Problem Is Not the Market, The Problem is You
Posted by Larry Doyle on November 19th, 2009 12:14 PM |
Trading on Wall Street is fascinating. Picture yourself surrounded by individuals within three to four feet on every side, a manager at the end of the trading row, and salespeople screaming to get your attention. In what may appear to be bedlam, one must be able to properly manage significant levels of risk.
What are the key character traits necessary to manage risk? The ability to calculate quickly while maintaining exceptional levels of poise, focus, and discipline. Why do so many competitive athletes make their way to Wall Street? These trading floors are the equivalent of locker rooms and athletic fields.
As with any athletic atmosphere, there are also some very healthy egos on Wall Street trading desks. The very nature of the enterprise attracts those who have strong belief in their own abilities. Competition promotes ego. That said, throughout my career I witnessed varied levels of success inflate individual egos to the point where the ego became unmanageable, the risk outsized, and the subsequent losses fatal. That scenario repeated itself at every shop on Wall Street.
Having witnessed it, I kept a short cutout from a trader’s magazine. The magazine item addressed the topic of losses. I wish that I saved this clip, but I distinctly recall its message. In so many words, it said ‘the problem is not the market, the problem is you, the trader. You need to accept that the market and its participants are not wrong, but that you and your ego are not willing to accept initial losses so they grow to the point where the losses become fatal.’ (more…)
2010 Outlook for Banking
Posted by Larry Doyle on November 19th, 2009 9:31 AM |
What does the future hold for our banking industry? Will it be ‘business as usual,’ as some on Wall Street might like? Will the populist rage sweeping the country compel those in Washington to enact meaningful reform? Will credit loosen? Will housing stabilize and support increased lending by banks? How many banks will close? So many questions and so much uncertainty. While we can make projections on all these fronts, let’s tap into the minds of those who monitor developments in banking on a daily basis.
The American Banker is the banker’s bible when looking for cutting edge analysis and perspectives. Today, this fabulous journal brings us over the wall and into the minds of top rated banking analysts on Wall Street. Let’s navigate, 2010 Outlook : Red Tape, Housing Could Impede Banks’ Recovery:
The banking industry may be on the mend, but its recovery could be hindered by heavy-handed regulation and more pain in the housing market, among other things.
That was the consensus of three banking analysts who participated in an American Banker roundtable late last month in New York.
The veteran market watchers — Anthony Polini of Raymond James, David Hendler of CreditSights Inc. and David Ritter of Argus Research Co. — said the worst of the financial meltdown may be over, but banks are still facing heavy losses and depressed profits, particularly if the government gets carried away with financial and other reform efforts.
In my opinion, these analysts provide a mix of thoughtful insights combined with industry bias. That said, the overall review is compelling. Let’s touch on a few major themes. (more…)
Is Lloyd Blankfein a Liar?
Posted by Larry Doyle on November 18th, 2009 3:45 PM |
Yesterday I wrote “Just How Sorry Is Goldman Sachs?” in response to a blanket, unspecified, and unsolicited apology put forth by Goldman Sachs CEO Lloyd Blankfein. In my commentary, I asserted:
Wait a second. Blankfein admits that Goldman participated in activities that led to the crisis? Get Lloyd back in here and ask him for specifics.
In an attempt to probe as to Goldman’s culpability, I inquired:
What do you think Blankfein was referring to when he stated that Goldman “participated in things that were clearly wrong”? I’ll get the ball rolling with a few possibilities:
1. Manipulated the equity markets via computer programs connected with high frequency trading.
2. Ran over Tim Geithner in the settlement of open positions with AIG.
3. Facilitated insider trading on behalf of hedge funds.
4. Intentionally misled lesser prioritized clients via trading huddles.
5. Abused privileged information provided by former Goldman execs now in government positions.
6. All of the above.
7. Other . . . please share your opinions.
Today we learn the answer is most likely choice # 2. It appears that Lloyd Blankfein would like forgiveness for the aggressive posture it took with Uncle Sam in the process of settling its exposure with AIG. Recall that Blankfein has repeatedly asserted that whether AIG went down or not was not meaningful to Goldman Sachs because Goldman had secured collateral from AIG to cover its exposure. (more…)
Why Do We Need a Multi-Agency Financial Fraud Task Force?
Posted by Larry Doyle on November 18th, 2009 12:45 PM |
Should we take heart that the Obama administration is creating a multi-agency Financial Fraud Task Force? While there is no doubt there are massive frauds in the system, the mere creation of a task force does not necessarily mean the frauds will be rooted out. Why? If the agencies involved in the task force are themselves fundamentally and structurally flawed, then frauds will continue. If the agencies merely failed to execute or perform then perhaps this task force will expose those deficiencies and lessen fraudulent activities.
Which agencies will be involved in this task force? The Securities Industry News reports, U.S. Launches Multi-Agency Task Force to Prosecute Financial Fraud:
The task force will be led by the Department of Justice and chaired by Attorney General Eric Holder Jr., but will also include senior officials from the Department of Treasury, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Reserve System and other major federal agencies.
Thus, this task force would seem to consist of all government agencies while being led by AG Eric Holder and the Department of Justice. What does Mr. holder have to say? (more…)
Gaming Housing Statistics or Time Reveals Truth
Posted by Larry Doyle on November 18th, 2009 10:46 AM |
Time reveals truth.
I love that pearl of wisdom shared by Danielle Park, my guest this past Sunday evening on No Quarter Radio’s Sense on Cents with Larry Doyle. I find it very applicable to the economic report released this morning on housing starts. What did that report indicate? Housing starts in October registered a supposed surprising decline of 10.6% to a seasonally adjusted 529, 000 annual rate.
Is this truly a surprise? Market analysts and government pundits who continually ‘oversell’ economic data as legitimate, when in fact that data is gamed via government props, need to show surprise when a report disappoints. If they do not act surprised, then they merely expose themselves and lose credibility.
The simple fact is the housing market in our country remains in decline. One merely needs to look at the continually increasing levels of delinquencies to understand that. I addressed this important data last May in writing, “The Most Critical Economic Statistic”:
Which economic statistic is the most important? Unemployment? Housing starts? Trade deficit? Inflation? Retail sales?
Well, they are all important . . . but as I review the many statistics, the economic data that I believe most significant are loan delinquencies. Now, mind you a delinquency does not mean that the loan has defaulted and been foreclosed upon. A delinquency is merely a late payment. Typically loans are classified as 30 day, 60 day, or 90 day delinquent. There is a very high correlation between delinquent loans and those that default. (more…)
Will Geithner ‘Walk the Walk?’
Posted by Larry Doyle on November 18th, 2009 9:35 AM |
Do you have any confidence that Washington even knows how to properly address our massive and growing fiscal deficit? Rahm Emanuel, Tim Geithner and others understand that from a political standpoint they need to start talking about deficit control, but will that talk lead to action?
Do you think Congressional leaders, specifically Harry Reid and Nancy Pelosi, have the character and fortitude to ‘tighten the belt?’
The first real test for this crowd is already upon us. How so? The TARP, with a $700 billion commitment, expires on December 31, 2009. Of that $700 billion, $400 billion has actually been spent. Why wasn’t the other $300 billion spent? Well, don’t forget that Obama’s Stimulus Bill totaled $770 billion and assorted other programs implemented by Treasury have run into the trillions. As a result, Geithner did not immediately need to allocate those funds.
The question begs as to what will happen to that $300 billion. While Emanuel and Geithner are starting to ‘talk’ the fiscal discipline ‘talk,’ will they ‘walk the walk?’ (more…)
Just How Sorry is Goldman Sachs?
Posted by Larry Doyle on November 17th, 2009 7:47 PM |
Goldman Sachs CEO Lloyd Blankfein
Mea culpa, mea culpa, mea maxima culpa . . .
It is not everyday that the head of a major Wall Street bank issues an unsolicited and unspecified apology. In fact, in my 23 years on Wall Street I do not ever recall a Wall Street CEO issuing an apology in the manner that Lloyd Blankfein did today. What did Blankfein say? From a Bloomberg report, Goldman, Buffett Establish $500 Million Small-Business Program:
Blankfein, speaking at a conference today sponsored by Directorship magazine, apologized for Goldman Sachs’s role in some of the activities that led to the financial crisis, without providing specifics.
“We participated in things that were clearly wrong and we have reason to regret and we apologize for them,” Blankfein said at the New York event. The magazine named him its CEO of the year.
Wait a second. Blankfein admits that Goldman participated in activities that led to the crisis? Get Lloyd back in here and ask him for specifics. (more…)
Danielle Park Provides More Sense on Cents
Posted by Larry Doyle on November 17th, 2009 2:30 PM |
My interview with Danielle Park this past Sunday evening on No Quarter Radio’s Sense on Cents with Larry Doyle was a gem. I have received countless messages of thanks for bringing the wisdom of Danielle Park to bear on the readers and listeners at Sense on Cents.
For those who missed the live interview, I strongly recommend listening to the audiotape. In the same spirit, high five to VD for bringing to my attention a recent MoneyShow.com interview with Danielle. This 4-minute clip entitled, “Stock Market Not Like the 80’s & 90’s,” may only whet your appetite and have you wanting more of Danielle’s cogent insights and macro-perspective. Click on the video image below to bring you to the MoneyShow.com site where the video will automatically begin playing.
LD
