Annals of no-comment, Meredith Whitney edition

April 9, 2009

David Weidner speaks to Meredith Whitney:

When I asked Ms. Whitney this week if she deserved acclaim for The Call – in particular credit for calling the meltdown – she declined comment…

“The disclosure (at banks) was playing catch-up,” Ms. Whitney said. “You really had to dig deep and pay attention to balance sheets. A lot of people knew the system was overlevered. That’s why finding the inflection point was so meaningful.”

That’s declining comment? It seems like quite a good answer to me. The Call in question was Whitney’s sell rating on Citigroup in October 2007, when Citi was trading at more than $40 a share; it more or less marked the point at which Citigroup’s share price fell off a cliff. (See the graph below.)

Whitney’s point is well taken: it’s one thing to point out that lots of banks had lots of leverage. But it’s another thing to get the timing right and work out exactly when all that overleverage was going to hit them in the share price.

Weidner’s not impressed: he says that “Ms Whitney’s call on Citi wasn’t that great”, and compares her unfavorably to Dick Bove, Mike Mayo, and Charles Peabody; not to mention Nouriel Roubini and Nassim Taleb. But this isn’t some kind of competition with only one winner. And when it comes to research, it’s not just what you say, it’s how you say it. Whitney has the rare ability, among sell-side analysts, to speak in clear and unhedged declarative statements, which has served her very well. Add to that the fact that she was right, and you can see how she became such a star.



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