Meredith Whitney On Consumer Credit, Financial Buys And Mark-To-Market

Meredith Whitney is one smart woman.  She was on the money on the financial sector more than a year ago and now when she talks, I listen.  She wrote a piece in the Wall street Journal earlier this week and went onto CNBC to speak about it.

The basis is that credit card lending is shrinking.  She calls it the next credit crunch.  45% of Americans carry revolving credit card debt.  There will be a reduction of this debt by 2.7 trillion dollars this year.  This will impact consumer spending.  I listen to this very closely because I believe consumer spending will lead us out of this bear market and the recession in general.

Buying for her is a case of “dating not marrying” and therefore she is a buyer right now.  She thinks a company like Goldman Sachs (GS) might be building market share now much like they did in 1998 when the markets sold off.

She also mentions a piece that might become an issue in the future - is TARP money being used to fund foreign loans?  Taxpayer money?  She sees a wave of protectionism impacting decisions that Citigroup (C) may make, for instance.

Mark to Market accounting - should it change?  This was a hot topic at the beginning of this crisis and was an issue again this week.  Her opinion is that it is no help to revise the rules now.  The damage has already been done.  It might actually hurt these companies because if the market should eventually come back, they would not get the benefit of the better market in the pricing of their assets.

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