It all started back on Oct. 31, 2007, when she published her now-legendary report on Citigroup Inc. In it, she pointed out that the company's dividend now exceeded its profits -- the bank was handing money back to its investors faster than it was taking it in from its customers.
The U.S.'s biggest bank was being managed to ensure only its bankruptcy. Citigroup would need either to raise capital, sell assets or slash its dividend -- possibly all three.
Whitney now says ``that call was absolutely straightforward, the easiest call I've ever made.'' But at the time, none of her fellow analysts was saying anything like it.
.. I guess my clients knew who I was,'' she says, ``but the rest of the world -- I don't think so.''
Now, six months later, she's probably the most feared analyst on Wall Street. The rise in her status is truly sensational, and due, largely, to a single prediction. On Oct. 31, 2007, she was right, and the world was wrong.
.. Meredith Whitney was the first person inside Wall Street to grasp that something important, but intangible, has changed in the relationship between Wall Street and the outside world.
This is my explanation. The central truth about Wall Street firms just now is that nobody knows what they're worth.
Of course, nobody ever really knows. In the best of times, Wall Street firms cannot divulge their positions without exposing themselves to their market predators. In the worst of times (now), their positions are so complex that the people who run them don't fully understand what they own.
Even if they did, those assets are illiquid, hard to price, and changing in value from moment to moment. If Robert Rubin didn't know that Citigroup had written tens of billions of dollars of liquidity puts -- or even what, exactly, a liquidity put was -- how can he do anything but pity the poor fellow whose job it is, from the outside, to figure out what Citigroup is worth?
"You can't really know,'' says Whitney. ``The financial disclosure is terrible. They're all either liars or they don't know -- but I assume they really just don't know.''
Link Posted by Tim at April 30, 2008 09:24 PM | TrackBack