Photo: Bloomberg Risk Takers
Last night, Bloomberg’s Risk Takers did an excellent profile on Meredith Whitney, the controversial analyst who has, undoubtably, had some major hits.Whitney got Wall Street famous when she predicted the subprime mortgage crisis. More recently, though, people are doubting her prowess. In a 500 page report, she predicted the collapse of municipal bonds.
It hasn’t happened… yet.
But still, in an industry where predictions are everything, and where the financial crisis changed everything, her name still gets major attention.
Here’s a look at how things got that way.
Like Warren Buffet, she had a lucrative news paper delivery service. She would even wake up at 5am on the weekends to deliver her papers.
While in high school, she would dress the part of a young female Wall Street analyst, pearls and all.
Meredith attended the all girls Madeira boarding school and did a post grad year at the Lawrenceville school.
Meredith claims that the comprehension and deciphering skills she developed while studying history has allowed her to better understand and link movements in financial markets.
Her boss at Oppenheimer was Steve Eisman, the pessimistic financier who predicted the subprime crisis.
Steve Eisman rigorously taught Meredith how to conduct thorough research and how to construct simple explanations for events in the markets. The skills and unique view points that she learned from Eisman has brought her great fame. Meredith left Oppenheimer for a brief period to work for CIBC, but returned in 2004.
The couple met while making an appearance on Fox News. Layfield claims that when they first met, Meredith was far too aggressive and not very nice.
In October of 2007, Whitney published a report about Citigroup, claiming that the bank was far too leveraged and had far more real estate on its balance sheet than previously stated. She said that Citi must face massive wright downs and cut its dividend.
Following Whitney's report highlighting her concerns about Citi, several other Wall Street analysts downgraded the company's stock. A few days after her report was published, Citi's long-time CEO Charles Prince resigned amidst growing capital concerns.
Whitney's early and correct call on the subprime market made Wall Street listen. Her work on the subprime crisis earned her a spot in Michael Lewis' famous subprime crisis book, The Big Short.
She created the Meredith Whitney Advisory Group in 2009, at the height of the recession. MWAG offers services to corporate and institutional clients.
Her report in September of 2010, a 500 page analysis of the municipal finances of the 15 largest states, received great attention. The report claimed that municipal bond defaults would be on the rise.
She predicted trouble for the municipal bond market within the following year.
However, there have been several municipal defaults.
When discussing Meredith's municipal bond research, Lewis said, 'It was surprising to me that more people weren't interested in the analysis underneath it all'.
But Meredith says that she'll now be 100% sure about her pessimistic claims before she takes them public.