Chris Whalen’s 2010 Outlook: "A Grudging Admission of the Truth"
By Aaron Task
Financials suffered Thursday after Citigroup’s massive secondary offering was poorly received and influential analyst Meredith Whitney cut 2010 estimates on Goldman Sachs and Morgan Stanley.
The answer is "yes" (or "both"), according to Christopher Whalen, managing director at Institutional Risk Analytics.
In 2009, the momentum created by a "wall of paper fiat dollars" overcame the industry’s still-poor fundamentals, driving the sector higher, Whalen says. "Where you see the markets changing in terms of sentiment is where fundamentals are so ugly they can’t be ignored."
Whalen is sticking by a prior forecast that the fourth-quarter will be a "bloodbath" for the banks but says the real ugliness won’t occur until the middle of 2010…
But even prior to Thursday’s selloff, a lot of traders were nervously watching the poor action in the financials as a possible "tell" for the broader market. The question is whether the recent weakness is just profit taking after the big gains earlier this year or concern about the fundamentals heading into 2010.
