One last thing on Meredith Whitney and the GS upgrade. For now.
Whitney And CNBC
Courtesy of Karl Denninger at The Market Ticker
Finally, a somewhat-honest look at Meredith’s actual words this morning:
Unemployment is likely to rise to 13 percent or higher and will weigh on the economy for several years, countering government efforts to stabilize the banking industry, analyst Meredith Whitney told CNBC.
While Whitney raised her short-term outlook for banks, causing stocks to open in positive territory after pointing lower earlier, she said the long-term outlook for the economy remains murky.
Right, so now you’re right which ever way the market goes!
If the market rockets higher, you called it. If it tanks, you called it.
The truth is that this sort of "pumpage" is exactly the sort of thing I and others have talked about now for more than two years – Dick Bove’s infamous "generational buy" call being one of them – yet they’re always hedged so you can never say they were wrong.
13% unemployment means we should buy stocks right? That’s not only more than 30% above where it is now, how much consumer spending will another 30% added to unemployment count for? That is, how much will it subtract from GDP, and since profits are generated by sales in excess of costs, gee, what happens to that thing called "profits"?
Never mind what this will do to U-6, which includes people who have given up!
"We underestimate how much the whole economy is dependent on the mortgage industry, and that has to change," Whitney said. "This is what happens when you delay the inevitable. We’re buying time here, but we’re not restructuring the economy."
Right, which is why this sort of reflexive "buy everything!" reaction to Merideth saying that Goldman probably had a great quarter (does anyone doubt it when you have your fingers in the taxpayer’s wallet via AIG payoffs and sales of record amounts of Treasury debt?) is beyond stupid.
The economy does not run on going into debt on any sort of sustainable basis, even though certain people make a lot of money by conning you into going into debt!
Of course when you’re a banking analyst, and banks rent money (that is, make loans), you’d have a bit of trouble justifying your existence if you told the truth – that pulled-forward demand via credit eventually must end, and when you delay the day of that reckoning you make things much, much worse than they would otherwise be.
I sit in bemused amazement at the spin job that Kudlow and others on CNBC put on this sort of "presentation" by an analyst. There is never an exposition on the fact that 13% unemployment will absolutely blow the cover off all records in this regard, and that it is flatly impossible for there to be economic growth with 13% of the employment base out and on benefits, with another 10% or more off benefits and not counted!
That is one in four people of working age in this country without a job!
If you buy this pump as an investor you deserve what you get.
PS: CIT may blow up as soon as the next couple of days. How many small and medium-sized businesses will fail almost instantly if they do, and what will THAT do to unemployment?
