During a recent appearance on CNBC, Meredith Whitney repeated her warning about the municipals market, but downplayed the timing of the wave of defaults she sees coming, according to a Wall Street Journal blog entitled “Meredith Whitney Defends Self on CNBC, Warns of Another Big Downdraft in Housing.” She was pressed about her earlier prediction about hundreds of billions of dollars in muni defaults, and responded that the timing was irrelevant.
“What was troublesome is, people took that as saying it would have to be this year. I never said that. That’s the size we’re looking at. That’s the size we’re looking at,” she was quoted as saying.
Ms. Whitney denied having a stake in the muni bond market and claims to be providing a public service, despite having not released her research to the public. She has also reportedly declined invitations to testify before Congress about the issue.
Ms. Whitney has argued that states’ unfunded obligations threaten the economic recovery in her Wall Street Journal article “The Hidden State Financial Crisis.” She has also warned of multiple muni bond defaults and a “brutal” sell offs. It has not happened ? yet.
The muni bond market has recovered all of the ground it lost last fall, when it fell, partly in reaction to her warning of massive defaults. The market has been mostly flat in response to her latest warnings.
Now Ms. Whitney is also predicting double-digit declines in housing prices. “More double-digit declines, that is,” the authors point out. Whether Ms. Whitney is a sage or just “a professional scary person,” as the Wall Street Journal stated, is yet to be determined.
Ms. Whitney’s forecasts should not be summarily dismissed. After all she was one of the analyst that foresaw the recent financial crisis in 2005.
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