Meredith Whitney makes a good argument on the coming municipal bond crisis. She was spot on when the banks were cooking their books a couple of years ago. What she says makes sense, even though all the other experts say she is wrong.

States have budgets that are unbalanced.  Unfortunately, it is in the red.  This 60 minute video explains the implications on our economy.  Are we at the point the federal government will have to bailout every state?  Are we going to have dead beat states?

One reason why I like her views is that she explains how she gets to her conclusions.  She isn’t the mainstream media trying to cheer lead the economy into a better place because a report is not as bad as expected even though the numbers in general suck.

Meredith Whitney double dip housing video

The other good thing about her opinions that I like is she is very specific.  She is not just doing the old fortune telling thing making a general forecast like most economists do.  She is an expert in the banking sector and understands the numbers better than anyone I have seen on TV.

CNBC, 12/08/09, Meredith Whitney, Crap will hit the fan in the first quarter of 2010

I appreciate  the fact she recognizes that nothing has changed fundamentally in the last year.  The banks are not stronger nor are they managed better.  Foreclosures are still being added to the inventory faster than they can be resold and unemployment will continue to stay in the double digits. Her previous examples of tight credit with credit cards like American Express, Discover, Visa and MasterCard all reducing credit lines or closing accounts will have long term negative effects.  When she says the banks are better fundamentally, then I think we will be in a true recovery.  For her to remain bearish is very telling.

This is the latest Meredith Whitney video I could find with her assessment on the current economy.  I have to agree with her.  She has been accurate with her previous forecasts and based on what she says here it looks like more bad news up ahead.  Her main examples of tight credit with credit cards like American Express, Discover, Visa and MasterCard all reducing credit lines or closing accounts will have long term negative effects.

Nothing has changed fundamentally in the last year.  The banks are not stronger nor are they managed better.  Foreclosures are still being added to the inventory faster than they can be resold and unemployment will continue to stay in the double digits.

CNBC:

“I have 100 percent conviction that the consumer is not getting any better and there’s not more liquidity,” Whitney said. “So if everything touching the consumer is going to be represented in the S&P, then the S&P is going to be under pressure.”

The solution, she said, is for the government to take proactive steps that will give consumers more money to spend.

“I don’t think you can cut taxes enough to stimulate demand,” Whitney said. “For a 2010 prediction, which is so disturbing on so many levels to have so many Americans be kicked out of the financial system and the consequences both political and economic of that, it’s a real issue. You can’t get around it. This has never happened before in this country.”

I think when you have analysts like Whitney worried about the overall economy, then we are in for stormy weather.  Even though her specialty is the financial industry, she recognizes that effects the rest of the economy more so now than before.

Whitney: Home Prices Going Down Video

Meredith Whitney says the bank has weak earnings power and too much exposure to the real estate market.