Meredith Whitney: Home Prices Could Fall By Another 25%
Ten-minute clip and quotes from Whitney's appearance on Squawk this morning. Goldman Sachs gets some love now that their chief competitor Lehman is in ashes, but the bodacious bear sees a correction ahead for stocks.
Watch (below)
Home prices in the US could fall by another 25 percent because of high unemployment and another leg down will come for stocks, banking analyst Meredith Whitney told CNBC Thursday.
"No bank underwrote a loan with 10 percent unemployment on the horizon," Whitney said. "I think there is no doubt that home prices will go down dramatically from here, it's just a question of when."
Local governments and states are chronically under-funded and "most states are under water," adding to the problem of low private consumption, she said.
"If you look at the drivers for unemployment I don't see that reversing very soon," Whitney said.
If consumers were to decide to spend, "that would be a game-changer," but it would be an unnatural thing to do in a recession, she said.
"A lot of themes are constant, which is the US consumer and the small business doesn't have any credit, credit is still contracting," Whitney said.
Consumer debt and consumer credit have dropped according to the latest figures which also show that people have been spending more from their debit cards than from their credit cards.
"Obviously that doesn't bode well for spending," Whitney said.
"Goldman is taking a lot of the place that Lehman left," she said.
But banks are not going to see their earnings rise too much from now on, she warned.
"Banks are taking advantage of what the government is doing by artificially inflating asset prices so they can ride a steep yield curve and they're going to have a third quarter that reflects that," Whitney said.
Their shares are unlikely to be uplifted by these results as it happened in mid-July, because then they were under-valued, she added.
Sep 10, 2009 at 6:37 PM
Reader Comments (18)
It is no secret that the U.S. has a consumer economy. More than 2/3 of GDP is directly derived from consumer spending. The staggering numbers in the weekly. U.S. lay-offs reports shows that the U.S. economy is shedding jobs at a Depression-like rate. Meanwhile, the monthly jobs report from the Bureau of Labor Statistics tells us nothing, since those manipulated numbers have no connection with the real world.
As I wrote two days ago (see “The Myth of the Job-less Recovery”), there is no such thing as a “job-less recovery”. The U.S. economy has been able to imitate an “economic recovery” in previous downturns, through the success of its propaganda-machine in inducing U.S. consumers to take on more debt – and create the illusion of economic growth through excessive borrowing-and-spending. Similarly, if I was to lose my job, but manage to borrow a million dollars, I could certainly demonstrate the appearance of affluence to my neighbours.
With over $57 trillion in total public and private debt, those days are over in the United States. With a crescendo of talking-heads proclaiming that a “U.S. recovery” has already started, recent reports of U.S. consumer credit show that this claim is nothing short of absurd.
Total U.S. consumer credit plunged by $21.4 billion in July alone – the biggest drop on record, and the sixth, consecutive monthly decline. Meanwhile, the plunge in consumer credit in June was revised 50% higher from over $10 billion to over $15 billion. At the same time, according to BNN, a survey of U.S. banks shows that 1/3 are planning further tightening of their lending standards, and none are planning on loosening credit.
“It is one more sign that consumers are not going to be contributing much to the economy for the balance of the year and probably for a good part of next year,” said Bernard Baumohl, chief economist for The Economic Outlook Group, at Princeton. This is a gross understatement.
In fact, U.S. consumers are contributing nothing to the U.S economy. Consumer spending has fallen over the last year, and “real” consumer spending (i.e. spending adjusted for inflation) has been falling every month this year – even with an endless string of retail “sales” and gimmicks like the “Cash-for-Clunkers” program.
I already pointed out in my previous commentary that no economy can have real, economic growth without job-creation accompanying it. Yet the U.S. propaganda-machine claims to have a legion of (anonymous) “experts” all in agreement that a “job-less recovery” has begun.
With vast numbers of jobs being lost, and the amount of credit available to Americans collapsing at the greatest rate in history (and with U.S. banks planning further cuts in credit), there is zero possibility of any real growth in U.S. consumer spending.
So what will we hear next from the propaganda-machine's “experts”? Is the U.S. consumer economy about to experience a “job-less and consumer-less recovery”?
At some point, the sheer lunacy of what these “experts” are trying to get us to swallow must trigger an inevitable “gag” reflex. Keep in mind that this is the same group of experts who were “surprised” at the bursting of the U.S. housing-bubble (the biggest asset-bubble in human history). For the contrarians out there, the simple fact that all these “experts” are predicting a U.S. recovery is the most certain evidence that the U.S. economy is about to start its next leg down.
If the US had as many workers producing something as they have federal and state employees pushing pens, using paper and telling the rest of us what to do and what's good for us, we would never have got into recession in the first place.
And their pay from our taxes makes it even harder for ordinary people to make ends meet and do our bit for the recovery. The outcome for us is not certain, but for them, what does it matter if it takes a while longer? Their pay check is safe enough.
I take solace in seeing that the lowly consumer now knows what is going on even if the administration refuses to acknowledge that a 'new paint job" will not fix a house that is structurally damaged. The government is bankrupt and lost in a talking head sound loop espousing the correctness of their fiscal policies, while the average citizen, the real canary in the coal mine, has just fallen off his perch.
Meridith is speaking on both fundamentals and fact. Unemployment is going HIGHER...bank owned inventory will RISE.....current bank owned home inventory levels are NOT being properly disclosed..(they would not lie would they?)...AND folks are scraping to make the current payments. Her thesis is based on worsening economic conditions (and rightly so) and the fact that take home pay for existing homeowners is dropping or has dropped on average by at least 20% YOY. We are just in the early stages of home price decline...the 6 worst states have seen a HUGE decline but the rest are catching up slowly. I am an appraiser and have a slight clue as to what I am talking about. Hope I have not depressed the crap out of everybody but the truth is slowly coming to light. Can't wait to see what happens when the commercial RE hits the fan...It's coming and SOON.....AB
All postings are also posted from different blogs and web sites, Be proud with rants on message boards , while Rome burns?lol
Neighbors: Exec. moved into bank-owned beach home
Neighbors: Wells Fargo exec. moved into beach home surrendered to bank by Madoff-duped couple
* On Thursday September 10, 2009, 11:11 pm EDT
MALIBU, Calif. (AP) -- A Wells Fargo & Co. executive who oversees foreclosed properties hosted parties and spent long summer weekends in a $12 million Malibu beach house, moving into the home just after it had been surrendered to Wells Fargo to satisfy debts, neighbors said.
Related Quotes
Symbol Price Change
The previous owners of the beachfront home in Malibu Colony -- a densely built stretch of luxury homes that has been a favorite of celebrities over the years -- were financially devastated in Bernard Madoff's massive fraud scheme, real estate agent Irene Dazzan-Palmer said.
The couple signed the property over to Wells Fargo last spring, and the bank subsequently denied requests to show the house to prospective buyers, Dazzan-Palmer said.
Residents in the gated community told the Los Angeles Times that a woman they believe was Cheronda Guyton took up occupancy at the home in May. Residents said they obtained Guyton's name from the community's guards, who had issued her a homeowner's parking pass.
Residents also wrote down the license plate number of a 2007 Volvo sport-utility vehicle they say was parked in the home's garage. A check of state motor vehicle license plates by the Times found the vehicle was registered to Guyton.
Guyton is a Wells Fargo senior vice president responsible for foreclosed commercial properties, resident Phillip Roman said.
"It's outrageous to take over a property like that, not make it available and then put someone from the bank in it," said Roman, who lives a few homes away from the property.
Residents said Guyton, along with her husband and two children, often hosted guests at the home, including a large party the last weekend of August. Malibu Colony is about 25 miles from downtown Los Angeles.
Wells Fargo said in a written statement that it would conduct a thorough investigation of the allegations by neighbors, but said it wouldn't "discuss specific team member situations/issues for privacy reasons."
Guyton's home number is unlisted, and attempts to reach her at her Los Angeles office after work hours were unsuccessful.
The bank's agreement with the prior owner required it to keep the home -- a 3,800-square-foot, two-story structure built in the early 1990s -- off the market for a period of time, Wells Fargo said in the statement. The bank said it planned to list the property for sale soon.
When I re-surface, it will be the dawn of a Brave New World.
For the looming FED audit will reveal the custody account agency debt swaps, and the Sprott expose of the U.S. intragovernmental bond scheme is already being picked up by Wegelin and others - pretty soon thereafter a massive flight from US securities will follow - just as quickly as the intended collapse of Lehman followed the massive naked short selling engineered by Goldman and Alistair Darling. And Rockefellar will have his crisis - U.S. sovereign default.
"So what you folks achieve here with creative comments?
All postings are also posted from different blogs and web sites, Be proud with rants on message boards , while Rome burns?lol"
Ken,
I've been as ready as anyone to take concrete action against the bailouts, but I'm also not interested in getting shot in the street. All by myself, all pathetic like. I mean, c'mon. But those of us who do feel the way that you and I do -- and there are lots of us, need to do two things first:
1. Coordinate
2. Spread the word
Do we have critical mass yet to even begin organizing a movement? I'm not sure. Maybe the egg should come before the chicken, but that's a conversation we all need to have.
As for spreading the word, while there is a relatively small contingent (200,000 people?) who have a good sense of how wicked the bailouts are, there are probably 200 million people who have no idea that Obama is no different from Bush on this. Ditto on Obama's foreign policy (i.e. war) and ditto on civil liberties. Ironically, Obama will be worse on civili liberties because he has taken steps to make the illegal things Bush did, *legal*.
Anyhow, spreading the word right now is very important. With most journalists being congenital idiots,
maybe an organized movement with a NAME and a sound-bite mission statement would be a help in that regard.
So, yeah, WHAT DO WE DO NEXT? is a conversation we should be having. I agree. (I would also second what others have said -- posting comments that are three miles long with no indication of what's your words and what came from some article is not conducive to having that conversation.)
That sounded snippy from me. Didn't mean to be. But seriously, we should all be having that conversation.
Urgency & why?
Washington is quietly going to silence us all with bills shoved our throats next
No need for conversation: Video..you tube weapon only and try to unite
Barack Obama - The Great Messiah Of Lies
http://www.youtube.com/watch?v=6y3r61aLDMg
Dr. Ron Paul
Weekend Watching - Juan Enriquez at TED: The Ultimate Reboot
Posted September 11th, 2009 by Michael Nystrom
Watch the first 2-1/2 minutes and I guarantee you'll be hooked...Watch it all the way to the end, and you'll be blown away. Thoughts & comments highly appreciated.
http://www.dailypaul.com/
you wrote:
1. Coordinate
2. Spread the word
Do we have critical mass yet to even begin organizing a movement? I'm not sure. Maybe the egg should come before the chicken, but that's a conversation we all need to have.
As for spreading the word, while there is a relatively small contingent (200,000 people?) who have a good sense of how wicked the bailouts are, there are probably 200 million people who have no idea that Obama is no different from Bush on this. Ditto on Obama's foreign policy (i.e. war) and ditto on civil liberties. Ironically, Obama will be worse on civili liberties because he has taken steps to make the illegal things Bush did, *legal*.
Anyhow, spreading the word right now is very important. With most journalists being congenital idiots,
maybe an organized movement with a NAME and a sound-bite mission statement would be a help in that regard.
James H.
As I said, all groups must put effort to unite and launch a concrete civil disobedience movement. Town hall protests labeled mobs did send a tremor up Poli-Tics spines but a earth quake is now required to show , it is not unruly mobs but "We The People want our Nation Back". Time to Join the Tea party tomorrow in DC, Instead of rants on message boards or blogs.
Please I always open to join a concrete agenda,will Join when you folks have one.
Sincere Regards
you wrote:
When I re-surface, it will be the dawn of a Brave New World.
For the looming FED audit will reveal the custody account agency debt swaps, and the Sprott expose of the U.S. intragovernmental bond scheme is already being picked up by Wegelin and others - pretty soon thereafter a massive flight from US securities will follow - just as quickly as the intended collapse of Lehman followed the massive naked short selling engineered by Goldman and Alistair Darling. And Rockefellar will have his crisis - U.S. sovereign default.
LOL
Barney is clever Monkey and will fool Dr. Ron Paul again. That Criminal blood sucking pest does not like the HR1207 Draft. He wants to compromise with DR. Ron Paul and this high drama I believe will not yield much.
Only "WE THE PEOPLE" File case in Federal court to go after the FED Terrorists, will yield results.
Why be a coward and hid eon an Island? and let your country masses suffer?
Thanks for helping me realize what I coward I am for taking my first vacation in three years of working two full time jobs to dig out of the home equity debt I incurred to bail myself out of the dot.com bubble burst before that.
I'll try not to have a good time and instead think about the suffering masses all week just for you.
I commented based on this:When I re-surface, it will be the dawn of a Brave New World.
For the looming FED audit will reveal the custody account agency debt swaps, and the Sprott expose of the U.S. intragovernmental bond scheme is already being picked up by Wegelin and others - pretty soon thereafter a massive flight from US securities will follow - just as quickly as the intended collapse of Lehman followed the massive naked short selling engineered by Goldman and Alistair Darling. And Rockefellar will have his crisis - U.S. sovereign default.
lol
Laughter and vacation is great medicine after serving DEBT hell.
O'Dear enjoy every bit of it
"We are on the verge of a global transformation. All we need is the right major crisis and the nations will accept the New World Order."
David Rockefeller
"But this present window of opportunity, during which a truly peaceful and interdependent world order might be built, will not be open for long. Already there are powerful forces at work that threaten to destroy all of our hopes and efforts to erect an enduring structure of global interdependence."
David Rockefeller,
speaking at the Business Council for the United Nations,
September 14, 1994
"We are grateful to The Washington Post, The New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion for almost forty years. It would have been impossible for us to develop our plan for the world if we had been subject to the bright lights of publicity during those years. But, the work is now much more sophisticated and prepared to march towards a world government. The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national autodetermination practiced in past centuries."
David Rockefeller,
( founder of the Trilateral Commission),
in an address to a meeting of The Trilateral Commission,
in June, 1991.
"NO FEAR OF THE ABYSS"
S. Gompers
Take a breather if you can - Keep the faith because we must....