Saw an interesting report on 60 Minutes the other night about state budgets. This woman, financial analyst Meredith Whitney, predicts hard times ahead. But not everyone is so gloomy, including Joe Mysak of Bloomberg news, who thinks her predictions are overreaching.
From 60 Minutes:
Whitney made her reputation by warning that the big banks were in big trouble long before the 2008 collapse. Now, she's warning about a financial meltdown in state and local governments.
"It has tentacles as wide as anything I've seen. I think next to housing this is the single most important issue in the United States, and certainly the largest threat to the U.S. economy," she told Kroft.
"There's not a doubt in my mind that you will see a spate of municipal bond defaults," Whitney predicted.
Asked how many is a "spate," Whitney said, "You could see 50 sizeable defaults. Fifty to 100 sizeable defaults. More. This will amount to hundreds of billions of dollars' worth of defaults."
From Mysak:
So said banking analyst and new municipal bond expert Meredith Whitney on the “60 Minutes” show on Sunday, in perhaps the boldest, most overreaching call of her career.
There are a lot of reasons to be doubtful about the health of the municipal market right now, as elucidated by “60 Minutes” correspondent Steve Kroft. Tax revenue is down, public pension and health-care liabilities are up, the federal government’s bailout money to the states is running out and the chances that those funds will be replenished are remote.
And yet -- hundreds of billions of dollars in default? The number is in the realm of the fabulous.
Whitney also has ideas on the housing market and stocks. Here's another take on housing and the likelihood of foreclosures in the coming year.
