Meredith Whitney Bullish on Financials??

Okay, so the title may be a stretch but she brings up some great points in this CNBC video. First she says the Mike Mayo piece (which was widely credited for the sell off today) is non news which is something I have been saying all day. The market has screamed higher with financials up 60% in three weeks there is nothing new in the Mayo piece than that which is already well known (have not seen the piece, referring to the headline bullets that everyone is talking about). Which brings up another point. CNBC drives me nuts sometimes. Most of the morning commentator after commentator talked about the hopeful "exaggeration" of Mayo saying the banks had marked their loans down only 3% when they may only be worth 65%. This is a total ignorant, small brained understanding of the issues and the accounting surrounding it. There is really no reason you need to know this unless you deal with it on a day to day basis which is fine, great but if you don't know anything about it, don't act like you know anything. Here you have "professional" investors and commentators marching across on CNBC displaying ignorance. You can easily tell how much loans are marked down on the balance sheets of banks by looking at the loss provisions. Loans are different from investment securities. Most loans are held at par and a reserve is built against potential losses. Banking 101. The massive amounts of losses experienced and write downs you read about is typically on the investment securities side of the equation. So what Mayo is saying is that there will be large losses on the loans books that isn't marked down. Banks currently have a loan loss reserve anywhere between 3 and 4% currently. Meredith Whitney said everyone knows about this and it is non news, which is exactly right.

Anyway, got off on a tangent. Other things Meredith talked about where interesting. She may be straying from what she is good at (analyzing banking companies) and making trading calls but I happen to think there is a decent probability she is right. She thinks all the government maneuvering will cause bank capital and hence book value and capital ratios to go up in the 1st quarter. That this will be the first quarter in several for banks to show profits as a whole and this could cause continued rallies in financials and hence the markets. That you should lay off the shorts and look to short at the end of April into May. I think this is a decent probability and early last week bought a large amount of September XLF calls to hedge a portion of my financials short book. When asked what stocks she would buy in the financial sector, she said her overall bearishness makes her to much of a chicken that things are going to get much worse. So any bullishness seems to be a market timing event.