Tags: whitney | bank | stocks

Whitney: Bank Stocks Way Overvalued

By    |   Thursday, 14 May 2009 02:43 PM

Superstar bank analyst Meredith Whitney says bank stocks are overvalued, thanks to lax government rules that allow banks to overstate earnings.

“I absolutely would not own these stocks," Whitney told CNBC. "Some of these business models are never going to come back."

As for the strong rally by bank shares since March, she said, “I couldn’t believe it with my own eyes, because the underlying … earnings power of these banks is negligible.”

"I call this the great government momentum trade. The government enabled the banks to have better than expected — better than even the banks could organically deliver — first quarter earnings.”

And Whitney says that could continue into the third quarter.

But eventually, banks will come back to earth, she says. That’s because consumers remain under water.

“The consumer’s not going to spend,” she says. “You’ll still see a massive retraction in consumer liquidity."

Whitney says the government’s intervention in the financial system makes trading bank shares very dicey.

"For fundamental investors, you invest on what you know to be the rules of the market," she explains. "With the government involved, no rules of the market apply."

Or, she said, they’re being changed in “the middle of the game.”

Richard Bove, another star bank analyst, disagrees with Whitney.

"The world has changed dramatically in the past two months,” he wrote in a note to investors.

“April was a substantial improvement for financial companies compared to a very dismal March. May is better than April."

© 2017 Newsmax. All rights reserved.

 
1Like our page
2Share
StreetTalk
Superstar bank analyst Meredith Whitney says bank stocks are overvalued, thanks to lax government rules that allow banks to overstate earnings.“I absolutely would not own these stocks," Whitney told CNBC. "Some of these business models are never going to come back."As for...
whitney,bank,stocks
245
2009-43-14
Thursday, 14 May 2009 02:43 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved