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Whitney: 'I Am Wildly Bullish on the US'

Wednesday, 25 April 2012 04:45 PM

Star Wall Street analyst Meredith Whitney says she is "wildly bullish" on the U.S., as its relatively sound economy will attract investors especially away from Europe, where a debt crisis shows no sign of abating.

While the U.S. is due to see better days, those states that have adopted more business-friendly policies such as Texas and the central plains states will particularly shine.

"I am wildly bullish on the U.S., in particular markets in the U.S. You've got a capped inflation story, you've got a hedged inflation story, you've got great growth, you've got one common law, one common language, one common currency, and I think the U.S. market looks terrific," Whitney tells CNBC.

"For an investor there is so much opportunity out there — there's opportunity from Texas all the way up to North Dakota and you can play every industry on that basis."

Policy pays, Whitney adds.

"It's the agriculture and commodities but it's also the right-to-work states, it's where businesses are moving because it's easier to operate and create jobs."

Less business-friendly states like California and Illinois won't be so fortunate, she says.

Europe, meanwhile, remains a cause of concern.

Bailouts arranged for the Greek government calmed markets up until now, yet yields are spiking in the larger Spanish economy, a sign investors are growing increasingly worried Madrid will need a bailout.

Meanwhile in France, President Nicolas Sarkozy trailed Socialist challenger François Hollande in Sunday's elections, leaving both candidates headed for a runoff in May.

Surprising voter support for far-right candidate Marine Le Pen caught markets off guard and pushed the euro down, stoking fears that patience with austerity measures and economic uncertainty under Sarkozy may be wearing thin.

A Hollande victory probably won't bode well for France.

"A 75 percent tax rate cannot be good for Europe. It means a couple of things. It means that Europe has a very, very difficult time showing growth, showing any real momentum, and that has a clear drag on the U.S. economy," Whitney says.

There is, however, a bright side, at least for the U.S.

"But it also means another thing, and I think the Fed should be more straightforward with this: It means the U.S. looks like a much more stable liquidity pool. Long-term rates will stay lower for longer and the Fed has less to worry about. The Fed doesn't maybe need to be so proactive in terms of QE3 and whatnot, because long rates stay low because there is no other place to go," Whitney says, referring to quantitative easing (QE), an extraordinary monetary policy tool.

Since the downturn the Federal Reserve has slashed benchmark interest rates to near zero. The Fed has also purchased over $2.3 trillion in assets from banks, a liquidity-inducing measure known as quantitative easing.

The Fed has carried out quantitative easing in two rounds, and at the Fed's most recent monetary policy meeting and press conference, Fed Chairman Ben Bernanke has said he cannot rule out the possibility of rolling out a third round of quantitative easing, dubbed QE3 by the markets.

"We remain entirely prepared to take additional balance sheet actions if necessary to achieve our objectives," Bernanke said at a news conference, according to CNBC. "Those tools remain very much on the table, and we will not hesitate to use them should the economy require that additional support."

For Whitney, the Fed is playing politics by not being more straightforward that the economy probably doesn't need easing.

However, since easing pumps up stock markets as a side effect, investors are enjoying buying stocks on the notion that the Fed will be there should the market and economy tank.

"I think that the Fed is as political an organization as it has ever been, so they'll do whatever it takes stabilize and pacify the markets," Whitney says. "That does not mean that that's the best policy for the overall economy."

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Wednesday, 25 April 2012 04:45 PM
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