Meredith Whitney Exercises Fantasy ~ The Risk Averse Alert

Monday, July 13, 2009

Meredith Whitney Exercises Fantasy

Alright Meredith Whitney, riddle me this...

Give capital starved players a stock trading at $150 in an era where the lynch pin of the global financial system remains broken (structured finance) and what will become of it?

Let's consider the larger matter...

Truth is equity these days is at great risk simply because it trades in highly liquid markets where capital readily can be raised. Absent a fully functioning securitization market where credit can be manufactured and marketed as AAA securities (and Wall Street made tens of trillions of dollars of these), enterprises trapped in leverage, now and for as far as the eye can see, will be pressed for capital to meet obligations that no longer can be papered over with another tranche of fools gold.

So, what will be sold?

An Eastman Kodak, commanding a paltry $3 per share?

Or a Goldman Sachs bringing today's seller a solid $150?

It's a no brainer! Meredith Whitney's bullish Goldman Sachs forecast simply fails to account for macro conditions in which all publicly traded companies presently operate.

Equity is dead money because we are burdened by grown adults who insist upon playing a game of make believe, pretending that a bankrupt financial system can be salvaged without profound upheaval.

This game is so incredibly dangerous. Just as easily as AAA securities once were manufactured, so too chaos necessary to keep the game going. The more thoughtful analyst ponders, then ... short of bankruptcy reorganization, what are the means by which inevitable upheaval might be averted ... or, more aptly, redirected ... or, more likely, coerced into submission?

You can be sure of this: Meredith Whitney took into account none of the fundamental reality in which Goldman Sachs operates. The global financial system is bankrupt. And unless all of its common is in the hands of its directors, Goldman's shares in all probability will fall with the rest of the market ... much like happened last year.

Fast Money
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