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As you may have heard, Meredith Whitney has lately been saying that we’re going to be looking at the scariest environment imaginable when as many as 50 to 100 cities and other municipal issuers will supposedly default on their debt this year. Charlie Gasparino, however, is suspect. No one he knows has seen a copy of Whitney’s report (entitled “State Budgets: The Day of Reckoning”) and until he gets a peak and can evaluate it, Chaz doesn’t think we should be buying what this broad is selling.
All we really know about the report is its overheated title — “State Budgets: The Day of Reckoning,” and what Whitney will disclose about her research, and methodology, which so far ain’t much. No one I know in the municipal bond market has even a bootlegged copy.
Seeing the actual report might give us some idea why she thinks defaults might surpass levels over the past year not seen since the Great Depression — a pretty outlandish claim when you think of it — considering the general improvement of the economy. Seeing the report will also give the investing public some indication about Whitney’s own motives in making such claims. Has Whitney or her firm invested in municipal bonds or are they shorting the market (betting it would fall)?
Regulators expect market positions to be disclosed in research — even the proprietary kind that’s not released to the general public. On its face, there’s nothing wrong with Whitney taking a market position, but if she or her firm is short the market, it gives us some more insight into her call and why it’s so aggressive.
CG wants his insight and he wants it now. If he doesn’t see a copy of this thing by COB today, the receptionist at the Meredith Whitney Advisory Group can expect a visitor.