David Weidner wants everyone to gird their loins, and beware the analyst wearing spiked heels. Why? Simple: she's going to hurt you in the end, and not just because she comes bearing ball gags and doesn't believe in safe words, though those are factors that should be considered, but because someday she's going to let us down on account of the fact that, really, she's not that great an analyst.
Sure, she made "The Call" back in October 2007 but a lot of people "made" "The Call" (why aren't you people falling over yourselves when it comes to Mike Mayo? And how 'bout Dick Bové, hmm? Where's the love there?). Then the media made her a star, gave her a Money Honey-esque nickname (Dollar Dominatrix), and the whole thing snowballed to where we are today. But it's not too late to pump the brakes on this thing! Sure, she's worked us over good and, full disclosure, I at times found myself enjoying her insistence on using the spreader, truss bar, and executioner's mask, but enough is enough. Get out now, before she puts us in a sleeper-hold.
But to put it bluntly, Ms. Whitney's call on Citi wasn't that great. It wasn't the first, nor was it the best. Before we douse her with more champagne, put her on TV with Charlie Rose and hand over the keys to the Treasury Department, it might be worth taking another look at what really happened in October 2007.
Citigroup was already in deep trouble. Mr. Prince was on the hot seat for Citi's inability to rein in costs. Credit issues were beginning to come to the fore when on Oct. 12, Dick Bove, then at Punk Ziegel & Co., Mike Mayo, then at Deutsche Bank and Charles Peabody at Portales Partners all issued sell ratings on the stock.
Citi held a conference call three days later and, according to a transcript, Ms. Whitney participated. She asked three questions of Gary Crittenden, then Citi's chief financial officer. She asked about Citigroup's banking business in Japan and other regions. She also asked how Citi planned to grow its credit card business. She asked no questions about Citi's dividend or capital position.
Two weeks later, Ms. Whitney made The Call and cut her rating. The rest is history.
Well, almost. The Call did not say Citigroup was stuffed with hundreds of billions of dollars in toxic assets. It did not say that multiple banks will fail unless the government intercedes. It didn't mention Bear Stearns (which she once expected to earn more than $11 a share in 2009), Lehman Brothers or American International Group Inc. It was a call that Citi was losing money and would have to take drastic action to raise capital.
Ms. Whitney's call looks good because it was right. She advanced the ball. Then, she followed up with equally bearish and correct calls in 2008. But she also benefited from an investor community that was floundering - and desperately seeking a guru - as it came to grips with a credit crisis that threatens to undo Wall Street.
The truth is not as tidy as the myth. Investors should take heed as the media trumpet Ms. Whitney's latest proclamation.