Tavakoli: “One of the reasons the media hype around Whitney’s end October 2007 (very late, not early as media hype claimed) Citi call is problematic is that it gave credibility to Rubin’s and Prince’s assertions in front of the FCIC that they didn’t know they had a problem until the fall of 2007.”

Stacy and Max,

Saw the Bloomberg article on Meredith Whitney’ recent performance

You may recall my March 23, 2009 commentary (linked and excerpted below). Jim Rogers was short Citi, and Whitney appeared on air with him refuting Rogers while Citi was dropping. This was ten months before her end Oct 2007 call, during which time Citi continued its downward trend. I also mention her Bear call. She didn’t advise clients to sell until the Friday before its implosion when the herd was saying “sell.” Lehman is a similar case.

One of the reasons the media hype around Whitney’s end October 2007 (very late, not early as media hype claimed) Citi call is problematic is that it gave credibility to Rubin’s and Prince’s assertions in front of the FCIC that they didn’t know they had a problem until the fall of 2007. Among many other red flags, Citi had a $200 million credit line to the Bear hedge funds that imploded in June 2007. The Everquest IPO proceeds would have been used to repay the Citi line, and the Bear funds had just bought a built-to-fail CDO from Citi. A loan that size would grab the attention of the executive committee (even if bank analysts like Whitney missed it). Moreover, Matt Goldstein and I picked up on that when he wrote his Everquest expose in May 2007 for Business Week http://goo.gl/sf20 ; the information was in the public domain along with many other red flags.

Best,
Janet

Reporting v. PR: Meredith Whitney and AIG
By Janet Tavakoli, President of Tavakoli Structured Finance, Inc.
March 23, 2009

Meredith Whitney seems best known for her analysis of Citigroup at the end of October 2007. Jim Rogers appeared with Whitney earlier in the year on Cavuto on Business and stated he was short Citigroup (he shorted C in late 2006/early 2007), and he said Citigroup was going to $5. Whitney rated it sector perform from October 3, 2005 until October 31, 2007. The stock lost 7.9% versus a 7.5% gain for the Philadelphia Stock Exchange/KBW Bank Index during this period (David Gaffen, WSJ, Nov 1, 2007). The following table summarizes the timeline to the best of my knowledge:

(MK: will add table)