Yes, Dear

Probably the worst thing that could ever happen to a
good analyst or strategist is fame. Former bank analyst at Oppenheimer
Meredith Whitney made the remarkably prescient call that Citigroup
(NYSE:C) would have to cut its dividend. That was October 31, 2007.

Citi stock had already fallen from above $50 to the
$30’s. And that fall by Citi, and the call by Whitney, marked the top of
the market’s rally out of the 2001-2002 recession.

At the time, nobody knew what was looming. I’m sure
even Whitney didn’t know just how bad the mortgage-backed crisis would
become. So much was hidden and poorly understood. It was a perfect storm
of leverage, falling valuations and hubris.

Meredith Whitney deserves plenty of credit for her
call on Citi. Hers was among the first voices carrying the message that
all was not well to be heard. She deserved a raise, too, but she took it
to the next level…

*****I will never begrudge someone for taking their
expertise out into the marketplace to try and make their own way. So I
don’t criticize Whitney for starting her own firm, based on her Citi
fame.

But she has spent the last 2 years trying to
reproduce her bearish call on Citi. And unfortunately, she’s starting to
look like a one-trick pony.

Back in the summer, when the “double-dip” of
recession talk was en vogue, she jumped on board, saying that consumer
spending had peaked and a double-dip for housing was coming.

Then, she released a rating report on states, saying
that several states are insolvent and will need bailouts. That may be
true. But any bailouts for states will not involve the kind of
negotiation and uncertainty that accompanied the European
bailouts.

Her continued bearish stance on banks has so far
been wrong. Earnings have continued to be solid for banks and some of her
bank price targets, like $7 for Bank of America (NYSE:BAC) are sensationalist and not
likely to happen unless there is another serious shock to the
U.S. economy.

*****Now, I don’t have a problem with bearishness.
There’s nothing wrong with trying to find what’s wrong with the economy,
or with a company. In fact, this is an endeavor all investors should
make. After all, if you don’t know what the threats might be, you have no
way to account for them if they start to become a reality.

At the same time, however, an investor (or analyst
or strategist) must understand that the only constant is change. The
market, the economy, the investment climate, whatever you want to call
it, is dynamic. It changes. And a successful investor must change with
it.

For instance, if you don’t recognize that the Fed
and the Treasury are actively supporting the banks, and have been since
late 2008, then you’re missing an important change.

Accounting rules were changed to support banks. And
if you continue to treat the banks like the rules were not changed, well,
let’s just say you’re probably not going to make any money on
them.

And never, ever forget: the point of investing and
analysis is to make money. Period. Being right is only significant if you
are making money. Think of it like being “right” in your marriage. Does
being right in an argument with your spouse make your life better? I’m
thinking probably not. Even if you’re right, “yes, dear” is usually a
better response.

I can’t help but think Whitney’s clients would be
happier if they had said “yes, dear” to Tim Geithner when he went all in
with the banks. Could Geithner be wrong? Sure. Will it make your life
better to argue with him? Not so far…

*****I probably shouldn