Might the undoing of Bear Stearns be a cathartic event, causing Meredith Whitney to rein back on her famously bearish views?
The Oppenheimer analyst has issued a fresh “underperform” forecast on Citigroup, Merrill Lynch and UBS, having decided that the Bear fire sale will cause a “valuation adjustment for all financials.” A note to clients on Monday declared:
While we believe BSC’s case is unique, what will not be unique, in our view, is a resulting major negative revalution of financials. For this reason, we provide a detailed examination and explanation of why we believe financial stocks have further downside of as much as 50% based upon 1990/1991 multiples of tangible book values.
Specifically, Meredith is predicting that after all the other writedowns, the next area for depletion will be goodwill, so investors should start focusing on tangible book value when looking a multiples for the banks.