Meredith Whitney is an easy target for Tom Brown

Tom Brown refutes Meredith's analysis with an Excel chart while his firm blows up 50% in 2007

Meredith Whitney is on fire at the moment. Her calls have been very good and she's not afraid to go out on a limb.

And then you have this quote from Tom Brown (for those of you all who don't know Tom Brown you can read his bio HERE):

"Every cycle there's one analyst who races to be the most bearish, and this time it's her. Honestly, I think we'll look back and see that Meredith Whitney's credibility peaked on July 15"

And I would counter this statement by saying, "every time someone actually makes a good call you always have someone who is jealous or goes against the grain just to get more attention - in this case its Tom Brown."

Brown goes on to accuse Whitney of being "incredibly arrogant" on the basis of her recent opinions. He then takes a personal shot at her: "The only explanation I can see is, she has no idea how to evaluate the possible downside risks."

I sense jealousy on the part of Tom Brown.

If you are interested, HERE is Tom Brown's case for a bottoming of the financial services stocks.

In my opinion, a quick glance at the metrics (bank net charge-offs and loan loss provisions of the past 20 years) he uses to refute Meredith's case are overly-simplistic. There are many more dynamics in place today that did not exist in the 80's and 90's. Using an simple excel chart of charge offs versus loan provisions just won't do it. Reminds me of a concept I remember from my engineering classes in college: curve-fitting. Nice try Tom.

Ironically, Tom Brown's investment firm lost nearly 50% of its value in 2007 due to bets in financial stocks.

In fact, the "oracle" himself made the following bold statement last November: "I think we're really close, if not at the bottom, for the financial services industry," Brown told hundreds of investors at the Value Investing Congress in New York. "There are many opportunities in the most battered sectors."

Wow Tom...a lot has happened since last November. Maybe someone should question your analysis.

Meredith Whitney sees AmEx consumer credit situation a major problem over 12 months

This shouldn't come as a surprise to anyone but maybe a form of validation:

Oppenheimer analyst Meredith Whitney seeing problems in consumer-based credit to continue over next 12 to 18 months. This comes on the heels of American Express noting a significant credit deterioration among its most affluent clients.

"The wide-ranging effects of the housing downturn are highlighted by the worsening of U.S. cards' credit quality in AXP's affluent cardmember base," Whitney wrote in a note to clients last week.

"Typically, the affluent segment holds up well during downturns, but home price declines have resulted in significant losses in consumer net worth (lower home values)," she added.

American Express said that even its best clients were spending less and taking longer to pay bills. With consumers weaker the company said it was no longer on track to boost earnings per share by 4 to 6% this year.

Whitney slashed her $76 price target on the stock and cut her 2008 earnings estimate to $2.60 from $3.45.

Analyst Whitney gloomy on U.S. spending as top AmEx clients hurt [Reuters]

Gilt-edged AmEx cards tarnishing [Barrons]

American Express cut to perform at Oppenheimer on deteriorating credit quality [Thomson]

Meredith Whitney: More Weakness Ahead?

When Meredith speaks people listen. She is a sharp analyst that has made some bold calls the past couple of years. Her biggest call: Citi's failures. This interview took place earlier this week on the CNBC set. Among her points in this interview:

1. Expect to see further weakness in housing prices



2. Banks are recapitalizing but very little of that is being used for loans



3. Systemic risk still pretty high for most investment banks



4. In this kind of market, money goes from "weaker" hands to "stronger" hands



5. Credit card industry will have repricing problems with their loan portfolios due to higher regulation

Her calls have been pretty spot-on recently. This interview is probably a bit extreme to the extent that she might be "overselling" the current market conditions. But at any rate, I would recommend that you keep her word in mind. And if you have a problem with her then maybe you should take it up with her husband.

Current Fortune article on Meredith Whitney [Fortune.com]