Meredith whitney: turns bearish

Meredith Whitney cnbc.com Meredith Whitney is making headlines: She has not been this bearish in a year! Whitney was the first to call the bubble in financial stocks. And then she predicted

the stock market rally. But now Whitney is starting to turn negative again. Whitney said on today's Closing Bell in an interview with Maria Bartiromo that there's no fundamental

reason behind why stocks like Tiffany , Bank of America and Caterpillar are up, especially in the consumer space. There's also been a real contraction in consumer credit. Whitney

hasn't seen this much consumer credit contraction, "ever." Whitney said "in 1990, '91, yes, you had the market provide so am liquidity to the consumers, the consumer

had more liquidity during that time. Now the consumer has actually a lot less liquidity. $1.5 trillion of credit lines on credit cards have been pulled from the system and that credit

contraction is reaccelerating." Whitney said "folks that are hoping for a robust consumer market, (consumer Christmas) are going to be disappointed. There's nowhere to hide at

this point." WHITNEY: BANKS NEED MORE CAPITAL The Fed and Treasury have to get the banks to pay back TARP. The banks are going to raise capital again. And then the states will have

their hands out. Because 44, 48 states are under funded and progressively getting more under funded. BARTIROMO: Let me get your take really on the capital of the banking system right now. So

you're expecting that we will see them do another round of capital raises. Do you think that the sector is Adequately capitalized today? WHITNEY: No way. BARTIROMO: No way? WHITNEY: No

way. Wow! NOT BANKING ON BANKING STOCKS BARTIROMO: You know, you came out with a call on Goldman Sachs a while back. Would you be shorting the whole group? WHITNEY: I think that the call

this year, the trade this year has been short the regional banks and go long the capital markets banks. And that's worse, because the government's behind the capital markets

providing unprecedented liquidity, buying these agency mortgage-backed securities, so the banks are buying them. It provides like, I say if the lifeguard's on duty people will get in

the pool, if the lifeguard is going to go off duty at some point, we just don't know. The capital markets are going to be down. Look at the equity markets are down. I think now you can

start to see the big banks converge closer to the regional banks. So the trade now is at least, reducing waiting in the large cap banks. All this said, I don't know sense to me because

it's rallying. And there's no root in fundamentals. There is so much money on the sidelines people say. _____________________________ * The Dow 30 in Real Time * The CNBC Stock

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