Can we hold financial analysts responsible for their calls?

If you're a regular viewer of 60 Minutes, last December you might've seen Meredith Whitney predicting 50 to 100 significant municipal bond defaults in 2011. She made the headlines with just that call.

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For the starters, she's one of the very few analysts who predicted the '07 financial meltdown in one form or other. Back then her prediction was, Citigroup would lower its dividend and that it was time to sell bank stocks. It could be cause of her financial acumen or sheer luck. That's her ticket to fame, till date that's the only good substantial call she ever made. She resigned from Oppenheimer on February 19, 2009 and started her own adivsory group.

But this muni default call didn't go unnoticed and critics pounced on it, from day one.
“You could see 50 sizeable defaults. Fifty to 100 sizeable defaults. More. This will amount to hundreds of billions of dollars’ worth of defaults.”
But as we're approaching mid of they year, she's getting very defensive on the call. Last Wednesday she's on CNBC squawk box.

Needless to say she's very tense and strangely she got pointed Questions from Becky and our new Free markets champion Joe Kernen. Here's few of her statements and my observations.

Muni defaults isn't part of large issue.
But her whole 60 minutes appearance was about her defaults call.

Tried to change definition of default as reduced services.
Her call specifically mentioned hundreds of billions Dollars of deficits.

Talks about state difficulties while the topic is muni-bonds.
State bonds are different from muni-bonds

She never mentioned 12 months
In 60 minutes video, she said 12 months

And here's response from Cumberland Advisors, her main detractors on this issue. Unlike Meredith, this firm isn't one trick pony and have gravitas.

I was thinking that she or her clients might be shorting municipal bonds. But she said on air that she doesn't have a position in bonds neither does her clients. Makes me think why would she make that kind of controversial call.

This looks like an exact opposite to Credit Ratings agencies role in sub-prime crisis, but equally harmful. Investors are already shorting the muni-bonds, and she added to it. I can't predict the result though. Looking at rise of income tax returns at state level, I assume/hope that states are in better shape then we all' re afraid of.

Financial industry and press aren't hiding their displeasure and I hope she wouldn't get a free pass. Not quite sure whether regulation covers this area or not.

Peace

P.S. Nice shout out from Meredith to Short Hills, my favorite mall in NJ.

06/14/11
This just in, WSJ itself is publishing contrary evidence to Meredith's predictions.