Did She Just Call the Bottom?

Of course she's too late but Meredith Whitney yesterday put a buy recommendation on Goldman Sachs. Is this another Dr. Doom moment? For those of us old enough to remember there was another Dr. Doom before Nuriel Rabini and he was Henry Kaufman, one of the investment sages of the 70s and 80s. During the 1981-82 recession Kaufman (aka Dr. Doom) was relentlessly bearish and pessimistic and the market bobbled up and down with his every utterance. Much the way it does with the imparted wisdom of Meredith Whitney.



Until August 1982 when Kaufman finally admitted that he was wrong - only he didn't say it quite that way. Kaufman's big bugaboo was what he called government crowding out. That is that the government was borrowing so much money to finance deficits that it was crowding private borrowers out of the market. (This manifests in higher interest rates than would otherwise be seen.)

Finally, in the summer of 1982, Kaufman said that the economy was so, so, so bad that load demand was so, so, so weak that the government was no longer crowding out the private sector. And ... wait for it ... the market took off like a rocket; a rocket that went up until the 1991-92 recession.

Yesterday's rally was the Whitney rally - where she admitted she was wrong without admitting she was wrong. (She's still a bear but likes Goldman Sachs a lot.)

Was this a Dr. Doom moment like 1982? It could be. If so, it's a few weeks ahead of my prediction that the spring correction will end in September.