Meredith Whitney Talks Economy, AI, FOMC Preview

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, podcasts, radio, news.

**SPEAKER_2** (0:07)
Meredith Whitney with us right now. We're thrilled to have her in here. And I should say shockingly well-timed as well. Meredith, I'm going to go back. This is, you were in school back then, 2008 But I look at Visa here, and I'm sorry, people don't understand back almost 18 years, it's up 21.6% per year.
And I remember you in your youth standing up on a table screaming by Visa. What is the Visa history and management now where they say, we got to lay off 7% of the people because the rules have changed?

**Meredith Whitney** (0:43)
Well, I mean, Visa has been a great demutualization story, right? So the banks owned it, they spun it off. There was a lot of, there's a lot of operating leverage to achieve. And it's just the whole process of cash to plastic conversion. But like any large company, you've got to right size. And I think a lot of companies that hadn't right size, that had over hired during COVID, have to face the reckoning that the only way to achieve operating leverage now is to get rid of, is to downsize. And I think you've seen everybody do it. The banks haven't really done it, but every tech company has done it.
They're not an outlier on that.

**SPEAKER_4** (1:28)
I remember the early days of FinTech, maybe it was you, somebody told me, you want to play FinTech just by Visa and MasterCard. I mean, all the stuff's got to ride on those platforms at some point.

**Meredith Whitney** (1:36)
They were the OGs of FinTech way back when.

**SPEAKER_4** (1:39)
Exactly.
I'm looking at JP Morgan, all time high today. I mean, what are these banks and all their stocks have been ripping? I'm looking at the year to date and the 12 month performance. Stocks have had great runs. What do bank stocks do? What do banks do when their stocks are trading at or near all time highs? Do they return cash? Do they buy stuff? What do they do usually?

**Meredith Whitney** (2:00)
Historically, pre-great financial crisis.
Remember the 90s, 2000s when bank stocks valuations were trading at all time highs, they would do transformational deals. There was massive M&A, massive consolidation.
This cycle since the crisis, they've, well, once they got out of, you know, effectively, regulatory prison, they started buying back shares. They increased dividends to a certain extent, but their favored route was buying back shares. And you would think that makes sense in low, when the stocks are trading with low valuations. But the banks have still bought back shares at high valuations, close to three times. And it's not as if, you know, the brokers used to, you remember the days, they used to buy back shares to offset their stock compensation. They've done that at exponential levels to their stock compensation. So historically, you'd think, well, at all time high valuations, price to tangible book, they would do some type of M&A. And I'd say they're just pussy putting around with buy backs and dividend increases. I think the one outlier, the one bank stock that has the, the one bank and one CEO that has to merity actually do a deal is none other than Jamie Diamond.

**SPEAKER_2** (3:20)
So frame an example deal.

**Meredith Whitney** (3:22)
An example deal.

**SPEAKER_2** (3:22)
An example deal.

**Meredith Whitney** (3:24)
I think when people thought that Jamie Diamond would retire with their new headquarters, that time came and went, he wants to do something big. And by big, I don't mean State Street, Northern Trust.
I think he does something Fintech, but major Fintech, which is over $115 billion valuation of Revolut.

**SPEAKER_2** (3:46)
Okay. Of Revolut is an example. Okay. What you do, folks, the way we rock on YouTube, you can see this. When Meredith Whitney walks in the studio, I use the HP12C.

**SPEAKER_4** (3:57)
Yeah.

**SPEAKER_2** (3:57)
Apple just hit $5 trillion.
I went back to the beginning of the boom, the jobs and all that, just the long Tim Cook log boom. Of course, for Meredith Whitney, I went logarithmic. And even one standard deviation below the long-term trend, in June of 2028, it hit $6 trillion. We don't extrapolate like that, do we? We're so wrapped up in the day-to-day, go to cash and all that. We just don't do simple extrapolations of Visa or Apple, do we?

**Meredith Whitney** (4:29)
No. Or the all-time greatest stock is Microsoft. In terms of the all-time greatest compounder, which is Microsoft. I mean, I think that we're also short-term, and the short-term, I took a long-term view of the banks. I took over the last few weeks to see what their real earnings power was, and how they were growing, or how they weren't growing, tangible book. And most of the earnings growth has been through share buyback. So if you look at Citi, for example, their tangible equity is below what it was before the great financial crisis.