What's Making Famous Bear Meredith Whitney so Bullish?

She made her name with bearish calls on munis and banks. So why is she bullish now?

Meredith Whitney

Whitney says people should know that there is some very good real estate out there to save and defend. She calls for privatization of education and other government-funded services, even security and police work. She says taxes and regulation "have to be cut" to foster the growth of business. The money states find from cost cuts and privatization must be reinvested in building infrastructure, bridges and schools and other public projects, as well as retraining workers for new jobs, Whitney says.

Economists say states made progress on cleaning up their fiscal messes, and some even have surpluses. But Whitney still has a relatively dire view. "We have reached a breaking point in some states," she writes in her book. "The money is gone." Stimulus spending will not help anymore, she adds.

Based on this view and other assertions, the book is being met with harsher criticism than some of her past forecasts. A Reuters reporter writes, "I would encourage readers to view it as the opinion of one analyst who has often been wrong." Forbes says the basic idea of people moving to the middle states is not supported by data. Bloomberg cited it for "a barrage of numbers, percentages, gross generalization, bald assertion and outright errors." The idea, the Bloomberg reviewer says, "sounds reasonable" but "the evidence is thin." Whitney's ideas, the reviewers say, are nothing new.

[See: 10 Golden Parachutes to Make Your Head Spin.]

"Reviewers are, of course, always entitled to their own opinions," she says when asked about the reaction. "But I continue to stand behind my book and the views expressed there within."

Her "middle states" idea, "based purely on dollars and cents, sounds reasonable," concedes Bloomberg reviewer Joe Mysak in an overall critical review. Whitney also sounds bullish in a way she never has in the past. That might not sell as many book copies as she might have with more "Black Swan" type gloom, and it's not likely to get her back on "60 Minutes" anytime soon.

But Whitney is not worried. Her career now is committed to the states. She says she has "no interest in politics" but will advocate her view as "a private citizen" who herself still lives in New York, not the great hinterlands she wants to change. She plans to work to improve the "fate of the states" for the foreseeable future, or as long as it takes for people to embrace transformation. "If you don't demand changes," she says, "you are going to suffer the consequences."