Meredith Whitney As Bearish As Ever (XLF, BAC, GS)

Meredith Whitney says there is no fundamental reason why stocks like Tiffany (NYSE: TIF) or Caterpillar (NYSE: CAT) are up. She says an extreme amount of credit has been pulled from the market; in fact, $1.5 trillion of consumer credit card credit has been eliminated.

Whitney says there is no way that the banking sector is adequately capitalized. She said most banks do not assume home values will fall and unemployment will rise. Whitney likely caused the financial sector to fall. Financial Select Sector SPDR (ETF) (NYSE: XLF) is down approximately $0.20 since she spoke. Other stocks that fell include Goldman Sachs (NYSE: GS) and Bank of America (NYSE: BAC).

Whitney says the call this year has been to short the regional banks and go long the larger capital banks. Whitney says investors should reduce weighting towards the larger banks.

She said she can't explain why the market is rising because it makes no fundamental sense. She thinks the banks will go back to tangible book value, but she does not believe Bank of America will go back to $3.

Whitney says retailers could have trouble this holiday season because the middle class is getting squeezed the hardest. She says the luxury retailer could be fine and stores like Dollar General (NYSE:DG) could still excel in this environment.

Whitney says before investing in the market, investors should wait for a fall. She says everything is too expensive and consumers should expect a double-dip recession in 2010.