Meredith Whitney became one of the most feared analysts on Wall Street in 2007 when she advised her clients at Oppenheimer & Co. to sell Citigroup. Last night, Charlie Rose asked her what she thinks lies ahead:

CHARLIE ROSE:  Listen, you saw this early certainly in terms of the banks, and you got a lot of credit for that.  Have we not seen the worst?  Is the worst still to come, or have we passed some point of beginning to understand and just waiting for the plan to get us back on track?

MEREDITH WHITNEY:  I really believe the longer we wait, the longer we head down this path — well, the math is the worst is ahead of us.  And…

CHARLIE ROSE:  So the end of 2009 or beyond?

MEREDITH WHITNEY:  At least the end of 2009.  Look, you have credit continuing being pulled from the system, and until it stabilizes, there is nowhere to go but down.  And from an unemployment perspective, no one is pricing in low, mid teens unemployment in any of their assumptions.  So it
is just a question of not if the banks need to raise capital, it’s when, and, you know, let’s get some capital back in the system by looking at who can provide it, like the local banks.  We will go back to a time that was and not try to preserve a system that is and — or was more recently and will never be again.

From Bloomberg:

March 4 (Bloomberg) — Reader’s Digest Association Inc., the closely held magazine publisher, hired law firm Kirkland & Ellis LLP to explore restructuring options including a possible bankruptcy filing, a person familiar with the situation said.

Some words of advice from Penelope Trunk for anyone considering enrolling in graduate school until this recession goes away: Stay away. Far, far away.

Bill Gross of PIMCO, the world’s biggest bond fund tackles that one:

Question: How bad could this get?

Answer: No one knows for sure, but common sense would provide a good guess. If the government cannot substitute credit to the same extent that it is disappearing from the private system, then the U.S. and global economies will retreat. If the economy is viewed as a bathtub filled with water (credit) at two different times with two different levels, then draining it back down to the lower first level might reduce economic activity proportionately. Liquidate debt (credit) to 2003 totals and you just might reduce economic activity (GDP) to 2003 numbers as well. Whoops! That would mean a 10%+ contraction in the economy with unemployment approaching the teens. Keep that bathtub full!

Question: What can be done?

Answer: Keeping the tub sufficiently full means advancing policies in content and magnitude never contemplated since the days of FDR. The U.S. and global financial systems require credit creation and foreclosure prevention, not bank nationalization as currently contemplated by some. Trillions will be required in the U.S. alone and it is critical that there be a high degree of policy coordination among all nations, which avoids protectionist measures reflective of failed policies in the 1930s. To date, PIMCO’s Mohamed El-Erian’s imperative of “shock and awe” has been more like “don’t bother us, we’re working on it.” Get moving. Risk being bold – Washington.

The short-sellers are smelling blood at Gannett, which was No. 16 on the list of their favorite stocks (as of Feb. 25). More than 30 percent of oustanding shares were being shorted.

Shares of the nation’s largest newspaper chain fell below $3 today, meaning the company can be had for $666M. Driving the stock lower was  news that S&P had joined Moody’s in junking Gannett’s debt.

Revenues are plunging and Gannett is being squeezed for the cash it needs to pay the bank. At the end of 2008, Gannett had approximately $3.8 billion in long-term debt. The company had approximately $1.2 billion of additional borrowing capacity to repay debt maturing in 2009 and beyond.

All this debt financed the purchase of newspapers that are worth much less than the company paid for them. In 2008, Gannett took a goodwill charge (writedown of assets) of $8.3 billion (!), almost all of it in its publishing division.

Now I am become debt, the destroyer of newspapers.