She still has her mojo.

A lot of people were surprised, even confounded, when analyst Meredith Whitney, the bear of all bears, stuck her neck out early yesterday and put forth the Street’s highest estimates for Goldman Sachs’ (GS) second-quarter profits. Whitney predicted that Goldman would report $4.65 a share. The consensus estimate was $3.48. Goldman announced this morning that it earned $4.93.

And you’d think the stock would pop on that news, wouldn’t you? Attesting to Whitney’s mojo (which, as I noted in yesterday’s Postcard, we’d been questioning), CNBC’s Jim Cramer wrote this morning that “Meredith Whitney pretty much ruined the Goldman Sachs trade” by putting that super-high estimate ahead of the earnings call. Goldman shares rose seven points yesterday to nearly $150. It’s down slightly  today. “Whitney wrecked it,” Cramer griped about the do-nothing stock.

Whitney thinks Goldman stock has plenty of room to run. Ever bearish on the economy, she’s convinced that Goldman, above all financial-services firms, will benefit from global woes, which are rising. In yesterday’s report, she says that Goldman will make out big on the surging muni market. Goldman is a major underwriter of muni debt–albeit behind Citigroup (C), Bank of America (BAC), JPMorgan Chase (JPM), and Morgan Stanley (MS)–and the No. 1 book-runner of Build America Bonds. These are a new type of municipal bond, part of the Obama administration’s $787 billion stimulus plan. Cities, states, universities and government entities use BABs, as they’re known, to finance infrastructure projects. This is a potential $50 billion annual market, Whitney says, and Goldman currently holds a 25% share.

Meanwhile, state budget gaps are sure to balloon as tax revenues fall faster than expected–and  unemployment rises to 13%, Whitney predicts. Goldman is poised to benefit from the widespread pain. With her upgrade yesterday (making Goldman her only “Buy” as well as her sole upgrade since she quit Oppenheimer in February), Whitney lifted her estimate of Goldman’s full-year 2009 profits to $16.59 per share, from $10.80. In 2010, she expects Goldman to earn $19.65 a share. That’s substantially above the Wall Street consensus.

Her price target that accompanies her new “Buy” recommendation on Goldman: $186. That’s 25% above the current price. One Postcards reader, Matt in Baltimore, commented yesterday that it “would have been impressive if she had declared a ‘buy’ rating for Goldman back when it bottomed out at 52$ a share in Nov. 2008.” True. Whitney said precisely that yesterday morning on CNBC’s Squawk Box, adding that she’s only recently gained clarity on how Goldman is making money–the fixed-income bonanza. And once other analysts recognize it too, they’ll raise estimates.

So there she stands, a bull on Goldman Sachs, though still in bear clothing. Whitney’s husband, meanwhile, has been running with the bulls, literally. Six-foot-seven, 260-pound John Layfield, best known as onetime pro-wrestling champion JBL on WWE Monday Night Raw, is in Pamplona, Spain. While she was shaking up the market, he was doing the famous run. Another kind of mojo entirely.

All eyes are on Goldman Sachs (GS), which announces earnings tomorrow. What goosed the stock…and then the banking sector and then the entire market today? Meredith Whitney’s upgrade.

It mattered–and helped send Goldman up nearly 5% to $149–because the famously bearish financial-services analyst, who helped bring down Citigroup and the banking sector two years ago, has been negative ever since. She announced her upgrade of Goldman at 2:24 a.m. At least that’s when the email from her company, Meredith Whitney Advisory Group, popped into my inbox this morning. This is Whitney’s first upgrade since she broke away from Oppenheimer in February to go on her own. It’s also her only “Buy” rating among eight stocks she follows.

So yes, Meredith Whitney finally turned…on one stock only. Don’t dare call her a bull on the market. She says in today’s Goldman report that her positive outlook “is deeply rooted in our sustained bearish stance on the U.S. economy and state of U.S. financials at large.”

She likes Goldman because she’s predicting “a tsunami of debt issuance” from federal, state, and local governments to shore woefully underfunded budgets. That, plus a surge in corporate debt issuance (to at least 60% of peak cycle levels, she says) will benefit Goldman, which along with Morgan Stanley (MS) is the last Wall Street giant standing. Survival of the fittest, precisely. The weak fall and the strong get stronger.

As for Whitney, she’s showing her muscle. Last week here at Fortune, we were talking about her as we began to assess the crop of candidates for this year’s Fortune Most Powerful Women in Business list, due out in mid-September. Last year Whitney ranked No. 35 on the list. We were wondering if she’s still got her mojo. Guess she does.

P.S. Whitney has sells on three stocks: Wells Fargo (WFC), Capital One (COF), and Citigroup (C).

A gloomy outlook as we head off for the long weekend. Today’s monthly jobs report was worse than May’s, worse than expected, and worse than we’ve seen in 26 years. The U.S. unemployment rate rose to 9.5%…and is bound to go past 10%.

So when will the pain ease? Microsoft (MSFT) CEO Steve Ballmer told me last week: “I don’t think we’re in a recession. I think we’ve reset. It’s very different. A recession sort of implies a recovery…I don’t assume there is a recovery.” Here’s the video of Ballmer and me on stage at the Cannes Lions International Advertising Festival, where he was named Media Man of the Year.

While in France, I caught up with another CEO, WPP Group’s (WPPGY) Martin Sorrell, who’s long been one of the more wise and worldly forecasters. (His company owns ad and marketing agencies that serve global giants like IBM (IBM), American Express (AXP), Ford (F), and Nestle (NSRG.Y), as well as Microsoft.) I asked Sir Martin is he buys Ballmer’s belief that media spending might decline as a percentage of GDP in the next 10 years. “I think advertising and marketing services as a proportion of GDP will be flat or rise,” he replied. “Any flatness or decline in the developed markets will be outpaced by growth in the BRICs and next 11.” Next 11? He means the major developing countries beyond Brazil, Russia, India, and China.

As for that broader question of how we’ll “reset” or otherwise emerge from this global economic downturn, Sorrell has an artful way of envisioning it: “It will be like an italic, lower-case letter “L” with a little bit of a flip up,” he says. “The recovery will not be a ‘V.’ And it will not be a ‘W.’ The little flip up will come in the first half of next year.”

Noodle that, and leave your worries behind this weekend!

P.S. In case you missed them, here are two more video clips from my conversation with Steve Ballmer in Cannes: Ballmer on Bing and Yahoo and Ballmer on Windows 7 and lessons from Vista.

On Friday I told you about Microsoft (MSFT) CEO Steve Ballmer’s riff on Bing and Yahoo. I asked him: How much market share do you need to gain in search to not need to do a deal with Yahoo (YHOO)? Ballmer called my question “back-handed” and went on to give a really interesting answer. Check out the video or my Friday Postcard if you missed the Microsoft boss’s take on Bing and Yahoo.

Ballmer nobly engaged and sparred in our on-stage Q&A at last week’s Cannes Lions International Advertising Festival. He batted back my question about the global recession this way: “I don’t think we’re in a recession. I think we’ve reset. It’s very different. A recession sort of implies a recovery.” He added: “For planning purposes, I don’t assume there is a recovery.” Here’s more from Ballmer on the “reset” and how Microsoft is adjusting to it:

The Festival’s 2009 Media Man of the Year wasn’t afraid to sock the ad community with bad news. Ballmer proposed that media spending might decline as a percentage of GDP in the next 10 years. “We live in a funny Internet world,” he told the crowd of 1,000 or so. “As soon as all information and content is digital, and the marginal cost of production can look pretty close to zero, you get all kinds of changes in the monetization models.” Innovators will invent new ad-funded models, he said, “yet at the same time, the amount of time that people will be spending in relatively advertising-free environments could continue to increase.”

Not a happy outlook. Though, as I noted to Ballmer and the audience: Who can predict, really? I mentioned that I’d last been to this Lions Festival in 1993—and read aloud this prediction from a 1993 Fortune story titled “How Bill Gates Sees the Future”:

“I think the intelligent-corded phone will catch on faster than the PDA (personal digital assistant). We can take today’s office phone system with all those features you can’t figure out how to use and put a screen on it, and even do simple video conferencing. Also, in four or five years, you’ll have wild advances in flat-screen technology that will really change what makes sense to be on paper versus what makes sense to be on that screen.”

Ballmer’s reply to his famous partner’s outlook: “Well, he was right on 50% of the predictions!” Indeed, and the art of business is betting big on the right 50%.

Greetings from France. I’m at the Cannes Lions International Advertising Festival, where the skies are sunny and the industry outlook is dark. This morning, Marcel Fenez, managing partner of PricewaterhouseCoopers’ global entertainment and media practice, laid out the dismal details. He called the current recession in ad spending “not cyclical but structural.”

Which means that the advertising business has permanently changed. And it’s going to be rough sailing for a long while. Global ad spending will decline 12.1% this year, Fenez estimated. Next year will be another bad year — down 2.7% — before an upturn begins in 2011.

That’s the worldwide view, and the U.S. picture looks even worse. Fernez forecast a 14.8% drop in spending this year and 3.3% next year.  Hardest hit: TV, newspapers and consumer magazines. (That’s us at Fortune!)  Stealing share as the total pie shrinks: Video-game companies and the Internet. (That’s us at CNNMoney.com!)

“The upturn will be all about structural change,” says Fenez. So what’s a big fat media company to do? In lieu of getting more ad revenues, media outfits will try to get consumers to pay for content, particularly digital as the world goes in that direction. PricewaterhouseCoopers’ 2009 survey of consumers across the globe indicate that they’re game to pay for quality and premium content. So, says Fenez, we’ll see lots of experimenting with micropayments, stored-value cards, and “all you can eat” subscriptions. But it won’t be easy getting people to pay for what they’ve gotten used to getting for free.

To take a deeper dive into the global outlook and the challenges, you can go to pwc.com/outlook and see the full report, executive summary and video….Now heading to the Cannes Lions Tweet-up with Twitter co-founder Biz Stone and Hill & Knowlton. More later! — Pattie Sellers

by Jessica Shambora

The drama continues apace in banking. Yesterday we shared a CNN interview with Citigroup (C) CEO Vikram Pandit, as he struggles to hang on, while Pattie last Friday gave her take on the fall of Bank of America’s (BAC) chief risk officer, Amy Brinkley — a veteran of Fortune’s Most Powerful Women list.

Another top woman in banking — one of the few still standing — swung by our office here at Fortune a few days ago. Ellen Alemany is chairman and CEO of RBS Americas (RBS) and Citizens Financial Group, an RBS unit with $6 billion in revenues and branches in 12 states. Alemany, who joined UK-based Royal Bank of Scotland in June 2007, had just finished a run of 13 town halls with thousands of her employees across the U.S.

Though you may not know her name, Alemany is very much at the center of the banking world. She’s the only woman to head a top-10 U.S. commercial bank. And as the representative for the Boston district (and only woman) on the Federal Advisory Council, she regularly consults with Fed chair Ben Bernanke and the Board of Governors.

So what is Alemany’s outlook? “There will be more small bank failures in the next six to nine months,” she told us, noting that she’s concerned about declining real-estate values and rising unemployment. She sees the negative trends in her own backyard. Citizens’ headquarters are in Rhode Island, where the jobless rate is 11.1%. And the bank operates in Michigan, where the unemployment rate, 12.9%, is the highest in the U.S.

Recovery seems so far away that businesses aren’t even looking to expand. “We have money to lend, but the loan demand isn’t there,” Alemany says. “It’s going to be difficult for the remainder of this year through the first half of next year.”

As for her own career, Alemany has come to understand “difficult.” After 21 years at Citigroup, where she ran Global Transaction Services, a profitable $8 billion unit in some 100 countries, she moved to RBS. It might appear that she was seeing safer ground. But the British government has had to shore RBS and now owns 70% of the business. And if you think that Citi is the worst-performing bank stock, think again. RBS’s shares have sputtered 87% in the past 12 months. Citi is down a mere 83%.

“The world’s looking for a new business model.”

– Citigroup (C) CEO Vikram Pandit, defending his leadership, in an interview with CNN Tuesday. During the past week, news media outlets have reported that FDIC Chair Sheila Bair thinks Pandit lacks the retail banking experience to revive Citi and wants him out. Meanwhile, others speculate that Treasury Secretary Tim Geithner believes that Pandit deserves a shot at the turnaround and that a management change could do more harm than good.

Both Geithner and Bair play key roles in the approval of a $58 billion conversion of preferred shares into common stock, intended to shore up Citigroup’s capital. Announced in February and scheduled to occur in April, the conversion was held up by negotiations with federal officials. But it should happen this week, according to Citi. With that, the government will own as much as 34% of the bank. That’s a dicey investment. The stock, trading at $3.41, is down 83% in the last 12 months.

So what sort of new business model does Pandit forsee? “When you look at the last five, 10 years, there were two engines of growth. There was the U.S. consumer and credit creation. None of those are likely to be the engines of growth going forward…I’m optimistic that we might start seeing stability in the financial markets, but that’s stage one. Stage two is about what kind of world we want to have going forward, what’s the new business model? And that’s what we’re really focused on at Citi.”

And the question for you: Should Citi shareholders, including the government, give Pandit more time to deliver? –Jessica Shambora

by Patricia Sellers

You might call Al Koch the world’s biggest trash collector. As bankrupt General Motors (GM) splits into two parts — New GM, containing Chevrolet, Cadillac, Buick, and GMC, and Old GM, containing designated bad assets such as Pontiac, Saturn, Hummer, Saab — Koch is the hired gun who’s supposed to create value from that latter lot.

Bringing “New GM” out of bankruptcy will be difficult enough. Why would anyone take the tougher slog at “Old GM”?

This is what Koch does — the toughest turnarounds. He’s vice chairman at restructuring consultancy AlixPartners, which works on saving sick comapnies globally but has been a Detroit mainstay for decades. AlixPartners’ clients have included DeLorean’s creditors in 1984, Detroit (the city itself) in 1994, and Kmart in 2002.

Koch, now 67 and a 14-year veteran of the firm, has served as interim CEO of crippled companies such as video-game distributor Handleman (HDLM) and manufactured-home builder Champion Enterprises (CHB). But his most memorable job was at Kmart in 2002. Kmart was the largest retail restructuring in history and, as it turned out, one of AlixPartner’s big successes.

As Kmart’s interim CFO through its bankruptcy, Koch got lucky. When I interviewed him in late 2005 for a story about investor Eddie Lampert, he said that he and his restructuring-expert colleagues had never heard of this young investor who had swooped in and bought Kmart bonds at 40 cents on the dollar. “To most people, Kmart looked like a pile of trash,” Koch said. “We were told that this hedge fund guy had bought a huge portion of Kmart and wanted to get it out of bankruptcy fast.”

Lampert pressed Koch and the other restructuring pros, who were earning $10-20 million a month during Kmart’s bankruptcy, to exit Chapter 11 quickly. Lampert argued that neither customers nor management talent would be attracted to a bankrupt Kmart. The company emerged from bankruptcy in May 2003, a year ahead of schedule. Lampert, who had invested some $800 million for a 54% ownership stake, merged Kmart with Sears two years later to form Sears Holdings (SHLD).

Old GM won’t be as smooth or as quick as Kmart was. As my colleague Alex Taylor notes, “new GM” will have an incentive — from the U.S. government, new owner of a 60% stake –  to exit Chapter 11 rapidly, possibly in 60 to 90 days. The Old GM restructuring, meanwhile, could take years.

As Old GM’s chief restructuring officer, Koch will be negotating separation agreements with New GM and commandeering efforts to unload or liquidate those dud brands such as Saturn and Hummer.

His influence could turn out to be broader than his marching orders designate. After all, he’s worked with GM several times over the years. These past few months, he’s helped negotiate the sale of New GM assets to the government. Now he’s reporting to CEO Fritz Henderson and to GM’s board as well. As a guy who lives and dies by finding value in junk, Koch surely won’t take his shot at making history lightly.

“Betting on the Future.” That’s the 2009 theme of Fortune’s Most Powerful Women, who convened in New York City last evening for a mega-celebration and some very smart conversation. I’m not sure I belong on stage with three superstars under 40: Bank analyst Meredith Whitney, Google’s (GOOG) Marissa Mayer, and Goldman Sachs’ (GS) Dina Powell. But there I was (at age 49), talking with them them about how they’ve navigated their careers and how they view the future.

It was an insanely inspiring evening, thanks also to 32 young women from 23 developing countries. This happened to be the last night in the U.S. for these participants in this year’s Fortune/U.S. State Department Global Women Leaders Mentoring Partnership. These international women are nominated by the State Department’s embassies in developing countries and chosen by Fortune to shadow American women leaders each May. Some of this year’s mentors — including Time Inc. (TWX) CEO Ann Moore, Fidelity Personal Investing president Kathy Murphy, American Express (AXP) execs Joan Amble and Susan Sobbott — were with us last evening.

So were plenty boldfaced names: Tina Brown, Nora Ephron, CNBC’s Becky Quick, CNN’s Christiane Amanpour. My Postcards colleague Jessica Shambora sat beside Sheri McCoy, Johnson & Johnson’s (JNJ) Worldwide Pharmaceuticals chairman, who is No. 44 on Fortune’s Most Powerful Women list.

A few Best Moments from the evening:

Best Career Lesson: Mayer, Google’s vice president of search products and user experience, talked about juggling 14 job offers after she graduated from Stanford. She interviewed with Google founders Sergey Brin and Larry Page and guessed that their start-up had “a 2% chance of succeeding,” she said. But she also figured, “I’ll learn more failing at Google” than succeeding at a well-established, stuck-in-its-ways company. She took a risk, And look at where it got her. At 33, Mayer is the youngest person ever to make Fortune’s Most Powerful Women list.

Smartest Industry Outlook: Meredith Whitney, who is No. 35 on our MPWomen list and made Fortune’s cover last August, said that more banks will fail as the economic recovery stumbles and some giants fail to adapt. The survivors: nimble companies that revamp their business models. One that she bets will succeed: American Express. (Click here to see Whitney talking with CNNMoney’s Poppy Harlow.)

Most Dynamic Duo: Gayle King, O magazine editor at large and Oprah Winfrey’s best friend, who brought as her “rising star” guest her daughter Kirby. A 23-year-old Stanford grad, Kirby Bumpus is pursuing her Masters in Public Health — and this summer doing an internship with teens in Harlem, teaching them about sex education.

Most Moving “Greatest Mentor” tribute: Rica Rwigamba, who runs an eco-toursim company in Rwanda, spoke about her mother and drew tears and standing ovations. This charismatic entrepreneur, who was one of the 2009 mentees, told a story about her mother returning to Rwanda after the country’s genocide and finding a new home for her husband and children. After Rika’s tribute, CNN”s Christiane Amanpour, sitting beside her, talked about her “Greatest Mentor.” She started by citing the remarkable success of women in a revived Rwanda today: Women hold 56% of the seats in Parliament. CNN’s chief international correspondent segued into a tribute to her mentor: Ted Turner, who built CNN.

Best Party Crasher: Cecilia Attias, who divorced French President Nicholas Sarkozy in 2007, remarried and has moved to Manhattan. She came with Jocelyne Attal, the former CMO of Avaya who now has her own marketing firm, JAgency. Surprise! Attias’s arrival was particularly dicey since the only dinner seat we had for the former First Lady of France was at a way-in-the-back table. Frantically, we tried to make the necessary switches. We couldn’t do it in time before everyone was seated. I have to say, Attias was lovely and most gracious. She thanked us and said she was thrilled that we were able to accommodate her.

We were happy to have her with us…along with 180 other extraordinary women who define power broadly and reach out globally to try and make the world a better place.

Stay tuned to Postcards for video from the evening. Meantime, have a good weekend!

“Any effort to restore confidence in our economy must start not on Wall Street but in Main Street, and that’s what the credit card situation is all about.”

– Senator Harry Reid of Nevada, the Democratic Majority Leader, speaking before a Senate vote on Tuesday that put new restrictions on the credit card industry. The bill is supposed to make card terms more explicit and be fairer to customers, providing safeguards against rate increases and late fees.

The vote did not cap interest rates, so the card-issuers can continue to raise them. This is exactly what banks including American Express (AXP), Citigroup (C), Bank of America (BAC) are doing as they cut risky cardholders from their rosters. The banks may also look at adding other fees back in and cutting rewards programs. So while the bill may spell relief for some consumers, those who regularly pay off their card balances may lose out. Three words: no more miles. –Jessica Shambora