Will Ackman's Plan for Fannie Mae Backfire?

Jul.16.08 | About: Fannie Mae (FNMA)

Ackman's smoke and mirrors ploy about his so-called bail out plan of Fannie Mae (FNM) should earn him top honors as Wall Streets best BS artist.  But could Ackman's passive arrogance backfire and become self-destructive? 


It got waste deep as the CNBC red carpet crew paid homage to William Ackman, hedge fund manager of Pershing Square Capital.  Apparently enamored by Ackman's subtleties, boyish charm, and parlor antics, Joe K. and company failed (as usual) to ask the right questions and challenge this snake oil salesman, but instead allowed the fear-peddling Ackman to execute his plan virtually unchallenged.


His plan?  Now that's what you really didn't hear, but you did see it in action!  His plan, the unmentioned one that he just happened to think of recently, was never mentioned.  The plan goes something like this. 


1.  Heavily short FNM,

2.  Create colorful and impressive charts that reinforce negativity. 

3.  Appear on CNBC with the meaningless charts.

4.  Walk the frightened sheep through a chart  "paper talk" that concludes with the stock being worthless.

5.  When the stock plummets, cover.


While Ackman's chicanery is overtly typical of short sellers, it appears to work quite will in separating investors from their capital and causing stock prices to plummet.  The real insult here is not Ackman's bag of tricks, but the lack of balance on CNBC's part.  There are two or more sides to every story.  Where was the opposing view?  What we heard Tuesday was one-sided hyperbole.  One would think that in matters of such national, financial importance, we would not give the microphone to someone whose only goal is to undermine and destroy the public confidence for financial gain.


Disclosure: Writer does not have a long or short position in FNM.