The Inverse Fannie/Freddie Correlation Indicator

If you picked today to get back from holidays and re-commence messing about in the capital markets, I'm guessing you wish you hadn't. The indices all tanked, with everything from oil to the financials doing a Fearless Freep dive into nothingness.

Then again, there were some bright lights out there. Matter of fact, two stocks (indicated by white arrow below) that have lost billions in market capitalization, that are the subject of non-stop news chatter, that are rumored to be set to take down Western Capitalism (sic.), were up big today. Fannie Mae and Freddie Mac were up 10.4% and 18.2%, respectively.

Not to put too fine a point on it, but we are deep into strange, strange market territory when these two neutron bombs not exploding yet is the sole sources of market cheer.

[via Finviz]

Comments

[paulibloom:]

Think MBI and ABK-manufactured negative spin-even the rating agencies changed opinion when the stocks went up. I have no investment in any of these but the parallel is striking when you consider the comments of the NLY-and they are smarter than most on FNM and FRE. Do you remember how MBI/ABK were going to take down the free world until they did not and then they actually did much better than feared. Think again

2008 Aug 25 11:15 PM

[montyman:]

Yes but the common stock is still worth zero.

2008 Aug 26 02:54 AM

[Ricard:]

Airlines did this too right after 9/11. You saw 20%-30% increases, followed by the same in reverse. This is called volatility, not "strange, strange market territory".

2008 Aug 26 12:10 PM