Fannie and Freddie: Rising to Big Cash or Another Fake?

Fannie Mae (FNM) and Freddie Mac (FRE) having almost doubled their stock prices within the last five days. Last week, on Friday, they were both stated to be going bankrupt, out of cash, and the government would be better off just letting them die off. The reasoning was that the amount of cash to keep them up within the billions would leave little to cover other costs. The FDIC, after the IndyMac failure, only has so much money to cover other banks that go bankrupt. I heard that the early 90s had the same bank problems.

Now, I do think the economy has only one way to go - UP! It’s been so bad lately with the foreclosures and banks failures, but I do believe we are slowly recovering. I also don’t think the government will let these two mortgage lenders go down the hole. If you knock over one domino, you’d be sure to hit many more down the way. If these two fall down, the hurting will not stop for quite a long time.

I also believe that George Bush is in part of this. This economy is pretty crappy and it works to the Republicans' advantage. They are about helping businesses and cutting taxes; these are two things that all Americans are looking at currently. You can be sure when the elections come in November that it will have some impact on their vote, especially with the amount of people unemployed and the continuing growth of inflation.

When election time is done and the votes are in, John McCain or Barack Obama will be in office. No matter who wins, you can bet the stock market will finally rise. All those banks shorting stocks will finally cover. People holding onto their money will start investing again. Good riddance, George Bush! Either guy will definitely do a better job than him.

Anyway, there should be a dip coming up next week for those short sellers. However, in the long-term, expect these two mortgage lenders to go up. They will not go bankrupt. Banks might be short selling them, but they know they can only fall with them if they belly up.

Disclosure: none

Comments

[John C. Lee:]

This is a fakeout short-cover rally. FRE should reverse in 1-2 days.

2008 Aug 29 04:21 AM

[monday1929:]

Who wrote this? It makes little sense and reads like a fith grade book report.

2008 Aug 29 06:54 AM

[DONE_SONZ:]

Cover already.Everyone had the presidents back until things got tough.

2008 Aug 29 07:38 AM

[Stan Muse_:]

FNM and FRE is what happens when you try to mix capitalism and socialism. You get the worst of both. The country is headed toward socialism no matter who wins the election. I would not rule out a complete bailout, resulting in a tremendous buy opportunity.

2008 Aug 29 08:11 AM

[montyman:]

What a crappy article! It begins by babbling about some features of the economy, mentions an opinion about the president, and then suddenly draws a conclusion (unsupported by any numbers) that the GSE's are going up. Wow.

2008 Aug 29 09:06 AM

[Ebi:]

Dead cat bounces

2008 Aug 29 09:21 AM

[ZagnZig:]

Do you know how fast – FAST MONEY IS?
Everybody knows that anyone buying this stock is strictly speculating –
The common shares are completely and totally worthless!!! Get it? Even the preferred big boys are lobbying congress trying to get 10 cents on the dollar for their preferred’s.
The rush out the door is going to happen in the next day or two and do you know how fast the fast money really is?

2008 Aug 29 09:43 AM

[ArchDukeFer...:]

The common shareholders of FRE and FNM will not fail. Why? The FDIC has now explicitly guarantee the debt of FRE and FNM. The GSE managements can issue debt whenever a contingency requires it.

2008 Aug 29 10:54 AM

[Diegojames:]

Lets see ,FDIC , an federal agency who needs money, will bail out FRE and FNM by borrowing from the US Treasury who will take the money from the taxpayers ????GREAT PLAN!!!
What do you do with all the managers, lawyers, administrative people and auditors who created all this along with the LENDERS AND UNDERWRITERS ON WALLSTREET WHO MADE THE PROBLEM??

GIVE THEM A HIGHER BONUS.? HOW ABOUT JAIL TIME, 50% LOSS OF RETIREMENT BENEFITS AND NO GOLF CLUB MEMBERSHIPS AND CAR OWNERSHIP RESTRICTED TO HONDAS.

BECAUSE SOON THE OBAMA GOVERNMENT IS GOING TO CONFISCATE ALL SAVINGS ACCOUNTS, IRA'S AND ASSETS FROM PEOPLE WHO MAKING OVER 250,000 AND LIVE IN STATES OTHER THAN OHIO AND MICHIGAN.

NOW THE BUSINESS PART. NO ONE UNDERSTANDS FNM OR FRE. SHORT COVER WHAT ? WHOOSE COMPUTER MODEL OR ACCOUNTANTS SEE VALUE THERE???? Would you rather own
WELLS FARGO or FNM ?

We are in pharmaceuticals and real estate. Everyone needs drugs and a place to live and do business from. These have value. Old computers are functional so why buy tech. We all need ENERGY...SO
here comes WINTER.. I need natural gas heat in Southern California.

Maybe the remaining USA will not be cold this winter. BUY CHK<COG<XTO....H... has a natural gas car coming...Wind turbines will continue,DRILL,DRILL,D... and explore.....pick yours
CAM<NOV<DO and....SOLAR....GEOTHE... ETC...and NUCLEAR ...buy CAMECO-CCJ....AND CUT THE red tape in government ..it is the same RED TAPE and analysts and thinking and oversight and governance that created this RATHOLE on of mortgages and lending and WALLSTREET FRAUD.

2008 Aug 29 11:23 AM

[Super Stock...:]

You guys are right. I wish to correct that article and state that the dip would begin August 29, 2008. Sometimes my forecast is a couple days off, bleh.

2008 Aug 29 07:29 PM

[David Martin:]

The conclusions of this article re not supported by any analysis, but are simply a statement of faith.
Worthless.

2008 Aug 30 04:33 AM

[ZagnZig:]

Wow - I shorted FNM with every dime I could get the friday before nationalization - sure the common were wiped out....


On Aug 29 10:54 AM ArchDukeFerdinand wrote:

> The common shareholders of FRE and FNM will not fail. Why? The FDIC
> has
now
> explicitly guarantee the debt of FRE and FNM. The GSE managements
can
> issue debt whenever a contingency requires it.

Mar 24 05:58 AM