The Bailout: Some Hedge Fund Winners And Losers 6 comments
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Driven by a declining housing market, and aided by the Treasury Secretary's recent decision, hedge funds that bet against Fannie (FNM) and Freddie (FRE) racked up big gains on Monday (see Reuters article).
Hedge fund Seabreeze Partners, run by short-seller Doug Kass, was short both companies. Kass's big bet has helped his fund to be up over 25% this year. William Ackman's Pershing Square Capital Management has also made money betting against Fannie and Freddie.
Short-sellers have often been vilified, but now they have reason to gloat, causing one hedge fund manager to state: "I don't know how they could get it so wrong. There were so many red flags. I feel sorry for them."
One trader that was not as fortunate was Legg Mason manager, Bill Miller, who had increased his holding in Freddie to 79.8 million shares, causing his fund to be off 31 percent for the year. Miller had previously beaten the S&P 500 for 15 years. Some speculate that the Freddie Mac losses may put pressure on Miller to step aside. The old saying, "So what have you done for me lately" never seemed so brutal.
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This article has 6 comments:
Let us be realistic in the case of Fannie Mae please. The 'bailout' was a mugging. First, the CEO and board were strong armed into agreement by the FED with an ultimatum. Second, the 'powers' granted to Treasury under the new housing bill do not go into effect until October and as such any capital injections if ever required would not happen until after the law is in effect and happen only within the guidelines set forth by Congress. Third, the business going forwrd for Fannie will remain as always UNLESS Congress changes the Charter -no the Treasury has no say in the matter at all.
Fannie was and is meeting all Capital requirements SO why was the 'takeover' initiated? I will tell you what you may be either ignorant of or blind to. The buyers of Fannie debt were becoming worried as to the soundness of Fannie becuase of the mega short interests. The short and distort gangs that have been mugging the financials -Ackman ring a bell? YES what we see in the market place is Fear & Greed. The Greedy apparently were effective enough to cause enough Fear that the US GOV felt it necessary to act when fundamentally Fannie was and remains sound. You who disagree will one day see the reality...
(A) GENERAL AUTHORITY- In addition to the authority under subsection (c) of this section, the Secretary of the Treasury is authorized to purchase ANY OBLIGATIONS AND OTHER SECURITIES issued by the Corporation under any section of this Act, on such terms and conditions as the Secretary may determine and in such amounts as the Secretary may determine. Nothing in this subsection requires the Corporation to issue obligations or securities to the Secretary without mutual agreement between the Secretary and the Corporation. Nothing in this subsection permits or authorizes the
Secretary, without the agreement of the Corporation, to engage in
open market purchases of the common securities of the Corporation. ...
The July reprieve is apparently over. Any professional money manager who lost money in Fannie or Freddie stock needs to be sued for malpractice.
There were only 4 days to own Freddie stock, August 25th-August 29th. I know this because I made close to 50% from those 4 days.
Clark Jenkins
FishGoneBad.com
> jack