Timothy Travis

Fannie & Freddie: Myth vs. Reality, Part 2

"Losses of $99million? Where did you get this number?

What facts are you basing your conclusions on? "

Go on the FRE website and look at the investor presentation-freddie mac update.

Fannie & Freddie: Myth vs. Reality

"FNM and FRE holders wish they were only decimated. The term means
reduced by 10%. "

Good point on that rather embarrassing error.. I guess it was indeed wishful thinking on my part. Devastated would have been the correct term.

"Jul 11 09:30 AMAfter the stocks have fallen ~40% this week why does the author use terms like "immensely remote" "overblown" these companies are going out of business as public companies and down another 50% pre-market."

I think that there is a big difference between stock prices and the economic reality of these businesses. There is so much talk about being bailed out by the government that it has overshadowed the actual credit losses that the company is taking. As long term investors in mortgages FRE, and FNM, should be held accountable for credit losses but not the whims of traders on indices that have very little relation to the securities in the GSE's portfolio.

"Many companies have a negative net worth, but if you have actual positive cash flow you just keep on trucking. Your stock would not fall 40% in an hour. "
They both do have positive cash flow as the markdowns they have taken are non-cash charges. Actually MBI and ABK are very similar in that they are both cash flow positive as well. Short term stock prices are not the best indicators of a company's true financial situation. The major risk is the government stepping in due to public perception which seems quite high right now, but as a value investor I am comfortable holding on to my positions in the belief that fundamentals will outweigh public perception. We shall see though as there are no sure things in this environment.