ardano

Troubling Aspects to the GSE Bailout Bill

Once again, with feeling, FNM and FRE debt will be protected at all costs. Think about who holds that paper...Paulson and Bernanke seemed to have flipped a coin to see who is going to backstop the GSE's. Bernanke's a little busy right now propping up banks, brokers and other institutional investors. I think he said, "hey Hank, why don't you take this one." After all we're only talking $5Trillion. Due to longstanding accounting problems it was only dumb luck that Fannie and Freddie didn't have more bad paper on their books. They could not originate subprime, only acquire suspect paper through other procedures. Unfortunately, due to the implicit backing of the Treasury, soon to be explicit, Fannie and Freddie lack the cushion that is keeping other traditional banks barely solvent. However, if the backing of the Treasury has meaning, and I think it does, what's the difference? Oh that's right, there's the question about morals and banking. People will say all that money was paid out through Fannie and Freddie and now the taxpayers are caught holding the bag.

Trade of the day, buy Fannie and Freddie debt, not the equity, and short the long Treasury and US Dollar as more paper will have to be floated to make implicit explicit

Dollar Falls to Record Low Over Fannie and Freddie

To my fellow seekers.

Some of KL's observations are accurate and some data points valid. However, sometimes the logic that jumps from a series of observations to a trade/strategy is dubious. Current markets are perhaps the most challening ever. I have commented on articles talking about recent statements by Jamie Dimon where he says that the complexities of the markets are difficult for him to deal with. He's the head of JPM, and he's confused? I agree that posters need to be careful with their logic strings, but that as readers we should also be as postive as possible to advance accurate information as we seek alpha.

4 Sectors to 'Buy in May'

With respect to macro views detailed here, they remind me of rebounds off lows. The Dollar? Certainly due for a rebound. However, impossible to predict its future, (no pun,) as political control of the White House and Treasury will alter dollar policy. As for financials. They remain a stock pickers domain. Long and short positions in financials may well be one of the key trades for this year...and many alpha seekers will win and lose on this trade. I see narrow focused themes and violent swings throughout the year. In a macro sense the Fed is too optimistic about a rebound. Europe and Asia will also slow. Why do stocks get a bid? Commodities will continue to be hot as the leverage and liquidity will draw attention and assets. However, maybe nat gas will replace crude as the contract of choice...remember amaranth...