Just a quick note tonight guys and gals:
I have a busy evening. The GSE plot thickens! Fannie and Freddie each plunged over 20% for the day and are down over 40% for the week on further speculation of a bailout.
Here is the news from Bloomberg:
"Aug. 20 (Bloomberg) -- Fannie Mae and Freddie Mac tumbled in New York trading to the lowest levels since at least 1990 as speculation increased that the U.S. Treasury will bail out the mortgage-finance companies, wiping out shareholders.
Fannie, based in Washington, slumped 27 percent and McLean, Virginia-based Freddie dropped 22 percent, extending its losses to 90 percent for the year.
``Using taxpayer money to bail them out looks like it's becoming reality now,'' said Michael Nasto, the senior trader at U.S. Global Investors Inc., which manages $5 billion in San Antonio. ``That's going to leave the shareholders holding worthless paper.''
Rising borrowing costs and evidence that demand for their debt was waning last month led Treasury Secretary Henry Paulson to seek the authority to pump unlimited amounts of capital in Fannie and Freddie in an emergency. Freddie paid its highest yields over U.S. Treasuries on record in a debt sale yesterday amid concern that credit losses are depleting the capital of the beleaguered mortgage-finance companies.
Fannie and Freddie have $223 billion of bonds due by the end of the quarter and their success in rolling over that debt may determine whether they can avoid a federal bailout."
My Take:
The shareholders in these two GSE's are about to get "zeroed" via a bailout. What I found interesting about today's news was the reaction to it by the stock market. Stocks were up! The financials actually rallied today!
This tells me that many pigmen are in "the know" on how this all plays out, and its really not news to them. This makes me very angry.
Once again, the average Joe shareholders like you and I are left in the dark.
I am really starting to ask myself: Jeff, are you sure you want to continue to invest in the stock market?
Watching the manipulation, lies, and corruption day after day really makes me wonder whether or not I am a fool for even attempting to play with these convicts.
Some days, just feel like the average investor is the biggest sucker on the planet. I am sure after getting tipped off and making their money on the news, the pompous ultra rich sit there and laugh at the little guy as his/her account gets shredded.
When rates eventually rise dramatically(trust me they will) and savings accounts start paying 7%, I may just take my chips and go home.
Why would anyone want to play a game where the rules of the game are set up to beat you. I have no desire to be dropped into a pit of lions and you don't realize you are the raw piece of beef.
Do any of you feel like joining a game of poker where everyone knows your hand and before the betting begins?
Cramer even complained about this today. I wouldn't be surprised to see the trading volumes continue to drop in the markets as this corruption continues to worsen. Everyone I know is scared to death of the markets right now. I DON'T BLAME THEM!
Bottom Line:
Something big is being stirred up to bail out Fannie and Freddie. I would be very nervous if you are a shareholder in these companies . The price action this week says it all. The equity holders are pretty much screwed, and its time for the government to step in.
The lack of reaction in the markets to the news tells you that many already have the Feds playbook. This makes me want to go to cash because I don't know what the Treasury is putting together to bail these suckers out.
Cash sounds like the right place to be until this all plays out. In the end it really doesn't matter because the economy is toast. This is just one more example of how bad this mess really is.
Stocks corrections never go straight down folks! Interventions like the one being brewed up as we speak can provide temporary relief to stocks. You need to set up your portfolio so that it can withstand this volatility. Its time for the sidelines IMO.
Use this sticksave as another indicator of how bad this economy really is. Mortgage applications hit a 6 year low today. The housing market is evaporating faster than Fannie and Freddie. Applications hit 6 year lows during peak selling season folks! There is no appetite for housing and we have 11 months worth of inventory!
Anyone that thinks this ends well needs go see the Wizard of Oz and ask him for a brain.
4 comments:
I think something is definitely up and this is no surprise to Wall St. Not only is the J6P shareholder getting wiped out on this, but the taxpayer is going to get stiffed with a massive bill that will be with us for decades to come.
I totally agree Minton
And the market cheers the news! How crooked and sad.
You know PIMCO's Bill Gross knows whats coming. He bought a bunch of this toilet paper and now is pumping a bailout.
If the market continues these gmaes people are gonna bail.
I think you would be safer doing business with the mob versus Wall St.
Your quote "I think you would be safer doing business with the mob versus Wall St." should be translated into Latin and emblazoned on a coat of arms!
Basically, stocks have always been a ponzi scheme to screw the small guy, and its never been worse than it is now. When I was working on a trading floor, the only 'magic' that traders had was trading on information they shouldn't have, or manipulating price movements by volume.
Folk that trader in odd lots really have no business being there - most the time they'd be better off in Vegas. The volatility in stocks (especially recently) means it's a major gambling game when companies like Citigroup and Lehman can move 40% in a year (and yet these are supposedly blue chip). It will be interesting to see how much the average investor's confidence has been knocked.
Minton
You have insight on the floor that I don't have so please share your wisdom whenever you can!
Whats funny is everyone that I know thats in the game(including yourself) tells me how screwed we are.
J6P is in for a rude awakening.
I can't wait to see how this whole Freddie/Fannie thing shakes out.
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