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The Economist Knows What Evil Lurks In Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE)

Posted by timothysykes on Sun 20th of Jul, 2008 04:15:39 PM
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I really wish I could stop writing about FNM and FRE, but the implications of their current situation are just too great to ignore. THIS new Economist article details their problems well so that even the dumbest, most financially illiterate of you out there can understand that these government backed monstrosities could very well take down our economy, and along with it, our precious/ideal pump and dump trading opportunities (which is why it’s relevant to us…yup, wonder why the spam campaigns haven’t been goin’ crazy the past few weeks?)

As that article notes, these mortgage freaks were allowed to get their leverage ratios up to 65 to 1…so with their investments in the billions, all of a sudden, presto, leverage-o, they’re playing with trillions. And, any time we use the word trillions, we really must spell it:

P O T E N T I A L C A T A S T R O P H E

After all, we really never do seem to learn how dangerous leverage is until it’s too late…maybe it’s gonna take the failure of the US government guarantee and our joke of a financial system to get people to stop thinking about using leverage to get ahead/richer quicker cuz the risks are just too great.

Yes, it sucks, but it’s time we wake up and stop trying to predict bottoms and start thinking about how to minimize our risks and losses–admitting that it may well be too late to do anything whatsoever…

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  • John
    I'm tired of people blaming speculators and short sellers for the free fall of these big investment banks, don't blame the market blame the companies incompetent and ethically questionable management. Like Warren Buffet said, short sellers help pull the veil from these companies that are fronting and expose the poor condition that they are really in and we drive down these companies overpriced stocks, humbling them if you will. Just like some people don't like your brute honesty Tim, some don't like short sellers brute honesty.
  • Andy
    tim whats up with SOV.. anbody have any ideas??? thanks
  • I read some reports about the U.S. going into hyperinflation, any thoughts on that Tim? And as for FRE and FNM, aren't they doomed to price lower and lower, especially since FRE will be selling more common stock soon?
  • Jorge
    At the Macroeconomics level, this is a sad and terrible story that is and will cripple the middle and lower class.

    I think all these problems make a stronger case for the average Joe to become financially literate and cynical enough to understand that their government won't take care of them and the companies that they work for do not have their best interest in mind.

    Also I guess this needs to happen. As we all know Capitalism shakes up the system and shaves off the weak and the bad to enhance itself.

    Jorge
  • cash
    ain't leverage a BITCH?
  • jack is back
    FNM and FRE are not going under. Get over it! They are an arm of the Government. If they go under the entire system will be in such a state of entropy, that the Great Depression will look like sandlot ball. So, unless you folks really want to start speaking Chinese, you might want to say a pray that these jokers have some sort of plan to get things solid. BTW, how in the hell did so many players from Goldmansucks (GS) get into power positions within the Government? Those are the real crooks that have pissed in the punch bowl.
  • JS
    An interesting tale of when greed and ego meet.


    It's like they were a used car dealer: Ya, know? Buying everyone's f-1000 super triple disels and predicting gas would never go up. HOW CRAZY!!!

    Don't these people ever get off wall street to see how the real world works??
  • neil
    I would NOT be holding FNM or FRE long of common stock overnight. These guys will be saved by the govt, but I really think common shareholders will get hurt. If your gonna hold banks, hold the stronger ones.

    PS. Haven't posted in a long time, but I have been using some TIM principles and am up 12% this month after a not so great first half of the year.
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TIM Trades

View All
Date Stock Buy Sell Net
Nov 19 AENY $2.80 $3.02 $1148
Nov 18 NLST $4.16 $4.40 $947
Nov 18 IMGG $1.42 $1.64 $2094
Nov 17 NLST $5.04 $5.59 $2195
Nov 13 VRMLQ $21.50 $22.97 $2901
Nov 11 EONC $2.61 $2.80 $687
Nov 10 EONC $2.74 $3.36 $9784
Nov 6 QXM $4.31 $4.80 $1936
Nov 4 COT $8.66 $8.88 $642
Nov 4 QXM $4.61 $4.89 $822
Oct 30 DDRX $25.70 $26.53 $812
Oct 29 CTDC $4.00 $4.42 $781
Oct 26 AWSL $3.24 $4.10 $2516
Oct 23 RODM $5.27 $5.23 $301
Oct 22 AMLM $2.69 $2.97 $820
Oct 22 USEG $6.12 $6.09 $85
Oct 20 CBOU $8.93 $9.06 $243
Oct 16 VRMLQ $16.79 $18.65 $2773
Oct 13 YONG $11.05 $11.66 $1202
Oct 13 NPHC $0.59 $0.71 $583
Oct 12 IMGG $0.60 $0.70 $682
Oct 9 ZAGG $5.50 $6.10 $2380
Oct 7 GVBP $0.03 $0.27 $702
Oct 1 NPHC $0.70 $0.85 $1482

Total: $98,094 (681%)