Investing in Fannie and Freddie

Discussion in 'Economy' started by DiamondDave, Sep 23, 2008.

  1. DiamondDave
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    DiamondDave Army Vet

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    With the looming possibility of a fed buyout, possibly adding stability to these 2 companies (even though I do not agree with the buyout, but that is a separate issue)... Freddie and Fannie look like intriguing possibilities for a short term investment... Their stocks have dropped to around the dollar mark... both of which opened at less than $1 today and are up about 40% apiece... investors look to be waiting a bit to see what happens.. some took the early rise and cashed out when it hit about $1.40, and hence the drop back to about the $1.20 mark for Fannie... added stability could have this stock back at the $5.00 level in a relatively short period of time.... I'm seriously looking into the numbers and looking closely at the news coming out to determine if this could be a decent short-term quickie investment.... Yes, investing about 3K could yield a 1.5K loss or so, but could also return something like a 6K return if the stock does recover some...

    It is an interesting possibility
     
  2. LordBrownTrout
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    LordBrownTrout Gold Member

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    Good points. I hadn't thought about that. What were the shares worth before mae and mac went south?
     
  3. gonegolfin
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    gonegolfin Member

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    A friend of mine asked a similar question back on August 15th and the following was my reply. He was actually asking for another person he knew.

    "The government letting these institutions fail and letting the shareholders fail are two entirely different questions. They are not one in the same. The government can certainly allow the shareholder (both common and/or preferred) to lose their entire investment while keeping the debt holders of the agencies and investors of the MBSs whole. This would be part of a rescue of the agencies where they could choose not nationalize them or keep them private. But private does not mean that the existing shareholder class would be preserved.

    For now, the shareholders are not on the hook for any losses. But once real losses are incurred, I think there is going to be political pressure to make the shareholders accountable for the risk they took. I sure made the point that they should be accountable for that risk in my article. And I went even further than that (the debt and MBS holders)."

    Brian
     
  4. NOBama
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    NOBama Senior Member

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    The 20 year high for Freddie (FRE) was $73.70 on 12/1/04, the low was .26 on 9/16/08. FRE closed at 1.32 today.

    The 20 year high for Fannie (FNM) was $86.73 on 12/1/00, the low was .43 on 9/17/08. FNM closed at 1.31 today.

    Another company to consider: American International Group (AIG). The new CEO is talking about selling some assets to pay the fed off. If that happens, it could explode to the upside.

    This probably goes without saying but, all 3 are extremely volatile. Proceed with caution!
     
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    Last edited: Sep 23, 2008
  5. Paulie
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    Paulie Platinum Member

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    I would be VERY wary about getting in too deep with these stocks right now.

    A "cheap" stock is not ALWAYS a good stock, especially these particular companies.

    Buy precious metals, Dave. You should be looking to preserve your wealth at this point and protect it from the inflation we're probably about to be seeing in the coming years. And nothing has ever protected better than precious metals.
     
  6. DiamondDave
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    DiamondDave Army Vet

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    Made 43% overnight... sold just a few minutes ago...
     
  7. dilloduck
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    dilloduck Diamond Member

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    go double or nothing !
     
  8. DiamondDave
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    DiamondDave Army Vet

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    nah.. it was a gamble and a hunch.. I hit my target and got out
     

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