9 Comments for this entry

1. twist says:

   August 21, 2008 at 5:04 AM

    

   John-

   How silly is this?  From CNBC this morning:

   The near-collapse of Fannie Mae and Freddie Mac may signal a turning point for stock markets, provided that conditions in the credit markets improve, Michael Browne, Portfolio Manager from Sofaer Global Research, told CNBC Thursday.

   "I suspect that this offers a tremendous buying opportunity for the markets, it’s the sort of crash, it’s the sort of failure, that you see that tends to mark bottoms," Browne told "Squawk Box Europe" after discussing the future of the government-sponsored enterprises.

   "Provided the credit markets improve?" Why would the credit markets improve after the GSEs collapse?

   I’ve been wondering why the PPT types haven’t been out trying to rally this stock, and I have a theory.  I was wondering if Paulson and the boys would rather nationalize the stock near zero- that way they could say that market forces, not a government takeover, wiped out the shareholders. There sure is a lot of silence out there from government officials at the moment.
2. twist says:

   August 21, 2008 at 5:08 AM

   I was kidding about the “bulk” thing, but I guess I shouldn’t. L forwarded me the following email this morning:

   
   

   Thanks for your interest in Bulk Foreclosures with 21k Homes.

   We are still selling homes to investors for 15-30 cents on the dollar. Investors; please visit our website to begin the process of purchasing homes in bulk. We have access to homes in Arizona, California and almost every state. We are direct with the banks, and most packages are sold to investors for 15-30 cents on the dollar depending on the size of the package. We will work with agents and/or direct with investors.

   Contact us to begin the process of purchasing bank foreclosures in bulk.
3. John M. says:

   August 21, 2008 at 5:31 AM

   twist (#1) -

   Just finished the 6 minute [oops, make that 12 minute] video that came with that CNBC story. They really cherry-picked the bright bits. There is some more cautious wording throughout, including serious caveats right after the happy-happy meme the story picked up by Browne himself.

   And they also rehearse that same idea about Paulson perhaps deliberately pushing the stocks to zero before he rides to the rescue (which is one of the things that’s got Cramer exercised this week).
4. twist says:

   August 21, 2008 at 5:37 AM

   John-

   I saw Cramer raving on about that- but I wonder how failing to pump the stock, or halting trading , is less manipulative than letting it go.
5. twist says:

   August 21, 2008 at 5:50 AM

    

   Here’s one of the morning’s more interesting rumors:

   In other news, apparently the Fed is so concerned about the possibility that Lehman will suffer the fate of Bear Stearns it has begun calling banks to make sure they are not pulling business from the troubled investment bank. When it heard rumors that CSFB was pulling out of Lehman, Fed officials called to check. CSFB denied the story, of course. Skeptics will point out that the Fed’s calls are likely to intimidate banks from pulling out of Lehman regardless of its financial viability and risk taking, perhaps encouraging risky behavior by Lehman and worsening the already existing moral hazard under which the bank operates.

   Now it looks like Lehman is in trouble this morning. I wonder who the Fed calls now?
6. agnostic says:

   August 21, 2008 at 6:17 AM

   twist -

   Ghostbusters.
7. agnostic says:

   August 21, 2008 at 6:36 AM

   Regarding the possibility of halting trading on F&F, that could be a once-in-a-lifetime headline: “Trading Halted Pending Treasury Department Intervention”.

   John or others may have a different take on this, but it seems to me the cabal is rolling for a “super-senior” preferred security that has dividend/interest preference over every other security; the government wants to get paid first, as it should, should, ahem, the market return to a certain degree of normalcy (heh, I know). I think it stands to reason that we taxpayers should get paid first for our “investment.” However, I don’t think the common will ever trade at zero, mostly because the idea that F&F would file bankruptcy seems to be a little ridiculous, given the de facto government backing. As many have said, at these levels, the common stock price of both more or less represents a permanent call option on the future of both entities – what’s interesting about that is, if you have a government committed to inflating away the debt, at some point, house prices could begin to benefit from that inflation, repayments/activity might be closer to normal than they are now, and a restoration of a dividend on the common might be a possibility.
8. John M. says:

   August 21, 2008 at 7:38 AM

   twist (#2) -

   Fannie actually signaled the selling-in-bulk strategy a couple of weeks ago.

   “Fannie Mae loses $2.3B in quarter as defaults rise”, by Alan Zibel, Associated Press, August 8, 2008.
   

   To speed up the sale of foreclosed properties, Fannie Mae is opening offices in California and Florida and said it would consider selling those properties in bulk to investors. “I do not think this is a time to be holding onto (foreclosed properties) hoping for a better day,” Mudd said.
9. 45north says:

   August 21, 2008 at 8:47 AM

   I believe China threatened Paulson and thus our government if they didn’t insert the Fannie and Freddie “rescue” provisions into the Housing Bill

   http://tinyurl.com/5w8ubw

   I believe it too.

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