A few words on Fannie and Freddie
So, the GSE's finally got taken over by the Federal Govt. Nice. Let's see what it means. First it means that common stock holders will be diluted by about 90% so expect to see both stocks around a buck soon. What, you didn't read that. Well take a look. The Govt can buy up to $100b in common essentially to capitalize the companies which are undercapitalized by at least that much. It'll happen, even if they are only starting with a billion. SKF I've been touting, watch it run now.
How will this impact the macro economy. Well, the main effect will be one of smoothing. While we should avoid a depression save for some rediculously bad govt actions over the next few years, we will have a prolonged and deeper than anticipated a year ago recession- probably lasting to late 2009 at the earliest and likely to 2010.
Get your wish list ready. Mine is almost done. You will have a great buy low opportunity sometime soon. I think by year end, but it could be next year as well. You are about to get an opportunity to buy high quality cheap. Take it.
Now, while I hesitate to talk politics, I hope folks realize that although McCain is a good man, his economic policy, and policy on Russia, are not good at all. In fact, McCain could bury the nation in the hole that Bush/Cheney dug if he wins and the Democrats for some inexplicable reason roll over to him. Can you say philbuster. If McCain wins, heck I'll deliever the phone books anytime he advocates for some neo-con policy to get pushed for Congressional consideration.
Ask yourself a simple question, what's worse, some new taxes on the 5-10% most well off Americans or continued inflation and growing umemployment? It's a no-brainer. Read the actual platforms before spouting please. This economist, who worked for McCain in 2000, is telling you that Obama is better for your pocket book and our foriegn policy. Essentially what I tell clients and friends is before asking any other questions about the candidates ask these:
1. Who is more likely to get you killed.
2. Who is more likely to make you poor.
Ask in exactly those two ways. Don't quibble. Answer those questions.
McCain is clearly the higher risk candidate- decent guy and all. But, either he continues Bush policies that have run their course (or in some cases ought not to have been policy) or he creates deadlock at a time when we need a dynamic job producing energy policy at the heart of a recovery for the next decade, an overhauled healthcare system, a rejuvenated not replaced education system and a better face on foriegn policy.
Peace out, I need that rum now.