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mysoftballcoach (56.73)

Speculators, FNM, FRE, LEH

Recs

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September 12, 2008 – Comments (2) | RELATED TICKERS: FNMA , FMCC , LEH

Earlier this week there were many that blogged about taking a chance on FNM and FRE.  Speculation as to the the real value, and could they recover, etc.

Granted, it's only been a week.  But how is that working out for you?  

Sure, there have been some trading opportunities if you guessed correctly.  

The next one up seems to be LEH.  Should I buy?  Will it bounce?  Well, like my grandfather told me one time:  What do you with a dying skunk?  Run away, because it's about to really stink.

Just my 2 cents.

 Coach 

2 Comments – Post Your Own

#1) On September 12, 2008 at 6:29 PM, rd80 (98.46) wrote:

It's early in the game with FNM and I'm behind, thanks for asking. 

The share price has been above and below my cost basis since I bought on Tues.  However, it hasn't been high enough to hit my first sell order and it hasn't been low enough to consider doubling down.

I don't believe FNM is dead yet, and it may not even be a skunk. I believe FNM has a better risk/return picture than FRE and don't know LEH well enough to comment on that swamp.

I'm planning on writing a blog entry summarizing lessons learned on my FNM adventure once the picture clears up a bit.

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#2) On January 19, 2009 at 10:32 AM, IIcx (< 20) wrote:

FNM is an interesting retirement play that amounts to buying a lottery ticket at this point due to the political interventions.

- FNM is leveraged at 20:1 and FRE 70:1 with a 30:1 common in the banking industry.

- the purpose of the government receivership was to allow the companies to write down and pay-off exposure at a rate of 10% per year until they were small enough to stand on their own again

- in return for the 100 billion in backing for each they dropped all but the dividend to the government issued preferred stock (2008-2).

- their P/E at the moment is non-existent with an estimated 2009 eps of -8+

But, at the rate of mandated change, they will be viable again in 4-5 years -- possibly sooner if a bad bank is created. I wouldn't bet the farm on this one but it looks like a modest investment in their preferred stock will pay nice dividends own the road.

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