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Zecco.com » Top ZeccoShare Holdings » Other Symbols » freddie mac FRE
Last post 08-02-2008, 9:01 PM by phlabrasca. 4 replies.
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  •  08-02-2008, 9:39 AM 34663

    freddie mac FRE

    Reply Quote
    The sell off on this one (FRE), in particular, has been a clear overreaction and it is now ridiculously undervalued.  I know several veteran investors, with very good performing track records, who bought in yesterday at $8.00 a share on this one.  Even without the federal backing here, this would be a descent buy, but with the feds behind it to cushion their siuation, in several different ways, this is a strong buy and hold.  I have to confess though, I do LOVE it when investors do what the have in this situation with FRE, which is to react with the emotion, instead of logic.  It has made a lot of logical buyers and holders a lot of $$$ over the years, myself included!

  •  08-02-2008, 10:02 AM 34664 in reply to 34663

    Re: freddie mac FRE

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    Without Fed backing, Fannie & Freddie are basically insolvent.

    You can find former St. Louis Federal Reserve President William Poole saying: "Congress ought to recognize that these firms are insolvent," and where you'd like on the internet.

    True, the government did say that they need to do whatever possible to preserve Freddie and Fannie, but no one's sure what that will ultimately mean to owners of common shares. Most of the writings I've seen point out that the government will be very unlikely to buy common shares at all, and instead will opt to buy preferreds (if it even takes an equity stake at all). With more preferreds out there, paying at a set dividend rate, means a LOT less money to be distributed to commonshare holders.

    And by all accounts we're nowhere near the bottom of this real estate market, which means it's going to take some time for Fannie & Freddie to start growing again. Even if they weren't directly funding subprime buyers, the existance of subprime buyers in the housing markets during the last go around means that there were a lot more home buyers before than there will likely be for quite a while - hence they could push housing prices up to levels that we (again) probably won't see again for a long time.

    "Oh, but it housing will come back..." Look at the Nasdaq index; people who bought at the peak of the Tech Bubble and held on thinking that are 8 years along and still waiting to recoup their loss. So yes, maybe housing will come back eventually, but I'm sure there's a better place to park your money over the next decade or two than in these two.

  •  08-02-2008, 10:25 AM 34666 in reply to 34664

    Re: freddie mac FRE

    Reply Quote

    The gov't already is authorized to buy these shares, if they get tight, its already the law.  Also, to compare these two philanthropic housing stocks,  fannie and freddie,  to the tech stock bubble, is like comparing bananas and bricks.  They have  no relation at all.  Many of the tech stocks had a lack of "real" value and they were brought up to their highs on "emotion" and thats why they never came back.   Also, housing (buying and renting) is a NEED and the techs were definitely not at all, of course.  On these two, fannie and freddie, they are already very very low priced and a lot of 'housings' bad news is already at the forefront and being dealt with accordingly.     Ultimately, by buying these two stocks, the housing situation especially for the poorer folks, will get better a lot sooner.   So just like i WILL NOT buy up oil stocks, to screw over my fellow Americans, i WILL own these two, to support my fellow Americans.  I always like to remember were i am from and who i want to ultimately help, as a result of were i put my investing dollars.  I believe you can make cash and still not ruin the American economy in the process by making gasoline $10.00 a gallon. 

  •  08-02-2008, 12:37 PM 34671 in reply to 34666

    Re: freddie mac FRE

    Reply Quote

    FRE is on my watch list in the Bottom Fishing group.  The indicators I use flashed a short term up tell Fri., but not a bottom tell.  These aren't perfect, sometimes early, can be contradicted next day, and tell nothing as to how much up.

    So, I'm undecided short term, it could change Mon., and that is what I like about the technical approach: I'm not mentally committed one way or the other.

     

  •  08-02-2008, 9:01 PM 34681 in reply to 34663

    Re: freddie mac FRE

    Reply Quote
    I wish there were shorts available... I would put a spread on Fannie and Freddie. Long on one, short on the other, and eventually close off one position after you notice a strong trend.

    I don't see an obvious reason to buy at this price based on my TA. The movement hasn't really trended in either direction to indicate a bull / bear run. If the RSI dips below 30, I would pick it up...

    I only see technical plays on Fannie / Freddie... I would not invest in it simply because I do not trust the government.

    Remember, after the naked short rule expires, this can get hammered again.
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