It’s going to be a make or break month for Freddie Mac (FRE).
Their existence as a pseudo-public company hangs in the balance depending upon whether or not they can raise enough cash soon. The word in the street is, if they can’t raise that cash from private investors, then the government we taxpayers will most-likely be forced into bailing them out. There’s just too much money involved, and there are just too many other financial institutions and foreign investments involved for the current administration to let it fail.
IMO, things aren’t looking to good for Freddie Mac. Foreclosure filings are continuing to increase and housing prices are continuing to fall. The housing industry still hasn’t reached a bottom.
Even the king of value investing, Warren Buffett, has recently passed on FRE. It goes without saying that I don’t have all the answers, but I’m of the opinion that if Warren Bufffet considers Freddie Mac toast, then it’s toast.
On the other hand, there are other highly-regarded investors who think FRE is a good contrarian play. Legendary Legg Mason chairman Bill Miller is betting that Freddie Mac will muddle through the mortgage crisis, and Legg Mason is now their biggest shareholder.
So, what’s an individual investor like myself to do? I say we turn to an outsider, someone without an interest in the happenings of Wall Street, in order to get a better opinion of where Freddie Mac’s headed.
Comments 5
That was pretty quick. I wonder if the Wall Street Journal had this information available before the markets closed, and held off reporting on it as part of a “deep throat” deal?
WSJ says gov’t may soon back troubled mortgage finance giants Fannie Mae, Freddie Mac:
As of this writing, FRE is trading around $4.00/share. You can bet that if this news was reported earlier in the day, the markets would have responded appropriately. What BULL-shit!
Posted 05 Sep 2008 at 5:16 pm ¶It’s a done deal. We are now the proud holders of a private enterprise, whether we wanted it or not.
Hot off the Treasury Department presses:
I’m not sure how the markets will react tomorrow, but either way, I don’t see this as a good move for taxpayers.
Posted 07 Sep 2008 at 10:33 am ¶I love bailing out the country. I love inflation. We should find more mortgage and loan companies to bail out.
Can anyone else see the future where the next president gets into office and on their first public address, “We are all !@#$ed!” Jimmy Carter may have some pointers on this environment. Depressing.
Posted 08 Sep 2008 at 7:30 am ¶Mark my words. I’m betting that by the end of the year we’ll see another bailout… except it’ll be one of the Big-3 automakers.
Posted 08 Sep 2008 at 9:14 am ¶That is quite the thought. Their problems really were three fold: slow to change products, slow to improve basic overhead costs (ie wages), and bad, bad timing. I think that these companies have all tried to come out with some good products but are suffering from the fact that people just aren’t buying and what they are buying has high mpg, higher than anything they were prepared for.
I would be really surprised if the gov’t bails all three out, Chrysler is hurting pretty bad, they almost completely depend on the US market and it isn’t repaying them. Ford and GM have actually good international developments, just nothing doing well in the states.
I think the variety of cars will shrink in those companies and that may help some but they are trying to turn themselves around in a bad market where even Toyota is reporting losses.
Maybe though that is next, I would love to see the gov’t vs. the unions.
Posted 08 Sep 2008 at 7:21 pm ¶Post a Comment