Today FRE's corporate debt sold at prices saying "we'll be in business", yet the stocks are unchanged ... Unlimited discount window access + these stocks means they'll have the ability to replenish cash and stay above water as well. (the bond market agrees) IV on the options high too -- worth selling some puts here... Today's price action is just habit-based equity investor lemming psychology... I would not be surprised to see the S&P end the day at 1270.
"NEW YORK (Dow Jones)--The U.S. government's plan to bolster Fannie Mae (FNM) and Freddie Mac (FRE) by increasing their federal lines of credit and possibly injecting equity capital won't help the firms' shareholders, Goldman Sachs analysts said Monday, repeating their recommendation that investors sell the shares. " "Merrill Lynch said that while Fannie Mae (FNM) and Freddie Mac (FRE) credit losses are likely to lead to capital erosion, both companies appear to be sufficiently capitalized for the next few quarters, Reuters reports. However, Merrill cut its Fannie price target to $9 from $22 and Freddie Mac from $20 to $7 as it expects higher credit losses to weigh on the shares. Merrill predicts rising losses for several years, and predicts that the companies will need to access equity capital markets by the end of 2010, if not sooner. Merrill maintained its underperform rating on the two companies."
if today FRE and FNM tank to ... let's say $5 for FRE and $6 for FNM, will the clowns (Hank and Ben) make some crazy press release again?