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Random Thoughts: What Fannie and Freddie Mean to the Market

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Are mortgage lenders' troubles contagious?

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  • Fannie (FNM) and Freddie (FRE) have $233 billion of bonds due by the end of the quarter. Their ability to repay that debt will determine next steps for the GSE's and speak volumes about their ability to operate as independent, ongoing concerns.

  • If today's tape could talk, it might be saying "Alright-we're willing to toss Fannie and Freddie equity into the proverbial volcano as long as the credit side of the equation is backed."

  • Fair enough, I suppose-to everyone except holders of Fannie and Freddie equity- at least until the next leak springs in the financial dike.

  • That's the thing about socialization-once it starts, it spreads like the plague while every bleeding, gasping, dying institution expects the Federal ambulance to pull up to the back door and save the day.

  • Think airlines. Think General Motors (GM) and Ford (F). Think about the homebuilders. Again, once you open the blood bank, the lines will form around the block.

  • Time and price, Minyans. Time and price.

  • Remember Minyans, Nationalization is a process rather than a point and it's a process we've been talking about for five years.

  • I'll also say this-while the situations at Fannie and Freddie aren't something one would wish for, some serious snaps are warranted for thy Minyan Professors who have been flagging this process since 2003.

  • Monkey? I'm a gorilla, you clown!

  • No, I didn't "re-pull" the trigger on the long commodity trade after last week's Toddo two-step.

  • There were no couldas, shouldas or wouldas this morning (when crude was ripping higher) as profitability resides in the ride ahead. I continue to watch this complex versus the US dollar, which I believe turned a secular upside corner. Hence, my patience to wait.

  • Did the S&P violate the uptrend line from the July lows? That depends whether you draw it with a crayon or a pencil. On a closing basis, the bulls have a Cliff Branch to hang their hat on but the line between "the trend is your friend" and "risk rationalization" is rather thin.

  • Moi? I've got some Merrill (MER) calls ($23 is the level to watch), Apple (AAPL) calls (with a trailing stop and an eye towards acne at $180), Yahoo (YHOO) calls (which I'll trade around as per my opener) and a snivlet of S&P calls (watching that trendline, along with the financials for guidance).

  • That, a tight leash (it's thin out there) and alotta dry powder is how I'm rolling over the hills and far away as we hike over the Hump.

  • For what it's worth and so it's said, the Ratdog-Allman Brothers show at Jones Beach last Thursday ranks numero uno as the all-time greatest live musical let down. Lest you were on the fence...

  • Yep, rallied 7.5%, all the way to... Shanghai 2523. Keep it in perspective Yo, as Shanghai 3000 remains the level of lore.

  • Want some more Lore to Score? Some udder levels on thy radar should include:

    • Merrill (MER) $23, where that massive slug was recently priced.

    • BKX 60, for as go the piggies, so shows the smoke!

    • S&P 1260-1262, through the lens of holder the fourth higher low.

    • Apple (AAPL) $180. While we know never to anticipate the anticipator, an upside breach of this level, if and when, would trigger some reverse dandruff.

    • Lehman (LEH)--in general, given the overnight news.

    • Toddo 200 lbs. I mean, seriously, I haven't seen the inside of a gym in almost a month!

  • Good luck on the hump, Minyans, let's trade like a Phelps today!


R.P.

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Positions in AAPL, YHOO, MER, SPX
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