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Two Ways To Play: Fannie, Freddie Shoulda, Woulda, Coulda


Strengthen your portfolio in good times and bad.

Bloomberg reports investor Jim Rogers says the Treasury Department's plan to back Fannie Mae (FNM) and Freddie Mac (FRE) is an "unmitigated disaster" and the nation's largest mortgage lenders are practically insolvent.

Rogers, a former partner of billionaire investor George Soros, said, "I don't know where these guys get the audacity to take our money, taxpayer money, and buy stock in Fannie Mae."

"These companies were going to go bankrupt if they hadn't stepped in to do something, and they should've gone bankrupt with all of the mistakes they've made." Rogers called the solution a "Band-Aid" solution and asked, "What's going to happen three years from now when the situation's much, much, much worse?"

Separately, Soros said that both GSEs were facing a "solvency" crisis" and not a liquidity crisis. Soros called the financial crisis "the most serious of our lifetime" and an "idle dream" to not think that it would affect the real economy.

Shares of both companies popped over 20% before setting into negative territory. FNM settled -5% to $9.73 and FRE closed -8.26% to $7.11.

From the Bull Pen: Rogers said agriculture plays will continue to benefit in this environment. Bulls that agree may look to the Agriculture ETF (DBA); sell-stops can be set near the 50 DMA ($38.50).

From the Bear Cave: Bears may be hesitant to press the downside at this stage, but those believing it truly is the "most serious crisis of our lifetime" might choose to fade rallies in the S&P Depository receipts (SPY) into the $130 level, if and when they occur.
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No positions in stocks mentioned.

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