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Two Ways: Freddie Fumbles Four Decades of Profits

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Strengthen your portfolio in good times and bad.

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Shares of Freddie Mac (FRE) were halted after the close today, when the government-backed lender reported a loss of $23.9 billion for its fourth quarter. In addition, the company said it will need another $30.8 billion capital injection from the US Treasury.

According to the Wall Street Journal, Freddie lost a total of $50.1 billion in 2008, as compared to a loss of $3.1 billion last year. These 2 years of losses exceed earnings of the last 4 decades combined, from 1971 till now.

Rising defaults -- and the decline in the derivative instruments used to hedge against interest rates -- were largely to blame. This follows last month's Fannie Mae (FNM) loss of $25.2 billion. To date, Treasury has agreed to backstop the 2 companies with as much as $200 billion each.

For other trading ideas, see Professor Homes Osborne's Unbreakable China.

From the Bull Pen: As Professor Osborne mentioned, bulls can look to Freeport McMoRan (FCX) to the upside. We talked about the technical picture and it's breakout above $30. But passive investors can still consider playing this with a sell stop below that level.

From the Bear Cave: Bears can still consider the bearish dollar ETF (UDN). Take a look at the dollar index (DXY): It may have room to the low 80's.
No positions in stocks mentioned.

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