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Random Thoughts: Fannie and Freddie Downgrades

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Nationalization for lenders?

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  • Remember the Alamo... and remember the adage, when Goldman (GS) and Google (GOOG) are both pointing in the same direction, they generally serve as a snazzy tape tell.

  • The London Times reported that a Chinese sovereign wealth fund plans to invest up to $10 billion in Japan, which promptly sparked a 3% rally in the tricky Nikkei.

  • Aunt Fannie (FNM) and Uncle Freddie (FRE) were downgraded to "sell" this morning at Goldman Sachs following similar sentiments by Merrill on Friday. Three thoughts:

    • DOH! I downgraded 'em to sell at FNM $70 (but wasn't there for most of the move.
    • Nationalization anyone? One day, likely from lower levels.
    • If these names trade lower, the rest of the financials have further risk (think derivative machination).

  • Thanks Scoop! Alan Greenspan is now saying "economic growth has slowed and a recovery may take longer than usual." Hey Elmer, in all due respect, turn it off. You did enough when you endorsed adjustable rate mortgages when most folks didn't understand the risks.

  • Meredith Whitney and Opco are getting alotta play this morning on their tough talk on the financials. Much of this was out Friday, however, as highlighted in the 'Ville.

  • Minyan Stephanie Pomboy noted in this week's Barron's that 14% of all bank loans are tied to commercial real estate (the largest percentage ever). She also highlights that $565 billion in corporate bonds will roll over this year, which is a 34% increase from last year.

  • Mike Santoli noted in the same issue that $60 billion has migrated out of stock mutual funds and an additional $70 billion has entered money markets. Contrarian indicator or the shift in risk appetites that we've been monitoring in the 'Ville?

  • There is something quite ironic about Visa launching one of the largest IPO's in history right near the height of the credit bubble.

  • Despite all the noise - and there's been a LOT of noise - the mainstay averages continue to churn under S&P 1405 and INDU 12,800. The closer we get to those levels, the more aggressive Boo will likely be with his risk.

  • The VXO is quietly off a fisnki, which "quietly" being the operative word.

  • Twenty beats your five sir! Yeah, I also like to live dangerously and risk is my middle name. That doesn't mean we should make blind bets, however, and I continue to operate conservatively, picking spots and staying tight. Always honest, if not always sexy.

  • Well I got this guitar and I learned how to make it talk...


R.P.

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