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Fannie Mae (FNMA)

DON'T BUY
In a desperate situation. Feds are going to make sure it doesn’t go under. Could still drop another 50%-70%. Anticipate they will need another $25 billion. If things get worse, this number could skyrocket.
DON'T BUY
Has been short this one for a few months. In a capital structure of a company, you have debt holders and equity holders. Ultimately, equity holders are the last ones on the totem pole. When the equity is getting eroded as quickly as it is, it can disappear very quickly.
BUY
Government backstops the loans for Freddie Mac (FRE-N) and Fannie Mae (FNM-N). The Government has asked for their help and have given them leeway to issue larger mortgages, which will allow them to grow their portfolios. The stocks are severely undervalued.
BUY
Both Freddie Mac (FRE-N) and Fannie Mae (FNM-N) are outstanding franchises. Down about 60% and he is attracted to this area. Feels the government would back them if there were problems.
DON'T BUY
Will potentially have to restate $9 billion of earnings. CEO, CFO and auditor have been removed. Stock moved up on the news. It will take quite a while. There will be big pressures in Congress to change the special status because they are really trading off the back of the US government in borrowing which the private sector can't do.
DON'T BUY
The big red flag is that the auditors are not going to sign off on the financial statements. With rising interest rates, the spread narrows. This stock will continue to get hit.
TOP PICK
Should do well if Kerry wins the election.
TOP PICK
Top Short Has quasi government backing, but raises money like crazy in the foreign markets. Has some serious major accounting issues.
PAST TOP PICK
(A Top Pick June 30/04. Down 3.5%.) Sold off in Sept when the news hit about misgovernance.
TOP PICK

(Top Sell) Starting to crumble. Freddie Mac started several months ago and Fannie Mae has just started. Don't think it's over.

BUY
Has some issues on accounting. Stock has bounced up nicely. Quality of their mortgage book is pretty good. Rising interest rates could be a factor if they go to fast.
TOP PICK
Trades at a big discount because of their fears in the market.
TOP PICK
One of the best companies in the US. It decades long track record of earnings growth. Has paid out steadily rising dividends. Higher interest rates (flatter yield curve) will be good for them. 3% dividend.
BUY
Has been having some problems. The other problem is that just about everyone in the US that needs a mortgage, has one. With rates going up, they'll probably be less creation of new mortgages. Cheap.
BUY
Earnings continue to increase but is being hit hard. Outlook is fairly good.
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