re: FNM's/FRE's Assets to Be Unwound at 10%/Yr from 2010 On

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The government is taking over the two biggest firms in a struggling housing market, which froze up a huge portion of credit markets for the better part of a year.

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I don't think that this will unfreeze the credit markets. The banks still have tons of shite on their balance sheets. They cannot afford any risk. And its not like FNM/FRE will be able to cover everything that is no longer supported by the private market.

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Of course the market is going to respond well to the government adding unlimited liquidity to the market to stabilize house prices.

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Eh, I think the trigger for the downward momentum will be LEH pre-announcement.

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Bottom line: Lehman needs to get sold ASAP. I

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You think????? My opinion is LEH won't get sold until the stock price is in the single digits for an extended period of time.

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Just kill the zombies. The key to not ending up like Japan is to make sure you kill the zombies.

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I really worry about WB and C already being zombified. I hope these frickers die off fast, but I think there is a lot of vested power brokers wanting to see these frickers make it. It won't last though, as much as we lack in transparency, we are wayyyyyy better off than japan. If we just had savings to eat into. If there is a rainy day, this is it.

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No reason to limit it to just the financials.

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I am short the general market. The only sector I know is completely, absolutely, positively fricked is financials.

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. Depending on how this plays out, the dollar could reverse and pull oil back up with it.

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I think the dollar has a way to play up before we see a lot of pain. Plus, the eurozone is fricked worse than we are. I am worried that the US reaction to all of this will be more protectionism, I know that will happen in the EU. Plus, the ECB has been slow to react. They should be cutting rates right now.

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I'm guessing it will end up like that Merril "sale" a couple of weeks back. You know, the one where they sold their junk for 20 cents on the dollar and financed it 80% and have to take it back if it defaults. Yeah...sale.

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I want those types of terms. frick me for being poor.

With you on the dollar rally lasting a little longer, but that was before this bailout came to fruition. Currencies truly in a race to the bottom. I wonder if these guys know its not like golf.

The dollar has got to keep climbing. The rest of the world has stupidly kept their interest rates sky-high while their economies go to shite. And while high interest rates usually appreciate your currency, their currencies are actually falling based on predictions of the macroeconomic pain they are about to go through. Just wait until those bozos finally get around to cutting rates. It'll be bedlam with all the people rushing to the U.S. dollar.

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Eh, I think the trigger for the downward momentum will be LEH pre-announcement.

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Why? LEH already is garbage, and frankly, they're not all that important.

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And its not like FNM/FRE will be able to cover everything that is no longer supported by the private market.

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Ooooohh, yes they will. These were not just the 2 largest firms in the mortgage industry, these were giants that controlled the overwhelming majority of mortgage financing in some way.

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My premise is that JerseyTiger wants house prices to go down a lot.

A market bounce tomorrow would be perfectly rational.

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There's just no reason whatsoever to believe that they will go anywhere but down for the forseeable future. And there's certainly no reason to think they'll go UP for a very very long time.

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The government is taking over the two biggest firms in a struggling housing market, which froze up a huge portion of credit markets for the better part of a year.

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I really just don't know what you mean by this.

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Of course the market is going to respond well to the government adding unlimited liquidity to the market to stabilize house prices. It's just common sense.

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How is any of this going to increase actual lending capability to end users? FNM and FRE were basically just huge hedge funds at the end buying up ridiculous amounts of structured product that should never have been originated in the first place. You're kidding yourself if you think that market is coming back anytime soon. The marginal buyer still has almost zero access to mortgage credit. Prices are going down.

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Of course, this assumes that the stock market is already rationally priced to begin with, which probably isn't true. But supposing that it were true, then a jump in the stock market would be entirely appropriate.

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How is this even slightly good for equities?

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How is any of this going to increase actual lending capability to end users? FNM and FRE were basically just huge hedge funds at the end buying up ridiculous amounts of structured product that should never have been originated in the first place.

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Yes, and now they've been taken over by the government, which has specifically articulated the reason for the takeover as using FNM and FRE as vehicles to provide added liquidity to mortgage markets through 2009.

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You're kidding yourself if you think that market is coming back anytime soon.

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And you're kidding yourself if you think that this doesn't affect the market. Hypothetically speaking, falling prices going forward are already factored into stock market prices. The question is whether or not this moves the bottom any closer to the present time. I think that it does, beyond any shadow of a doubt.

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Yes, and now they've been taken over by the government, which has specifically articulated the reason for the takeover as using FNM and FRE as vehicles to provide added liquidity to mortgage markets through 2009.

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Its like you read the press releases and believe them. I have written press releases before and its almost all half truths!

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Hypothetically speaking, falling prices going forward are already factored into stock market prices.

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you are kidding right?

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Why? If the shite comes out sooner than expected, then the market should go up, right?

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Ok, LEH is estimated to lose $2.59/share in this qtr.
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If they announce they lose more than this, I think the market views this as a bell weather. Especially if it comes in like May (-5.14).....and my bet is its worse than May.

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to provide more liquidity to help prop up home prices.

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it won't work. They cannot take up the slack. And china had something to do with this.

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Look, I'm not saying that I have any idea to what degree stocks are rationally priced.

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There is almost no rationality involved in the stock market in any time period not measured by years.

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The dollar has got to keep climbing. The rest of the world has stupidly kept their interest rates sky-high while their economies go to shite. And while high interest rates usually appreciate your currency, their currencies are actually falling based on predictions of the macroeconomic pain they are about to go through. Just wait until those bozos finally get around to cutting rates. It'll be bedlam with all the people rushing to the U.S. dollar.

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And even if they cut interest rates, won't this cause temporarily inflation for European countries and strengthen the relative value of the dollar?