Finally Uncle Sam has woken up and taking over Fannie and Freddie by end of Sunday - it took PIMCO's Bill Grass to give the final push saying that we won't be buying any more stuff from these GSEs till US is in with us. Chinese and Russians not buying also helped tilt the odds - unfortunate for some shareholders (including myself) that they would lose lot of money on Monday - these stocks have already lost over 90% in last one year so there is nothing much to lose from here.
What good thing would come out of this bailout ? Here are my thoughts:
Have a good weekend - its quite sunny weekend in Bay Area !
/Shyam
What good thing would come out of this bailout ? Here are my thoughts:
- The uncertainty about these GSEs would be gone - at least for now and they would be able to raise money from all over the world (including Russians and Chinese)
- Mortgage rates would come down little bit - they have been going up even though Uncle Ben was reducing Fed rate all the way down to 2%. So that should help struggling homeowners with refinances
- Financials would get another boost especially mortgage insurance companies. I think this would be positive for RDN, PMI, MBI and so on
- In general this is good step and would provide some confidence to investors about US
- Should one invest ? I would recommend yes (I hope you bought Lehman when it was selling less than $15 on Friday). Invest with caution. Considering that shareholders got almost wiped out in Bear Sterns and now Fannie/Freddie, I would recommend investing via sector mutual funds
Have a good weekend - its quite sunny weekend in Bay Area !
/Shyam
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Check out my post on nationalizing wall-street !