Monday, September 8, 2008

Some quick analysis of what the Frannie bailout means

From Bronte Capital:

There is plenty of analysis on the web – and I have read my regular blogs – so I thought I might do something different. Warning this is a long post – and it is coming straight off the typewriter – so there are certain to be errors and misunderstandings. You are getting the fast-version analysis – and my slow version may wind up far more nuanced. I expect to be corrected - and will keep the comments as a rolling update...

I might have a go at working out whether there is any value left in Fannie stock or preferreds. This is by definition heavily speculative and not the sort of thing I would trade on. This is super-rough.

I am also only doing it for Fannie as I have not thought much about the numbers for Freddie other than that everything is substantially worse for Freddie.

The first surprise

The bailout looks more generous for the common than I would have expected and it is fairly generous to the preferred....MORE

HT: Naked Capitalism

From 24/7 Wall Street:

Trading Fannie Mae (FNM.OB) And Freddie Mac (FRE.OB) As Penny Stocks

...Now the two huge agenies will end up as penny stocks. They will likely be delisted from the New York Stock Exchange and will end up trading on the Over the Counter Bulletin Board.

Instead of firms owned by huge institutional shareholders, they will become part of the speculative world ofday traders. As penny stocks they could easily trade hundreds of millions of share a day. An eighteen-year-old with a PC and an account at E*Trade will be able to pick up 10,000 shares in either company using his weekly allowance....