Wednesday, June 16, 2010

MUST READ: "Finally: Fannie, Freddie and Delisting" (FNM; FRE) Plus "Line of the Day"

The Wall Street Journal's Matt Phillips gets it. And he also gets our prestigious "Climateer Line of the Day" (CLOD) award.
From MarketBeat:
Fannie and Freddie have been trader playthings for long enough.
First things first. Fannie and Freddie aren’t real companies. The total equity in the two companies is a negative $146.9 billion, according to Bose George, an equity analyst covering the mortgage and housing sectors for Keefe, Bruyette & Woods.
In short, these are government-owned zombie entities that would have been shut down by regulators long ago, if the regulators didn’t own them.

At one time there was a solid base of institutional shareholders for these firms. But that changed a long time ago, when the underpinnings of these entities was fatally disrupted by the subprime crisis. In short, any investors are long gone. “It’s largely day traders, I don’t think it’s people that care about the fundamentals that much,” George said of those who own the shares, in a quick chat with MarketBeat.

And those that have been dealing in these shares have basically been playing a giant game of hot potato, so much so that at points during rally off the March 2009 lows, Fannie and Freddie — valueless companies! worse than valueless! — made up some of the heaviest volume of any stocks.

Now if this was just any junk stock, we wouldn’t really care. But not only are Fannie and Freddie are under  effectively part of the government, they’re also likely to remain at the heart of the U.S. mortgage market for the forseeable future. Or at least until the government figures out what to do with them....MORE
Earlier today:
Fannie, Freddie Plunge Over 30% Each (FNM; FRE) 

"Federal Housing Finance Agency Directs Delisting of Fannie, Freddie Stock From NYSE " and "Fannie, Freddie delisting not due to performance-FHFA" (FNM; FRE)