Friday, July 11, 2008

I don't get it

The last real "news" about Freddie Mac is the May Monthly Volume Summary, which came out more than 2 weeks ago. Delinquencies on their book have been rising, but at .81 percent are not at anything like an alarming level.

Could the word of a former Federal Reserve Bank President really have such a strong impact on the market?

4 comments:

Economics of Contempt said...

Professor Green,

The trigger wasn't Poole's comments about the GSEs, it was Fannie's debt issuance on Wednesday -- with the spread widening to 74bps. Investors and traders don't distinguish between Fannie and Freddie; if one is in trouble, the other must be too. Of course, nowadays liquidity moves the equity markets more than information, so Fannie and Freddie's huge presence in the repo market might be magnifying any legitimate informational concerns.

I think it would be hugely ironic if Poole's comments caused a panic, seeing as Jim Hamilton's thoughtful, detailed presentation on the GSEs' problems at Jackson Hole last fall was basically ignored.

Uncle Billy Goes Long said...

It would be helpful (for me anyway) to understand how many institutional investors there are versus how many retail investors.

Or maybe not. I was thinking that if one of the large funds started selling off mass quantities of gse shares it would be because they know something fundamental about their situation. But it could be simple market manipulation: Poole provides the spark, and then a single large institutional investor begins to unload shares, in turn starting a cascade. Meanwhile they profit on the other side somehow by shorting.

Are there resources that show who are making large moves, and when?

I've become so jaded that I'm fairly certain Schumer blasted Indymac so that his "friends" could make some quick money before they dissolved in a more natural fashion.

Anonymous said...

U.S. Weighs Rescue of Mortgage Giants.
This would never happened if we would not have taken the words of Mr. Bush with Mr. Tony Blaire on the false dossiers of the Iraq war and the alleged WMD, that were never there. Anyone would now say, “Okay we made mistake. Let us forget and stride forward”. However, this is the nation that is drowning. This sort of ironically cooked up wars never was in the history of America.
Then America went to boost the dollar to such n extent that all bowed and said. “Sir, you are all mighty. You lead; we follow you all the way, shoulder to shoulder, from the fatigued soldiers of Afghanistan to Iraq and call UN too to help us”.
This has all of us in the gutter looking for pennies or cents.
I thank you
Firozali A. Mulla DBA
P.O.Box 6044
Dar-Es-Salaam
Tanzania
East Africa

Anonymous said...

I bought a few shares of FRE on Friday because of one reason. I have no clue whether they are going to make it or not, but there are many instititutions (the largest holders of Freddie and Fannie stock by far) who can no longer be seen holding the stock and they all sold in the past few days. They had to sell, so I bought some.