patrick.net

I remember hearing Peter Lynch recommend FNM many years ago in an audio book. I wonder what he will say right now.

Where did the MarinaPrime kid go?

Where did the MarinaPrime kid go?

_shrug_

But... where have all the flowers gone?

It’s interesting that the rest of the markets (currency, MBS) did not really react to the event.

The market may still consider it as a pure stock market event.

Only 45% overvalued?

I'm going to have to reconsider my 50% correction by the end of... what month is it?

Cheers,
prat

Can anyone estimate in layman's terms how FNM's meltdown would affect lenders, and in turn, potential homebuyers?

You day traders are a skitsy bunch.

I keep my positions overnight, so I am not technically a daytrader. I do not have the time to monitor the market all the time. :)

Can anyone estimate in layman’s terms how FNM’s meltdown would affect lenders, and in turn, potential homebuyers?

News? Randy? Zephyr?

Perhaps we should "diversify" into trading against sub-prime lenders as well. Any bad ones that are still flying high?

(Not investment advice)

FNM should sue its ex-CEO and CFO to get back all past bonuses, severance, stock gains etc.

I wonder who appointed their ex-CEO... Hmmm...

It was Bill Clinton.

It was Bill Clinton.

Thanks Zephyr. That's what I thought. :)

As big as FNM is the general market didn't even blink today. I guess FNM will reduce their net worth by about 20% due to the "errors" (lies & Fraud). Painful for shareholders. Earnings are now a wild guess. What is the company really worth?

I suppose they will lose more market share, but they were already losing it fast.

Life goes on.

We might all be better off with a smaller smaller Fannie.

We might all be better off with a smaller smaller Fannie.

Absolutely.

like the 4000 sf, 2-story, 4-bed, 3.5 bath townhouse in a nice neighborhood that lists for $285,000

Did you mean $2,850,000?

I think a good future topic would be who is more to blame, the stupid consumer or the crooked lender.

The stupid consumer is more to be blamed. No one point a gun at their head to sign the papers.

With the new bankruptcy laws, I’ll be willing to bet you will hear about lenders receiving death threats from highly leveraged borrowers who lost their ass.

Violence does not solve anything. Sadly those stupid consumers will never blame themselves for their obvious stupidity.

I think H.Z. hit it on the head. FNM is an easy target for those of us watching the RE bubble, but in reality it has only contributed to regional bubbles in a minor way.

From a purely economic viewpoint, asset valuation bubbles are quite complex phenomena, involving lots of dynamics and variables. Kind of like a hurricane: they happen a lot, but no one can easily point to exactly what starts them. Once they get started, watch out. (and spare me the butterfly-wings wit)

Sadly those stupid consumers will never blame themselves for their obvious stupidity.

Somehow I think AM radio will find a way to blame Clinton.

From a purely economic viewpoint, asset valuation bubbles are quite complex phenomena, involving lots of dynamics and variables.

They are as complex as human emotion. No more. No less.

FNM is an easy target for those of us watching the RE bubble, but in reality it has only contributed to regional bubbles in a minor way.

But perhaps the housing bubble environment did unearth their problem?

Somehow I think AM radio will find a way to blame Clinton.

But he did appoint the previous FNM chief. Also, it appears that the Dems are very sympathetic to Fannie.

Fannie's problem was corrupt senior executives. They cooked the books to get bigger bonuses.

If the fraud is at the high end of what is supected the loss could be close to 40% of the net worth of the company. Somehow I doubt it will hit the high end of the range. The current stock price of about $42 seems to reflect the high estimate of loss.

But what if SOCIETY willed them to sign those papers?

I guess they do not have a strong will.

And we all know Clinton loved to get some Fannie.

LOL

The stock has held in after hours trading... up slightly since the market closed.

I think it could get a small bounce tomorrow.

However, I'm not touching it.

No, we’re all too busy waxing our black helicopters.

What kind of helicopter do you fly?

What kind of helicopter do you fly?

He flys a hooey. (I couldn't resist)

Iceman,
Media portrayal is suspect, I agree. For example, the headline news story on yahoo finance at this moment is: "Durable goods see biggest rise in 3 months".

Also, the decidedly pessimistic UCLA Anderson article was headlined:
"Study: California real estate market headed for soft landing" by CNN-Money earlier today (now it says: "California housing at 'tipping point'
" (???)).

But then, maybe OUR perspective is skewed more than we think it is (?)... :)

Peter P, you should seriously look into some of the Behavioral Finance courses at UCB. You seem to have a penchant for this subject, and it quite exciting at the moment as an emerging discipline of study.

The GSE’s portfolio had been growing too fast and too big to make OFHEO and AG uneasy.

That is my point. The housing bubble caused an explosion of loan volume. Had there been no housing bubble the portfolio would not have been growing so quickly and any problem would have been less apparent.

The world is full of silly people with ideas such as this.

There's always a 'greater fool', if you look hard enough.

"However, I’m not touching it."
Zeph's not touchin' no fannie...bloated or otherwise. :)
(enough of the fannie jokes, huh?)

Peter P, you should seriously look into some of the Behavioral Finance courses at UCB. You seem to have a penchant for this subject, and it quite exciting at the moment as an emerging discipline of study.

Thanks for your recommendation. I will look into that.

The problem is that once you have a job, it is easy to be complacent. Going back to school seems to be an unnatural step.

Kohn: complacency would be ill-advised

Perhaps I should consult the stars.

There’s always a ‘greater fool’, if you look hard enough.

And they "intelligently" think that there is a greater-fool-of-last-resort, namely a bailout.

After all this time, he’s no longer saying “bubble burst”, but “soft landing”. His words.

What makes you think a "soft landing" is necessarily better? Strictly speaking, the correction should be of the same net magnitude, just spread out over a longer period of time. Great; instead of one big slap we can get ready for a decade-long water torture.

instead of one big slap we can get ready for a decade-long water torture

LOL, did Japan invent the water torture? ;)

"What makes you think a “soft landing” is necessarily better? Strictly speaking, the correction should be of the same net magnitude, just spread out over a longer period of time. Great; instead of one big slap we can get ready for a decade-long water torture."

I agree...kind of like grounded in bedroom for a weekend is more effective than no TV for a week.

"After all this time, he’s no longer saying “bubble burst”, but “soft landing”. His words."
In dot.com bust, after some time, even the strongest skeptics resorted to self-doubt and acceptance of the new paradigm...IIRC.

"Why do you assume I care one way or the other?"
Hey, thanks for giving us a glimpse. :)

In dot.com bust, after some time, even the strongest skeptics resorted to self-doubt and acceptance of the new paradigm…IIRC.

Very true. I would not mind a soft landing though (like it is possible, duh).

Peter, there are no $2,850,000 homes ten miles from the Mexican border.

I really admire Texas. It is pro-business and pro-growth. It is even kind enough to accomodate Katrina victims.

In Cali-phonier, we cannot get that 4000 sf house built for 285K. The construction cost of a 2000 sf house will cost more than that. Add this on top of NIMBYism and growth laws...

Anyway, watch for the deadcat bounce tomorrow for FannieMae(FNM)
It could be a chance to short . (imho) It should be way down before the market closes

Hopefully my Put orders get filled. :-D

Now, what do you think “prices on mortgage assets remain high relative to the cost of borrowing” mean? Can they just come out and say real-estate is overvalued?

I don't know the details regarding the accounting treatment for FNM's mortgage assets. But, GAAP regarding real-estate is problematic at best. They probably can't come right out and say "overvalued" because, from an accounting perspective, that isn't a straight-forward statement. It is quite common to find over/under-valued -to-book-value RE assets. This area is fraught with complexity and prone to mistatement, both intentional and accidental.