Wednesday, December 5, 2007

What were "they" thinking???

This morning, Freidman Billings downgraded Fannie Mae (FNM 36.13) and cut their target to 30. Not to be outdone, Piper Jaffray downgraded Fannie and cut their target to 25. Not to be outdone by these smaller firms, Credit Suisse cut their target on Fannie to 25 and their target on Freddie Mac to 22!! That's research? That's just stupidity! But that's how Wall Street works!

There is not one reason that any of these firms gave, that we don't already know. That means all this news is already factored into the price of the stock. What happened to the stocks today? Fannie closed up a dollar, and Freddie (FRE 34.67) closed up 2.36. And after the close, Fannie announced that their preferred offering was way over-subscribed, and tomorrow we have a deal on freezing sub-prime mortgage rates.

Now we have some people who pride themselves on never getting into a financial mess, complaining that they are rewarding irresponsible home buyers. Maybe they should work for Credit Suisse. Keeping these homes off the foreclosure market will help increase the value of their home. But they won't think about that, because the complaint, is really from those who are short, who won't profit when financial calamity is avoided.

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