What an eventful week we have had! Ackman, status conference, earnings and the great democratic exodus from Johnson/Crapo. I know many of you are in dismay that all of this great news was not adequately reflected in our current value. I think many of us get caught up in our own little Fannie and Freddie bubble. Keep in mind that most of the big names in financial journalism are quite conservative(Wall Street Journal, Barrons, Forbes, Bloomberg). Conservatives have always hated Fannie and Freddie, the PATH act that has been passed in the republican controlled house finance committee would not only eliminate Fannie and Freddie but remove all government involvement from housing finance. In article after article, in the big names of financial journalism I see financial reporters simply parroting the governments lies, grossly misrepresenting the true picture. Its is akin to the official state paper of Moscow glossing over the sins of Vladamir Putin.Often any mention of our cause is down played with the reference…. Hedge funds who bought up these stocks for pennies on the dollar with the hopes of making huge returns. Nowhere is this more evident than in the articles about the stress test, I read several that referenced the fact that Fannie and Freddie two companies who already needed over 180 billion in tax payer money would need another 190 billion in a severe downturn. They never mentioned the fact that they have paid back all the money. This is a pretty big fact to leave out don’t you think? The earnings last week, were spun to seem like Fannie and Freddie are on the verge of going broke, this of course is pure fiction. The Johnson/Crapo vote is still pending in the committee, we know that the legislation is dead, but I imagine the big financial news people will present it as ” bill to replace Fannie and Freddie passes in the senate!!!! with maybe a token mention that it stands no chance. If you knew nothing more than what you read in the mainstream financial press I doubt, you would be excited to invest in Fannie and Freddie.
Remember what I said in my first statement in January, my analysis and projections were based on a 1-2 year time frame. I must say that I never expected we would make this much progress in a mere four months. As I expected the democrats never had any true plans to do away with Fannie and Freddie, just as conservatives hate Fannie and Freddie liberals love them, they provide everything they ever wanted in housing finance. With the obvious failure by congress to enact legislation to unwind Fannie and Freddie, behind the scenes chatter has already begun on reform and release. These voices will be heard soon. There are also those in the halls of power that realize that it is unwise for the government to behave like indicted mobsters in the Fairholme trial. They know that this behavior could come back to haunt them throughout the entire judicial world. No one in DC is too excited to be the one who proposes reforming and releasing Fannie and Freddie after the way they have been demonized. It is possible that Mel Watt is chosen to do this “independently”. I will not be surprised if he parrots Obama’s stance Tuesday, but he may point in that direction. There is no question that the tide has turned, and momentum is on our side, pressure is mounting for DC to act. Our true rewards will be realized when Fannie and Freddie are reformed and released and when the sweep is overturned.I am not going to speculate or analyze share price, but I will say that the tipping point could arrive any day, I stand by my statement that time is short to buy at these levels. Keep the faith!