Chris Lau - Seeking Alpha

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Saturday, September 06, 2008

Fannie Mae and Freddie Mac to be Worth Zero for Shareholders

I wrote on August 18th that these companies would not be worth anything for shareholders. As reported by Marketwatch: "The Treasury Department is expected to announce as early as this weekend a plan to bail out and recapitalize collapsing home mortgage giants Fannie Mae and Freddie Mac in one of the biggest government rescues in U.S. history."

Full Story here: http://www.marketwatch.com/news/story/treasury-set-bail-out-fannie/story.aspx?guid={46D1439E-A2C4-418C-9BE0-09BE0B9EE60D}&dist=msr_4

Fannie Mae and Freddie Mac own/guarantee ~ 50% of the $12 trillion in outstanding US home mortgage debt. This again will put even more pressure on US government debt levels. I wonder, then how it is possible for the US dollar to continue to rally. In essence this entry is a contrarian view to my call for a stronger dollar.

So, both stocks will have a stock value of zero, and preferred dividends will be slashed.

Read full blog analysis from Peter Cohen at http://www.bloggingstocks.com/2008/09/05/will-fannie-and-freddie-shareholders-be-wiped-out-this-weekend/

Have you ever heard of the expression, 'dead cat bounce?'

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