Chris Lau - Seeking Alpha

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."

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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

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