Fannie Mae Stock right now

[creekfreek24]

Quick question guys sorry if it's already been addressed. Fannie Mae stock was at 78 cents a share several days ago. It was 98 cents at market close on 9/9. In Oct. 2004 it was $69 a share.

A friend of mine at work yesterday told me it would be wise if I had any play money to buy some stock up while it is so incredibly low right now. The Fed is protecting them so it won't go bankrupt. Do you think I should take 500 to 1000 dollars and buy stock? If so how long do you think it will take to rebound. Thoughts? Thanks guys!!

---

Members don't see this ad.

 

[southerndoc]

The stock is worthless, which is why there is a class action lawsuit against Fannie Mae/Freddie Mac's former CEO's. The plaintiffs claim the CEO's artificially inflated stock prices by overstating profits and other tactics.

You would be a fool to purchase stock in either company. The stock will most likely be reissued at a later date, making your current shares non-sellable.

 

[lord_jeebus]

Your friend does not understand the situation.

Fannie Mae stock has lost its value because of the government bailout. The government has issued much Fannie Mae stock to itself, which dilutes the value of the shares currently out there. The common stock will also no longer pay dividends. The stock costs less than a buck now, because that's pretty much what it's worth.

The bailout benefits those investors who purchased Fannie Mae mortage securities, not shareholders.

 

[plainfacts]

Never invest more than you can afford. If you buy this high risk stock be prepared to lose it all but with a chance to earn a lot. I certainly think it is worth the risk to speculate with 1000$ or so in the long run it doesn't matter if I lose a little when I will earn 200 000$ a year in a few years.

But be prepared that you could very well lose it all.

 

[lord_jeebus]

If you want to speculate with $1000, and are willing to lose it all -

Even at a dollar, I would short Fannie/Freddie before thinking about buying it.

 

[mgdsh]

If you want to speculate with $1000, and are willing to lose it all -

Even at a dollar, I would short Fannie/Freddie before thinking about buying it.

No point shorting it now. If you really want something with tremendous upside buy some puts on MER or AIG, especially if they can put in bounce. It's a little late on LEH, or WM.

*edit* please make sure you know WTF you're doing with options

 

[lord_jeebus]

No point shorting it now. If you really want something with tremendous upside buy some puts on MER or AIG, especially if they can put in bounce. It's a little late on LEH, or WM.

*edit* please make sure you know WTF you're doing with options

I wouldn't short FNM either at this point, I'm just saying that I think buying it is such a bad idea that even shorting would be better.

 

[The White Coat Investor]

Do you buy lottery tickets? That's what FNM is right now. You might hit it big, but most likely it'll be worth nothing after the winning numbers are selected. Individual stocks can and do go to zero all the time.

 

[plainfacts]

I wouldn't short FNM either at this point, I'm just saying that I think buying it is such a bad idea that even shorting would be better.

If you shorted FNM at 0.35 you've lost all your capital now.

 

[lord_jeebus]

If you shorted FNM at 0.35 you've lost all your capital now.

Yes, but when I posted that FNM was at 1.

 

[mgdsh]

Directly shorting stocks less than 5-10 a share, is essentially like playing with fire. You may not get burned the first time, but you'll get burned eventually. The risk:reward just isn't worth it, unless you have a hard well defined line in concrete stop set in place, but even then it's not to say the stock can't gap above that stop from one session to another.

 

[plainfacts]

Yes, but when I posted that FNM was at 1.

My point was that shorting Fannie Mae now is very much more dangerous than buying it. In the long run there is still a chance buying Fannie could be a profitable trade. Since Fannies value currently is very hard to estimate unexpected news could drive up the stock value. Let's say the government would say Fannie will stay private and the government will pay for the losses, stock would skyrocket to $20. You would not only lose your capital but owe your lender 20x your initial capital. However unlikely this looks now shorting a stock only carries the risk of losing more than you invest. Buying the stock you only risk your capital.

I'd rather risk losing $1000 with potential of earning 80x-100x my investment long term than risk losing 80x-100x my capital for a potential earning of $1000.

Especially with a stock like Fannie which if the housing market corrects itself could be worth $60 compared to it's current value of $0.7. Imagine if the Fannie stock is taken off the market and reintroduced ten years later at $60. Ouch!

 

[Sol Rosenberg]

However unlikely this looks now shorting a stock only carries the risk of losing more than you invest. Buying the stock you only risk your capital.

But this is always the case. The same with selling calls.

Why on Earth would you be considering shorting a stock AFTER it drops like a stone? The rules of business aren't any different for shorts. It's best to stay away from penny stocks (either buying or selling/shorting them.) At that price, they are very susceptible to manipulation.

 

[lord_jeebus]

But this is always the case. The same with selling calls.

Why on Earth would you be considering shorting a stock AFTER it drops like a stone? The rules of business aren't any different for shorts. It's best to stay away from penny stocks (either buying or selling/shorting them.) At that price, they are very susceptible to manipulation.

I don't think anyone here is suggesting that.

Again, I was just saying that I had so little faith in FNM, I'd short it at $1 before I'd think of buying it. Damn risky either way.

 

[southerndoc]

I don't think anyone here is suggesting that.

Again, I was just saying that I had so little faith in FNM, I'd short it at $1 before I'd think of buying it. Damn risky either way.

Actually new regulations in effect today prevent one from shorting a financial stock for the next 2 weeks.

 

[plainfacts]

But this is always the case. The same with selling calls.

Why on Earth would you be considering shorting a stock AFTER it drops like a stone? The rules of business aren't any different for shorts. It's best to stay away from penny stocks (either buying or selling/shorting them.) At that price, they are very susceptible to manipulation.

Of course, but FNM had a high risk of being pulled from the market and what do you do then if it is reintroduced 10 years later at 150$?

 

[plainfacts]

I don't think anyone here is suggesting that.

Again, I was just saying that I had so little faith in FNM, I'd short it at $1 before I'd think of buying it. Damn risky either way.

Let's say you have to either invest $1 in FNM or short FNM for 1$. In other words your capital is one dollar. Which would you pick?

 

[lord_jeebus]

Let's say you have to either invest $1 in FNM or short FNM for 1$. In other words your capital is one dollar. Which would you pick?

In this highly contrived scenario I would buy FNM, for the same logic I use when buying a lottery ticket.

I think $1000 is a different matter, but perhaps you have more money than I.

 

[plainfacts]

In this highly contrived scenario I would buy FNM, for the same logic I use when buying a lottery ticket.

I think $1000 is a different matter, but perhaps you have more money than I.

If you shorted at 1$ you've now lost 80% of your capital. If you don't close the trade you run the risk of being in debt. You'd be in a seriously tricky situation.

 

[plainfacts]

In this highly contrived scenario I would buy FNM, for the same logic I use when buying a lottery ticket.

I think $1000 is a different matter, but perhaps you have more money than I.

Stock is at 2.50 now and your trade is horribly in debt