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-- Posted Monday, 21 July 2008 | Digg This Article | Source: GoldSeek.com
Rick’s Picks Monday, July 21, 2008 “Phenomenally accurate forecasts” We did a double take on the following headline atop Friday’s edition of the Wall Street Journal: “Mortgage Giant Freddie Mac Considers Major Stock Sale”. This plan gets our vote for the dumbest idea we’ve ever heard from Wall Street. A cruel joke on shareholders, perhaps? After all, the stock has already fallen 75% -- and now the same geniuses who have practically run Freddie in to the ground are proposing to further dilute shareholder equity down to the vanishing point. What might Freddie hope to achieve via this “hyperinflationary” tactic? The issuance of new stock totaling as much as $10 billion supposedly is being considered, but how much could it help? Fannie’s troubled portfolio is nominally valued in the trillions of dollars, and raising another $10 billion from shareholders would be like piling up a few more sandbags after a mighty river has inundated its levees and put half the U.S. under water.
The idea is so miserably stupid, in fact, that even Congress is balking at it, fearing that taxpayers will be on the hook for yet more billions when Freddie fails anyway. Freddie’s ostensible goal is to save itself rather than be regulated to death following a government bailout. But the firm would never even have floated this idea unless the Fed and the Treasury Department were on board. That means it is probably just a red herring intended to distract us from the fact that there are no palatable options for saving the GSEs. So why did the Wall Street Journal play this non-story story so prominently, stretching the headline across three columns above the fold? Our guess is that it was a slow news day, and the Journal’s editors couldn’t come up with another story to hold up the page.
There is almost no chance this idea will get off the ground, so Freddie Mac shareholders needn’t worry about further dilution. But they should be worried that the stock is going to zero anyway. Clearly, neither the company’s directors, nor the Federal Reserve, nor the Treasury Department, nor the U.S. government has shareholder’s interests at heart. Is there some other reason to stick around?
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Seminar Seats Filling Up
Seats are filling up quickly for next week’s Hidden Pivot Seminar. Since it is the only class I plan to offer this summer, you should sign up now if you want to supercharge your technical chops in time to enjoy autumn on Wall Street. The package includes, for the first time, unlimited access to real-time tutorials held each and every Wednesday morning, as well as to recordings of these sessions if you cannot attend them in person. Only four seats remain for this session, which will be held this Thursday and Friday evening, July 23-24. Click here, and then on the “Upcoming” tab to register; or here if you would like more information as well as a detailed description of the Hidden Pivot Method and a free Hidden Pivot calculator (our latest model, perfect for beginners). ***
Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Monday, 21 July 2008 | Digg This Article | Source: GoldSeek.com
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