What We're Hearing

How would you like to buy a $755 billion asset company for just $310 million? On the surface it sounds like a bargain until I tell you that the company is Freddie Mac. Fannie Mae, which has $789 billion of on-balance sheet assets can be had for just $436 million. (The prices I just mentioned are based on the 'market cap' of each which is derived by taking the stock price and multiplying it by the number of shares outstanding.) Of course, neither is for sale and both (as you know) have contingent liabilities. Bottomline: you can't sell either without an act of Congress since both have charters issued by Uncle Sam. Also, the share price of each is half of what it was on Monday, thanks to a decision by their regulator to pull them off the New York Stock Exchange. (The industry is still waiting for a more detailed explanation from Federal Housing Finance Agency chief Ed DeMarco but no one is holding their breath.) The NYSE move by FHFA, though, accomplished one thing: penny stock investors have cut back on speculating in GSEs shares. At 48 cents (Freddie), and 39 cents (Fannie), there isn't much upside unless unemployment falls to 5% overnight and delinquencies to 1%. And hey, it looks like the Orioles are going to win the World Series this year...