i didn't see that but that's got to be one of the main reasons (outside of the potential accounting changes) why FNM and FRE are getting slaughtered. it could get ugly really fast. i saw NLY had some big put buying going on in it. they are pretty widely regarded as conservative but if that AAA index crashes then they are done!
what are your thoughts on GM and Ford bonds. these things are returning ~20% right now. while the risk would seem to be high, if you get one that matures in 1 year or less, are either of these going bankrupt in that time period? looking at Ford, their operating income has been positive (even if just barely) for the last few quarters and they appear to have $33B in cash. can they really be going bankrupt in under a year. but then 20% returns don't just happen for fun, so there must be something i'm missing.
well i would imagine the govt wouldn't let ford fail either. some in congress have already come out and said that we can't let gm fail. it would be complete political suicide in my eyes if they did. if you are looking at ford bonds make sure they are SENIOR debt and not subordinated debt. by having senior debt your risk on your principle is reduced significantly in a bankruptcy.
Why not just the common GM shares? I think they're worth taking a shot with a couple hundred bucks and holding the lottery ticket.
i would only buy the common if GM filed for bankruptcy or was looking like it was on the verge of it. i will probably wait on the senior debt as well. i can't see GM turning things around immediately so things should get cheaper. there is too much risk with the common as it stands now. too much risk with the preferreds as well but when the govt steps into to back GM they will shoot up and the common will not. plus you get the 15% yield with the senior debt. i'm too lazy to explain things right now so i hope that made some sense.
GLD- gold etf DBC- commodities etf GAF- Middle East and Africa etf (something that doesn't correlate with US equities, Asia correlates too much these days) FINPX- inflation protected bonds or TIPS (inflation is going to 10% folks, protect yourselves)
nothing on my front...havent really looked into it much... im luke warm on oil companies right now...
No, it makes sense. I understand there is less risk with the preferred shares. Yeah, I'd have to agree that it's gonna be awhile til things are turned around. I guess there just isn't a whole lot further it could fall. Still I'll probably sit on the sidelines awhile longer.
Can anyone explain to my why Fannie and Freddi are so important? Why can't we just have them collapse and have banks handle mortgages?
Because they, together, currently back like half of the entire country's mortages, to the tune of $5 trillion?
Banks are in such bad shape they wont be able to handle the mortgages. Also, Fannie and Freddie were able to offer lower interest rates because of the implicit guarantee of the government. That will probably change, though. So now, interest rates to buy a home will likely go higher.
