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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: John Vosilla who wrote (61823)5/24/2006 3:31:26 AM
From: Mike Johnston  Read Replies (1) of 110194
 
Stocks like that never go down until one day they will gap down for a 30% haircut. You will make money only if you have not lost your patience and are short on that particular day. The problem is the opportunity cost while waiting and possibly many months ( or years ?) of wasted put premium.

I am considering putting some cash into long term FNM 40 puts.
The question is, will the government prop it up outright or bail it out after the equity holders are wiped out ?

While i believe it will be the former, nevertheless there is a large potential payoff in the puts if the stock goes to 0.

But i might be early, maybe it will not happen until 08 or 09 if the bubble leaks slowly.
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