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Politics : Ask Michael Burke
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To: Knighty Tin who wrote (55711)4/13/1999 12:09:00 PM
From: Knighty Tin  Read Replies (3) of 132070
 
To All, Fannie Mae had really stinko eps. Up low double digits after increasing assets tremendously and at huge risk. Selling at 21 times eps with its return risk ratio is nuts.

Fannie's action are typical end game strategy in the financial area. They cannot get a good spread on their loans, so they increase activity, which means more quantity at the reduced spreads and more origination fees.

However, at what risk? Fannie and Freddie are lending to folks and on property that wouldn't get credit consideration a couple of years ago. They are borrowing short to carry these mortgages. So, the old borrow short to lend long disaster scenario is fully in place. I maintain my puts and expect down 50% on these dogs.
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