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To: Spekulatius who wrote (39893)	11/21/2000 9:29:14 PM
From: pater tenebrarum	Read Replies (2) \| Respond to of 436258

i agree...however, it may take multiple tries, i.e. it won't be easy to time. i have actually already wondered how come that real estate markets continue to hold up so well in spite of the NAZ denouement. the answer is that due to the implicit tax payer guarantee, FNM and FRE can expand their balance sheets at geometrical rates, as they never starve for funding. those are of course ultimately COMPLETE disasters in the making, i would even go as far as to suggest that they may not exist in their current form a few years hence once the coming bursting of the r.e. bubble takes its toll. the question is only, when. the GSE's have been instrumental in fueling the giant bubble that is now beginning to look a little pale around the edges...and their asset base is truly huge compared to their equity capital. in fact they could be teetering on the brink of a total wipe-out if there's a serious recession in an amazingly short period of time. the difficulty lies only in the timing, as confidence that these entities will be supported by the state through thick and thin is extremely high. all that said, buying a few puts while they're at the upper end of their trading ranges is indeed a tempting idea. and make no mistake, if anything goes seriously wrong with the real estate bubble , the stocks will likely fall sharply. imo the govt. is likely to nationalize them for a token amount in that case and take over their assets and liabilities, so as to avert a systemic collapse. all this may sound a bit nutty, or extreme, but what's really extreme is how fast they are expanding credit. truly breath-taking. reminds me a lot of the Japanese banks in the 80's.

To: Spekulatius who wrote (39893)	11/21/2000 9:41:07 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 436258

i agree...however, it may take multiple tries, i.e. it won't be easy to time. i have actually already wondered how come that real estate markets continue to hold up so well in spite of the NAZ denoument. the answer is that due to the implicit tax payer guarantee, FNM and FRE can expand their balance sheets at geometrical rates, as they never starve for funding. those are of course ultimately COMPLETE disasters in the making, i would even go as far as to suggest that they may not exist in their current form a few years hence once the coming bursting of the r.e. bubble takes its toll. the question is only, when. the GSE's have been instrumental in fueling the giant bubble that is now beginning to look a little pale around the edges...and their asset base is truly huge compared to their equity capital. in fact they could be teetering on the brink of a total wipe-out if there's a serious recession in an amazingly short period of time. the difficulty lies only in the timing, as confidence that these entities will be supported by the state through thick and thin is extremely high. all that said, buying a few puts while they're at the upper end of their trading ranges is indeed a tempting idea. and make no mistake, if anythong goes wrong with the real estate bubble , the stocks will likely fall sharply. imo the govt. is likely to nationalize them for a token amount in that case and take over their assets and liabilities, so as to avert a systemic collapse. all this may sound a bit nutty, or extreme, but what's really extreme is how fast they are expanding credit. truly breath-taking. reminds me a lot of the Japanese banks in the 80's.