Is this the end of the financial crisis?
This summer, I successfully worked to build a portfolio of financial stocks that has the potential to be worth $100,000 if all the stocks again reach their 52-week highs, and so far I’ve gotten a 42% return. Some stocks have been higher in recent times than their 52-week highs, but I didn’t want to get too crazy. I multiplied the number of shares I have of all my stocks by their year-highs and added up all the numbers.
Thankfully just 50 shares of Freddie Mac were included in this calculation because as of tomorrow, my $225 worth of FRE, which is down 50% from when I bought in anyway, will be worth $0. Where’s the money going and why now? Forbes.com cites the timing to “grumblings oversees” from China. After all, China is funding our war with Iraq so we better keep them happy, right? And the Asian markets open tomorrow.
So Freddie and Fannie Mae will be bailed out by the American taxpayers (and shareholders) to keep China happy so that we can still get money from them to stay in Iraq. Our tax dollars will go to help bail out bad mortgages (hey, the US is already trillions of dollars in debt, what’s another few billion?), to keep China happy, and to fund Iraq’s occupation. Forget Christmas; Christmas for me has always been tax time. Penciling in all those numbers into all those little boxes, looking up what a line means in the newspaper print tax book, licking the envelope and sending it to the office that handles the returns, watching my bank account for when the refunds are credited, and knowing that I did it all on my own has always been my kind of fun. But you can bet this year I’ll be going to H&R Block.
In afterhours trading on Friday, FRE fell 20% from $5.10 to $4.04, and I’m sure more people would have bailed given the chance. Freddie Mac’s common share price will be all but entirely wiped out and some people stand to lose a whole lot of money. One person on the Google message boards claimed to be in 7000 shares at a cost average of $5.51. That’s a lot of money to lose over a weekend.
For reasons I don’t yet understand, beside the fact that Freddie Mac often buys mortgages from other smaller banks, almost all of the other financials took a jump in Friday’s afterhours trading. So I might not feel the loss of my $225 at all. Still, I’d like to replace the stock with something else, and I’m very thankful that I never decided pick up more shares of Freddie Mac. It was tempting, especially after the rally the stock has seen in the last week or two, but it would have added to the loss I’ll feel (or slightly feel) Monday morning.
So now what? Now I will need to find a stock that can potentially, based on its 52-week high and the number of shares I buy, return the $3,350 that I’ll lose on my 50 shares of FRE. I’ve had my eye on Deerfield Capital (DFR), Community Bancorp (CBON), and yes, maybe even Triad Guarantee (TGIC) again. Freddie Mac was a bet I lost, but so goes the game!
