JNJ more for less (JNJ, rated BUY)

Corn Products produces corn sweeteners. Kill Ethanol and the price of corn will fall further. It has already fallen from $8.00 a bushel to $4.00. There is no reason for corn to sell above $1.50 a bushel.

F the Famers!!!!

The bottom has fallen out of commodity prices (CPO, rated BUY)

By Dawn Kopecki

Oct. 11 (Bloomberg) — Federal regulators directed Fannie Mae and Freddie Mac to start purchasing $40 billion a month of underperforming mortgage bonds as the Bush administration expands its options to buy troubled financial assets and resuscitate the U.S. economy, according to three people briefed about the plan.

Fannie and Freddie began notifying bond traders last week that each company needs to buy $20 billion a month in mostly subprime, Alt-A and non-performing prime mortgage securities, according to the people, who asked not to be identified because the plans are confidential. The purchases would be separate from the U.S. Treasury’s $700 billion Troubled Asset Relief Program .

The Federal Housing Finance Agency, which placed the two companies in conservatorship on Sept. 7, directed them last month to start increasing their purchases of loans and mortgage-backed securities as the Treasury seeks to absorb underperforming and illiquid assets from financial companies.

“For now, they’re under conservatorship and they have to be used to keep the flow of capital going to the housing market,” former Treasury Secretary Lawrence Summers said in an interview on Bloomberg Television’s “Conversations with Judy Woodruff .” “They’re important to maintaining the flow of government finance” and need to be used actively, he said.

Adding underperforming assets to Fannie and Freddie’s combined $1.52 trillion mortgage portfolios would come at a time when the two mortgage-finance companies already hold as much as $210 billion of bad debt that may be eligible itself for the Treasury’s relief program, their regulator said Oct. 5.

A spokesman for Washington-based Fannie, Brian Faith , and Doug Duvall at McLean, Virginia-based Freddie wouldn’t comment.

Overall Goal

Neither Fannie nor Freddie has turned a profit in the past year, accumulating $14.9 billion in combined quarterly losses , largely related to bad subprime and Alt-A mortgage assets.

FHFA spokeswoman Stefanie Mullin declined to comment on the details of the program. Treasury spokeswoman Jennifer Zuccarelli wasn’t immediately available to comment.

“The overall goal of the program will be to contribute greater stability and liquidity in the mortgage market, which should enhance consumers’ access to mortgage financing and ultimately result in reduced mortgage interest rates,” FHFA Director James Lockhart said in a Sept. 19 statement.

Subprime loans were given to borrowers with poor or limited credit records or high debt burdens. Alt-A loans were made to borrowers who wanted atypical terms such as proof-of-income waivers, without sufficient compensating attributes. About 35 percent of subprime loans in non-agency mortgage securities are at least 60 days late, while 15 percent of Alt-A loans are, according to a Sept. 9 report by FTN Financial Capital Markets.

Growth

Non-agency, or private-label, bonds are issued by banks and don’t carry guarantees by Fannie, Freddie or government-agency Ginnie Mae. Freddie held about $207 billion in non-agency debt in its $760.9 billion portfolio as of August, according to its latest monthly volume summary. Fannie had about $104 billion of such securities in its $759.9 billion portfolio in August.

Regulators initially restricted Fannie and Freddie’s growth when they seized control of the government-sponsored enterprises Sept. 7. To “promote stability” and lower mortgage costs to borrowers, Treasury Secretary Henry Paulson said the two would be allowed to “modestly increase” their mortgage portfolios to as much as $1.7 trillion through the end of next year and said they would no longer be run “to maximize shareholder returns.”

Less than two weeks later, Fannie and Freddie were told to ramp up their mortgage bond purchases as the financial crisis deepened and credit activity came to near standstill.

Fannie and Freddie which own or guarantee almost half of the $12 trillion U.S. home loan market, were given access to $200 billion in emergency Treasury financing as part of their rescue package. The companies may also be able to sell their bad debt to the Treasury through its $700 billion financial-rescue program signed into law Oct. 3.

FHFA has said the companies plan to release third-quarter results next month as scheduled. Analysts surveyed by Bloomberg project losses for both Fannie and Freddie at least through 2009.

To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net .

Last Updated: October 11, 2008 00:00 EDT

this is a good news

Freddie Mac (FRE) is a BUY

Financial advisors across the nation have been trying to clean up the mess that Jim Cramer made. We had clients crying because of the panic he created. Our phones have been ringing off the hook. His market call on the Today Show this week for investors to completely liquidate out of the stock market is the most irrational market commentary I have ever heard. At a time when a seasoned market veteran should be preaching the benefits of diversification and patience to overcome the tough times, this guy sounded more like a rookie — telling everyone to sell out after the S&P 500 had already dropped 30% for the year. Did he ever consider that adherence to such a strategy would collapse the entire investment system as we know it. This call might have been legitimate six months ago, but now?

His irresponsibility has no right being on television. He is doing a disservice to the very people he portends to help — the novice investor. From his platform, he has the opportunity to instill confidence in a system that is better off now than it was a year ago. Just ask Warren Buffett. We now have the $700 billion package to prop up the mortgage security market — just like Cramer said we needed. We have interest rates down to 1.5% — just like Cramer said we needed. On top of that we have the Fed stepping in to buy billions in commercial paper. These structural changes provide a rebuilt foundation upon which our financials can actually reap the benefits of capitalism. Capitalism doesn’t work without a market. Now we have a market. And Cramer decides to bail! Over the ensuing months he must be held accountable for this one.

Complete Story »

Cramer Should Be Suspended

In a world where my average equity holding moves in a 10% daily range, very little should surprise me.  I would like to share with you, however, something that makes absolutely no sense.  The world’s largest bond ETF, and one of the largest ETFs overall, iShares Lehman Aggregate Bond Fund (AGG), is trading at a 8.9% discount.

For those not familiar with the ETF, you can visit the iShares website to learn more.  It is designed to replicate the most popular bond index, the Lehman Aggregate.  It has over $9 billion in assets invested in 174 securities that replicate the index.  Total annual expenses are 0.24%. 

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Largest Bond ETF Now Trading At a Massive Discount

I would certainly not like to be known as the "Sponge Bob" of bottom calling (how about now, what about now?) - it isn’t a fun game in these markets. 

I was oh-so-negative in the summer of 2007 and ecstatic with the declines in January and March, when I was still short.  But, I changed teams early. 

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How Oversold Are We?

Bloomberg is reporting G-7 Commit to `All Necessary Steps’ to Stem Crisis.

Group of Seven finance chiefs, meeting after global stocks plunged the most since 1970, pledged to prevent the failure of key banks while stopping short of fresh initiatives to thaw credit markets.

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G-7: Nothing New

When I write, I don’t always know what will be popular, and what won’t.  Personally, I thought my article Rethinking Insurable Interest was the more innovative of my two articles yesterday, but Blame Game made the splash.  Well, perhaps no surprise, the crisis has the attention of all of us.  I just have broader interests; I want to write about a wide number of things.

My readers took me up on my request, and gave me more targets to blame.  Let me expand on them:

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Blame Game Redux: 8 More Things to Blame for This Crisis

With the severe market decline this past week, the 10-year percentage change for the Dow Jones Industrial Average (($DJI)) has fallen to single digits, and it appears likely that we could head into negative territory in the weeks to come.

A long-term historical look at the Dow since 1910 finds that ten-year periods of negative returns are not so unusual. They occurred in 1915, during the Great Depression years, and then during the severe recessionary period in 1974. Both the 1930s episode and that beginning in 1974 lasted a number of years: once 10-year performance went negative, it stayed that way for quite a while.

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Decades of Negative Returns: A Long-Term Look at the Dow

A stunning week, and thank goodness it’s over! Records were set on the downside with major averages sliding 18% over the course of five tumultuous sessions. Over the course of the last two weeks, we essentially met the definition of "crash" - a more than 20% drop in a short period of time. Selling was relentless all week long with only the Nasdaq Composite managing to close in positive territory by a few points on Friday.

As an indication of how pessimistic investors were this week, you have to realize that this selling took place despite the unprecedented coordinated global rate cut, decent earnings and forward guidance from bellwethers [[IBM]] and [[GE]] and commitments by the U.S. government to backstop commercial paper.

Complete Story »

How to Handle a Snap-Back Rally (If We Get One)