The Week Ahead: Earnings Season Gets into Full Swing

July 20, 2008

mkaminis Markos Kaminis (Wall St. Greek) submits:

The week that was… was a tale of two tapes. The five-day drama began in a state of complete chaos inherited from the prior week’s close, as investors and economic controllers contemplated the potential demise of the mortgage market as we know it. A mass exodus from the shares of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) illustrated in living color the reason why the GSEs should never have been private entities in the first place. The shares enjoyed an unnatural premium over the years, as the term “government sponsored” was misinterpreted as “indestructible” by equity investors.

Fannie’s shares ranged wildly last week from $6.82 to $13.99, and have depreciated in value by 31% in July alone. The same goes for Freddie, whose investors have born a 44% value decimation this month. However, even as the free world held its collective breath through the Congressional testimonies of Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson, a caped crusader swiftly answered the market’s call for help.

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