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Rumors of A Second Great Depression Have Been Greatly Exaggerated

(Last Updated On: February 9, 2012)

Rumors of A Second Great Depression Have Been Greatly Exaggerated:                                                                                                             Get Some of Your Tax Money Back By Buying Stock in Fannie Mae and Freddie Mac

It’s hard to believe that only months ago U.S. stock markets briefly occupied bear market terrain. Right now, the big three U.S. indexes—the Dow Jones Industrial Average, the Nasdaq and the S & P 500— are touching multi-year highs. Good job news and a brief respite of bad news from the Eurozone have been the drivers, and perhaps a growing sense that Barack Obama and his colleagues are slowly righting the U.S. economy.

One sector that has shown mixed signs of being at a bottom, but has been painfully slow to recover, is the U.S. housing market. Wall Street greed, one of the catalysts for a world economic recession, hasn’t gone anywhere. But the massive liquidity and credit crunches created by the mortgage-backed securities pyramid scheme seems to finally be working its way through the system, creating renewed equity market optimism.

I’m not sure if those trends will hold up over the long term, but right now the iron is hot, and so too is high volume trading of Fannie Mae (FNMA) and Freddie Mac (FMCC) stock. Looking at the stock charts of both entities, you can see that they are virtually mirror images. The share prices of both troughed along with the economy during 2011’s volatile trading year, at their lows dipping to just under .20 cents per share in late 2011, after essentially consolidating in the .20 cent channel throughout the second half of last year.

Judging from the recent heavy trading in FNMA and FMCC, both traders and institutional investors seem to have their sights set on driving their share prices higher. At the beginning of the week shares of both agencies rallied smartly through the .30 cent barrier, only to pull back and consolidate at slightly Some of the enthusiasm no doubt stems from the recent bullish push in the markets, but I’m guessing that a true bottom has also been put in some U.S. housing markets. Couple with an improving employment outlook, unprecedented low interest rates, and a push in Congress to make it easier for people to refinance their mortgages at lower rates, it may be a good time to sit on a few thousand shares of FNMA and FMCC and ride the trend higher.

By Jon Slotnick

 

 

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

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