 |
|
Home > Economy
A Non-Guarantee Put to the Test (part 1)
The Ballad of Fannie & Freddie
The stock market recovered from an early fall to finish slightly higher on Thursday (March 13).
*****
Once upon a time, the U.S. government created the secondary mortgage market. (During FDR's New Deal, if you're dying to know). With help from the agency known as Fannie Mae, this government creation grew tall and strong. What's more, the government held a virtual monopoly over its creation for several decades -- and after all, the market was its creation.
And this was a prosperous market indeed! Fannie perfected the practice of "securitization," whereby it bundled mortgage loans into tradeable securities. Everybody was happy. The getting was so good that, with a wink & a nod, the government made a partner for Fannie, and called him Freddie Mac -- eventually, the time came when they were even allowed to call themselves Private Corporations! The handsome couple was a model of stability.
Now, going private meant Fan and Fred lost their monopoly over the secondary mortgage market, and securitization was loosed upon the world. Yet the couple was more than clever enough to meet this challenge. Big Brother government's wink & nod meant Fan and Fred could get away with a slightly naughty ploy -- namely, paying just a wee bit less in yields than the competition. This discount was the value that investors placed upon Big Brother's wink & nod.
Alas, a suitably potent mix of time, monetary policy, and mania psychology can turn even the happiest couple ... well, into something it didn't used to be. The 1980s arrived and Fan & Fred stopped behaving like "government sponsored entities" and started acting like hedge funds. They created ever-more elaborate ways to transfer large interest rate risks. Derivatives and interest-rate options found their way into the mix. But Fan and Fred's competitors were no less creative. More time passed, and fewer and fewer mortgage lenders held on to the debt. Securitization became the norm.
The secondary mortgage market was a financial party, and Fan and Fred got a little crazy. They held more than a trillion in mortgages, and saw fit to pay millions to dozens of their executives. They got into some trouble with Big Brother in 2003, but their "time out" in the corner didn't last long. Interest rates had fallen to 50-year lows, and an even bigger mortgage market party -- the "Subprime Bash" -- was about to begin. They intended to be the stars of the show.
Tune in for Part Two tomorrow.
|
|
The Financial Forecast Service is the most valuable investment forecasting service you can buy – period. You get three publications that deliver market and price analysis, in the time frames that matter to your investment decisions. It's been a tough environment for investors lately, so go with publications that have proven their worth. Individual monthly subscriptions to these three publications would total $78, yet together they’re just
$59 per month.
(You save $228 a year.)
 
|
|
|
Here’s what you get:
|
The Short Term Update
You'll get forecasts for the markets' turns each Monday, Wednesday and Friday, after the markets close. It also includes occasional special opportunities. – $39/month
|
The Elliott Wave Financial Forecast
Tracks intermediate-term patterns in U.S. markets and forecasts upcoming price movements. You get monthly wave analysis of stocks, bonds, metals, the U.S. dollar and economic and social trends.– $19/month
|
The Elliott Wave Theorist
He may forecast the reversal of a 14-month trend, or Bob Prechter may present “Elliott” from physics to social theory. But no matter what, Bob stands you on the cutting edge of Elliott and the markets themselves. – $20/month
|
|
You also get a FREE copy of Prechter and Frost's classic Elliott Wave Principle -- Key to Market Behavior when you subscribe ($29 value; shipping and handling charges apply). This book revolutionized market timing when it hit the street in 1979, and is considered a masterpiece to this day. No investor should be without it.
Your subscription is risk-free. Try it for 30 days: if you don't like it, ship the book back to us in good condition and get a full refund of your subscription money (minus S&H). You can also get a pro-rata refund anytime during your subscription. If we don't hear from you, we'll continue to bill your credit card every quarter until you tell us to stop.
Don’t delay. Opportunity waits for no one.
If you want to order by phone, call our customer service representatives
at 800-336-1618 (from within the U.S.) or 770 536-0309 (from outside the U.S.).
When you call, please refer to code FFS3-FRECON.
|
|
|
| People who read this also read: |
|
|
|
Announcing EWI's New eBook ...
|
 In this exciting new 34-page eBook, Jeffrey Kennedy shows you — using real-life market examples — how you can use simple, yet powerful, moving average techniques to better your own trading. *Includes Jeffrey's own unique Moving Average technique!
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
© 2009 Elliott Wave International
|
|
|
|
|
|
|
|
|
|
|
|
|
The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.
|
|
 |
|
|
|
|
|