Bluemoon,
Let’s look at a 2 day timeline instead of 2 years:
At 4pm on Thursday Fannie Mae, (FNM), closed at $13.20.
By 9:30am on Friday it was down to $7.16, (a drop of 46% in after/pre market hours).
Anyone who knows anything about the US mortgage system knows that Fannie Mae is akin to the human skeletal system.
The big concern for stock traders was conservatorship.
As with IndyMac, here’s what a company’s website looks like when that happens:
http://www.indymac.com/
[For future readers of this post, you’ll probably be seeing a much rosier website than what is currently being displayed today, (7/12/08)]
Point is, at the conservatorship level, a company’s stock is pretty much worthless.
At 10:30am on Friday Treasury Secretary Henry Paulson announced their focus was to support the pair, (Fannie and Freddie), “in their current form” without a takeover.
For a trader, that statement was beautiful.
A $10,000 investment at about 10:30am netted 4 grand by the end of the day, ($10.25/$7.25):
http://bigcharts.marketwatch.com/charts/big.chart?symb=fnm&compidx=aaaaa%3A0&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=4&size=3&state=8&sid=1899&style=320&time=1&freq=6&comp=NO_SYMBOL_CHOSEN&nosettings=1&rand=7369&mocktick=1
In REI terms, that’s 26 SFH monthy cash flows @ $150.00 each, (excluding taxes and fees), in 5.5 hours.
Next week is a different story.
-Mike