How low can Fannie Mae go?
Will a 100-year storm sink Fannie Mae? One [market] letter is betting yes.
A "hundred-year storm" is how Fannie Mae CEO Franklin Raises has described the possibility of a self-feeding interest rate meltup -- which could be very unpleasant for the giant mortgage finance company.
Fannie Mae's problem, expressed in an Aug. 19 hotline by VIP Investor's Doug Fabian in the Fabian family sledgehammer style:
"It is now quite likely that revelations of unhedged, miscalculated and undisclosed derivative risks, amounting to TENS OF BILLIONS of dollars will soon rock the entire financial world.
"Behind closed doors, uncertainty about Fannie Mae had ALREADY sent interest rates soaring. This week alone, rates spiked up an extra 2 percent...
"It's a Death Spiral.
"And it could trigger a flat-out PANIC."
I say Fabian family style because Fabian's father, Dick Fabian, was one of the most powerful salesmen I've ever seen. His message -- trade mutual funds using a 39- week moving average system and eke out small gains -- was stunningly simple. But nevertheless his Telephone Switch Newsletter became one of the hottest services of the 1980s and after presentations at investment conference, Fabian would vanish under seething scrums of questioners.
Doug Fabian now says that "it's unlikely" Fannie Mae will fail. (Whew!)
But he goes on:
"Nevertheless, the losses in the stock itself are likely to be staggering."
This might seem crazy - except that the very respectable New York Times and the Financial Times of London have just published articles seriously discussing the same thing. And the European Central Bank has advised dumping Fannie Mae debt.
In his hotline, Doug Fabian urges investors to contact him for a "little-known investment designed uniquely for this exact situation." It looks like you have to subscribe to VIP Investing to get it -- for $499, discounted from the "standard $2,000 rate."
A bargain!
I don't know what the "investment" is, but Fabian's service seems designed to take advantage of a relatively new, very volatile investment vehicle: enhanced index funds (EIFs). He says specifically that these eliminate the need to go to cash in financial crises -- and points to profits in Rydex Juno fund, which is designed to behave inversely to Treasuries. (Breaking news: Mark Hulbert tells me that Fabian nevertheless sold Rydex Juno last night and has gone to cash.)
I do know, however, that the 50 percent annual gain Fabian says VIP Investor is "designed" to make (This is if the even-larger gains from a Fannie Mae crisis don't occur) are completely off the chart in the 23-year monitoring experience of the Hulbert Financial Digest. Plus, Fabian's Sector Investing, VIP's predecessor service, slightly underperformed the market on average over the four-plus years HFD was following it.
On the other hand, Fabian's Successful Investing, successor to Telephone Switch Newsletter, is the second-best market timer over 23 years, behind Richard Russell's Dow Theory Letters. Fabian Sr.'s system apparently works. Salesmen sometimes have something to sell.
Four other [market] letters monitored by HFD rate Fannie Mae.
In his PortfolioGrader.com, Louis Navellier gives it a D grade on his A-to-F system -- a sell.
In IQ Trends, Geraldine Weiss has it in her "Declining Trends" category -- a negative.
Value Line rates it a 3 on its 1-to-5 scale -- a neutral.
Morningstar gives it a 5-star rating -- its highest. Analyst Richard McCaffrey is a brave man: he kept Freddie Mac at 5 stars despite the recent management purge. And, at $50.40, the stock is right where it was.
Will a 100-year storm sink Fannie Mae? One [market] letter is betting yes.
A "hundred-year storm" is how Fannie Mae CEO Franklin Raises has described the possibility of a self-feeding interest rate meltup -- which could be very unpleasant for the giant mortgage finance company.
Fannie Mae's problem, expressed in an Aug. 19 hotline by VIP Investor's Doug Fabian in the Fabian family sledgehammer style:
"It is now quite likely that revelations of unhedged, miscalculated and undisclosed derivative risks, amounting to TENS OF BILLIONS of dollars will soon rock the entire financial world.
"Behind closed doors, uncertainty about Fannie Mae had ALREADY sent interest rates soaring. This week alone, rates spiked up an extra 2 percent...
"It's a Death Spiral.
"And it could trigger a flat-out PANIC."
I say Fabian family style because Fabian's father, Dick Fabian, was one of the most powerful salesmen I've ever seen. His message -- trade mutual funds using a 39- week moving average system and eke out small gains -- was stunningly simple. But nevertheless his Telephone Switch Newsletter became one of the hottest services of the 1980s and after presentations at investment conference, Fabian would vanish under seething scrums of questioners.
Doug Fabian now says that "it's unlikely" Fannie Mae will fail. (Whew!)
But he goes on:
"Nevertheless, the losses in the stock itself are likely to be staggering."
This might seem crazy - except that the very respectable New York Times and the Financial Times of London have just published articles seriously discussing the same thing. And the European Central Bank has advised dumping Fannie Mae debt.
In his hotline, Doug Fabian urges investors to contact him for a "little-known investment designed uniquely for this exact situation." It looks like you have to subscribe to VIP Investing to get it -- for $499, discounted from the "standard $2,000 rate."
A bargain!
I don't know what the "investment" is, but Fabian's service seems designed to take advantage of a relatively new, very volatile investment vehicle: enhanced index funds (EIFs). He says specifically that these eliminate the need to go to cash in financial crises -- and points to profits in Rydex Juno fund, which is designed to behave inversely to Treasuries. (Breaking news: Mark Hulbert tells me that Fabian nevertheless sold Rydex Juno last night and has gone to cash.)
I do know, however, that the 50 percent annual gain Fabian says VIP Investor is "designed" to make (This is if the even-larger gains from a Fannie Mae crisis don't occur) are completely off the chart in the 23-year monitoring experience of the Hulbert Financial Digest. Plus, Fabian's Sector Investing, VIP's predecessor service, slightly underperformed the market on average over the four-plus years HFD was following it.
On the other hand, Fabian's Successful Investing, successor to Telephone Switch Newsletter, is the second-best market timer over 23 years, behind Richard Russell's Dow Theory Letters. Fabian Sr.'s system apparently works. Salesmen sometimes have something to sell.
Four other [market] letters monitored by HFD rate Fannie Mae.
In his PortfolioGrader.com, Louis Navellier gives it a D grade on his A-to-F system -- a sell.
In IQ Trends, Geraldine Weiss has it in her "Declining Trends" category -- a negative.
Value Line rates it a 3 on its 1-to-5 scale -- a neutral.
Morningstar gives it a 5-star rating -- its highest. Analyst Richard McCaffrey is a brave man: he kept Freddie Mac at 5 stars despite the recent management purge. And, at $50.40, the stock is right where it was.
