Fundamental Trading Diary

Fundamental analysis of the capital markets

Betting on FNM and FRE

My 3 contract short of NQ was very well timed indeed!  I exited out at 1940.75 for a $1500 gain.  I am still net short 1 contract @ 1921.

I entered in small positions into FNM and FRE at the beginning of this week, and they are both down just shy of -30%.  This is purely a bet that these agencies simply won’t be allowed to fail.  On the flip side, Bear Sterns wasn’t allowed to fail, but the shareholders certainly got shafted.  I don’t think the same thing will happen here.

I continue to believe in a decline in commodities and stocks.  I suspect that t-bill yields will concurrently sag and the risk spread widen while the discussion about FNM and FRE bailouts continue.

I have still been wrong about my choice of contracts.  I assumed that the NQ stocks would be much weaker, but it in fact is the blue chips which have sagged the most.

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August 21, 2008 - Posted by | Uncategorized

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