Drunken Idiot Contrarian Buy
In keeping with the theme of yesterday, I threw mo money at that ho’ [[FNM]] @ $7.11 (my lucky number). After having consulted with my mentor, I have decided to take this action. This is totally 180 degrees from what I would normally and consistently do.
“Don’t throw good money at bad.”
Fortunately, I still have Ben and Hank’s personal guarantee that all will work out for the good. They never lie, as you know.
I know, it makes absolutely no sense. No sense a’tall.Â
If I’m going down on this, I’m going down in hot supernova-like flames.
However, let me throw this out: a whole generation of traders don’t remember the Chrysler bailout years ago. Everything turned out well in the end—and that was all about cars. With FNM, we’re talking about financing the American Dream. It’s an institution that cannot afford to fail. Someone will eventually step up to the plate, in my humble and seemingly misguided opinion.
Headline induced FEAR is driving this egregious meltdown. So what does a Costanza trader do?
Buy when the blood is running in the streets.
This is uglier than sin.
A long tail down chart formation warrants a mandatory bounce.
Disclaimer: This information is not intended to be used as the primary basis of investment decisions. Because of individual investors requirements, it should not be construed as advice designed to meet the particular investment needs of any investor. Consult your financial prior to taking any actions. The information and opinions contained here are those of the author and are not necessarily the same as those of iBankCoin, its principals or its affiliates. Trade at your own risk.Â
Â
What’s going to prevent the equity from going to 0 if they back it anyways?
July 11th, 2008 at 11:22 amBeen thinking about your trade all morning. Glad to see you’re handling it well, rather man-style, if I may be so bold.
July 11th, 2008 at 11:24 amCC-
Nothing. All stocks have the potential of having their equity go to zero.
This is a big bet, I know. If it works, I will be legend, ticker tape parade and all.
It’s a management decision on my part. I’m now sitting on a 47% cash position. As of yesterday, I was up 14.23% YTD. If FNM blows up in my face, it’s still only about 8% of my capital. I’ll still be up YTD, though not happy.
July 11th, 2008 at 11:31 amhttp://market-ticker.denninger.net/archives/511-Fried-Fannie-Thursday.html
July 11th, 2008 at 11:39 amWood,
With this bounce, I’m currently up over 35% so far on the shares I bought a little over an hour ago.
An alternative is to try to daytrade my way out of this. I could take some profits now and look to enter a short position. That’s not my style, though.
We’ll see where things are at EOD.
Decisions and news on FNM will come quickly.
July 11th, 2008 at 11:43 amDenninger is always depressing. Even if his is correct.
July 11th, 2008 at 11:54 amI know where you’re coming from on this Alpha. It’s a big gamble, but I bought a measly 2 Oct 7.5 FRE calls yesterday, which dollar wise is not a big risk. From what I seen from our government in my lifetime, there is no way Congress will let FNM or FRE collapse. They will legislate away the ability for that to happen, it won’t matter how creative they have to get. I’d bet right now they are planning the New Millenium version of the RTC right now. I have no intentions of betting on anything else in the financials right now, I might gamble but I’m not crazy.
July 11th, 2008 at 11:56 amI picked up some shares of FNM and FRE this AM in the peanut gallery. I’m with you on the ST trade but don’t know about averaging down unless it’s a long term gig.
July 11th, 2008 at 11:58 amI was a day early on FNM. Perhaps The Fly will let me use his time machine to undo the FNM trade from yesterday. However, my sense is that he would charge an egregious fee + my firstborn child, to use it.
July 11th, 2008 at 12:19 pmI feel pretty confident you’ll come out ahead, on both sets of shares, AD.
July 11th, 2008 at 12:29 pmAny late day thoughts on FRE? Hold over the weekend for a bailout?
My morning calls have quadrupled already.
July 11th, 2008 at 1:59 pmI am hearing that FNM will have no trouble maintaining the divi.
Write it down.
July 11th, 2008 at 2:58 pmI’m guessing everything worked out well for you on these trades Alpha, I’m happy for you.
Good job Cubs!
July 11th, 2008 at 3:14 pmHave you ever heard of a govt guarantee on common divi? Preposterous? Possible?
July 11th, 2008 at 3:56 pmNever underestimate the manipulative powers of a central banker.
I am much more powerful than Merlin.
July 11th, 2008 at 4:02 pmBen,
Come the revolution, I’m wondering what will be an appropriate punishment for you.
I’m thinking something “Dumas.” Maybe clap your mug in an iron mask until your beard grows up your nose and into your frontal lobes.
_
July 11th, 2008 at 4:14 pm