Fannie Mae-No Politics (FNMA)

[big-yank]

The Fannie & Freddie party started a week ago, Friday, when two blocks of 14 M shares were traded in FNMAT. The run in FNMAT S/P only commenced after those two late-in-day trades and largely occurred after the weekend, but before the market opened on Wednesday, following the election results and surprise. This tells me that the election had nothing to do with the upward momentum as it spread to other FnF stock iterations. It was triggered by some large institutional buys and sells. Period.

FNMA traded over 110M shares last Wednesday to Friday. That is 10% of the float. That total is way beyond retail trading volume or shorts covering. So that leaves, once again, insty trading as the source. That tends to be confirmed by the size of many very large trades during the run-up. Since large insty holders are also the prime litigants in much of the pending court action, I believe the hefty action of the last few days is related to leaks of court progress favoring plaintiffs.

This tells me NOT to expect some heavy pull back on S/P on Monday, but to be on the lookout for news as the courts resume work following Veteran's Day. I believe that selling now could prove to be a huge mistake, even for day-trading fans. I also think shorting could be a terrible and potentially lethal tactic, here.

On the flipside, I have never bought into the theory that Obama will sandbag the new administration by ending the sweep or the conservatorship to worsen budgetary problems for a successor. First, the budget expires in December so a shutdown before the Inauguration would impair O's legacy in an ugly way. So the many "in print" predictions of some immediate privatization of Fannie and Freddie just don't make any sense, from my perspective.

Only news from court will move the needle higher until some point likely well beyond January 20th as the new leadership team takes the reins in all 3 branches.

That, at least, is what my investor intuition is telling me.

JMHO.