Thursday, August 21, 2008

Quote Of The Day

A trader discusses his reason for purchasing Fannie Mae today on CNBC: (Video Link)

Pisani : …What fool would buy Fannie Mae now when everyone knows the equity is worthless? Here’s a fool who just bought Fannie Mae this morning. Now, what’s going on, why would you buy Fannie Mae right after the open, what price did you buy it at, what price did you get out at, and why?

Redler: Well as active traders we look for over-emotion. Everyone on TV was saying Fannie and Freddie are zeros. They might as well be zeros, but it doesn’t have to be a zero tomorrow…

It's kind of like musical chairs. As long as the music is playing, everyone can keep dancing around, and some will profit at other people's expense. But at some point reality will hit on the entire game and the music will stop for Fannie/Freddie Mac shares. And at that point, someone will be left holding the bag (or in this case, the worthless equity certificate).

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