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Tape Tale

Bruce Krasting's picture




 

 

Close-up of Electronic Stock Ticker

 

I grew up in no-tech. I watched the live tapes for price action, CRT screens came later. There were noisy screens that scrolled data on a wall. I would do work; phones, papers, talk to colleagues, etc, all the while the 'thing' would be clacking away. It only took a half sec to have a look. In "slow" markets, the tape went - click.. click...click. When markets got "fast," the click went to a whir; that got the eyes. A change of cadence was a "Tell" that something had happened. In the background, over the other noises, you would hear the occasional, 'whoa', 'jeepers', 'huh', 'lookatdat' - signs that something had printed of interest.

I still do it from time to time. I've been watching the following "name" of late. Like all stocks, this one has a story behind it, and its price is very much about expectations for the future.

 

fanniep

 

The stock had a very nice run up in the spring and early summer, +60% in just 4 months. What's not to like about that action? But all hell broke loose on 8/16. The stock droped a mind numbing 75% in a single day - (the widows and orphans got taken to the cleaners)

After the blowout, the stock went no-place for a couple of months. It looked like dead money, but there was still life. In mid October it caught a bid. It made a major recovery coming into the end of the year - it doubled off of the low - looking good! The New Year has brought more cheer to shareholders. The stock has tacked on another 20% in just 8 trading days - momentum is rising. The volume is rising too, a block trade crossed today that was, by itself, 5Xs the daily average - News pending, perhaps?

So what is this thing? Is it an acquisition candidate that had a deal go bust in August, but is now coming back to life? Is this some company that had a terrible quarter, the market killed the stock, but now it is a "value" play? Or is this one of those big short names, like HLF, where short players are getting their balls squeezed and have to cover?

Actually, it's none of those things. What's driving this stock is politics. It makes for an interesting tale of the tape. This stock is Fannie Mae Preferred Series S. This puppy trades in the pinks, under the symbol FNMAS.

 

ap110808122045_2_wide-2ce0eebd65530f7af0c740cd5667bd00eca4af45-s6-c10

 

What would a Romney victory have meant for Fannie shareholders? The answer came from the guy in charge, Ed DeMarco. On 8/16 he said that he favored running Fannie down in an orderly fashion, and then just shuttering what was left. On paper, Ed's plan took the Fannie pref to zero. (my interpretation of events - the market read it my way). Ed D was backed by big ticket Republicans. So this was a window into what would have happened if Mitt had won.

But Democrats hated DeMarco. The Blues want to use Fannie (and Freddie) as tools of social policy. The Dems want to keep Fannie alive forever, the Republicans have always wanted to bury it. In the fall, as it became clearer that Mitt would lose, the betting on Fannie rose.

After the election, Obama made it clear that DeMarco was out, and Fannie was here to stay. The prospect for an Obama victory is what got the stock going; the election result just fueled the speculation (and the silly rally).

The price performance has nothing to do with fundamentals. The chart is really a proxy for the market's perception on the size of government in the future. This stock is telling me that that the street "bet" is for a return to a big government role in mortgage finance.

Funny how the markets always tell a story.

 

Note: Do not read this as an excuse to get involved with this swill - on either side. It's a "stay away". I thought that the correlation to the election, and the perception that Fannie might rise from the ashes with the support of the Democrats was interesting. Find another sand-box to play in, this one's soiled.

 

ashes_57n-1

 

 

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Sun, 01/13/2013 - 11:23 | 3148671 bugs_
bugs_'s picture

trades like a chinese fraud

Fri, 01/11/2013 - 19:00 | 3145776 Escrava Isaura
Escrava Isaura's picture

ak-khana, don't you know anything else beside copying and paste the same comment?

Fri, 01/11/2013 - 15:30 | 3145095 Grin Bagel
Grin Bagel's picture

I'm in my 72nd year, living on my Social Security of $828/mo.,vunerable as all get-out. I was almost always self-employed where everything in my life was business and I put the percieved welfare(paychecks) of my employees ahead of my own at all times. I say percieved, because it turned out that after years of having them perform "make work" instead of some days of "no work", I realized that due to cultural differences of Latins to Anglo Saxons, they would have preferred the free days to be with, or work for, their familes. I, today, applaud them for that. This coupled with personal illness for the last 10 years of my working window which was weighted in qualifying my retirement pay has left me with almost minimum benefits to have in dealing with maximum disadvantages economically, financially, socially and politically for the remaining years of my life including loss of a 38 year marriage and foreclosure on our home.

I mention this as possible food for thot for the self-important sounding knee-JERKs who have bought the whitewash of welfare reciepients as "the problem", being the human individuals instead of "the problem" being, in reality, the Corporate and political "individuals".

 

Good luck to all, and to all a good life.

Fri, 01/11/2013 - 12:48 | 3144436 the grateful un...
the grateful unemployed's picture

the corruption of Fannie was bipartisan. and sure lil ole maxine waters wants to keep it as a tool of social policy, its just that there were too many poor blacks using the program, (people pretending to be poor blacks) NOT in order to buy CA crackerbox houses in inglewood (let me pre-apologise for that) but mcmansions in the hamptons. the rich want to live in beverly hills (new 99cent store) and shop in watts. then they gripe about welfare (reagan called them welfare queens in cadillacs). because the program is costing too much. if the rich (which the GOP has decided to defend) didn't want the best of everything in their world, and in our world we could all get along.

Fri, 01/11/2013 - 11:04 | 3144104 moneybots
moneybots's picture

"The government can NOT afford housing to completely collapse..."

 

So what collapses in its place?

Fri, 01/11/2013 - 15:04 | 3144986 SAT 800
SAT 800's picture

the entire US Dollar economy, of course. But, "no one could of seen this coming".  I wonder who the scapegoat will be.

Fri, 01/11/2013 - 11:00 | 3144091 Gromit
Gromit's picture

FNMA Preferrreds are a nice inflation play.

If real estate recovers, price may return to $25 issue price.

Fri, 01/11/2013 - 15:02 | 3144982 SAT 800
SAT 800's picture

"A nice inflation play" a nice example of conventional thinking. by time they pump enough money into the system to get housing prices somewhere near their former un-realistic inflated values. silver will be 150$/oz; and your profit will buy you a nice used pick up truck.

Fri, 01/11/2013 - 23:57 | 3146458 Gromit
Gromit's picture

I'm in at one dollar, so my profit is already about a used pickup truck.

If they go back to par ($25) that's a 25 bagger.

Of course I like silver too!

 

Fri, 01/11/2013 - 09:19 | 3143807 Jack Sheet
Jack Sheet's picture

That chart is a paradise for technical analysis fetishists (NOT). A bit like the turkey in Nassim Taleb's Black Swan book.

Fri, 01/11/2013 - 09:18 | 3143804 Moe Howard
Moe Howard's picture

These two "Companies" are where Democrats are sent to pick up their payoffs for services rendered, example Rahm "Mossad" Emmanuel. Citibank is another, example Robert "The Sandwich" Rubin. Latest Lew "the Orthodox Jew" headed to Treasury.

Fri, 01/11/2013 - 06:10 | 3143648 ak_khanna
ak_khanna's picture

The stock, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players.

The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves. They effectively use the media to lure the other players in the market to a position where they would incur maximum loss.

The markets will fall only when the banksters have eliminated all the short positions and only they themselves have positioned themselves to profit when the market falls

OR

When an unexpected world event catches the banksters with their pants down and the softwares they use to rig the markets go berserk beyond their control.

http://www.marketoracle.co.uk/Article35345.html

Fri, 01/11/2013 - 04:03 | 3143579 Itch
Itch's picture

Lol "the thing"...that thing is probably the best technical indicator ever invented, vis-à-vis if a market is overly busy going in one direction, its more than likely to be going in that direction for a while. Quote rate, marvellous, in fact i wish i could attach a clicking quote noise to my platform. The auditory aspect of it can really ramp up the conviction. Most times I have to do a double take when im using only my eyes…”is that going fast or am I seeing things”.

Fri, 01/11/2013 - 22:42 | 3146326 StychoKiller
StychoKiller's picture

Hmm, kinda like a Geiger counter...

Fri, 01/11/2013 - 03:04 | 3143547 ebworthen
ebworthen's picture

Housing will be in the shitter again but anything owned by the government will be propped from here to judgement day.

Watch J.P. Morgue and Citi and Bunk of Amurica and Walls Fargone shovel more shit onto Fannie and Freddie when the current housing bubble pops; and CONgress and the FED will "make it all better" by bailing the assholes out, again.

Fri, 01/11/2013 - 00:47 | 3143443 Kreditanstalt
Kreditanstalt's picture

The whole market is like that...government interference-driven.

Fri, 01/11/2013 - 14:58 | 3144970 SAT 800
SAT 800's picture

The whole country is like that. Just a reminder.

Thu, 01/10/2013 - 23:36 | 3143328 TonyCoitus
TonyCoitus's picture

You never know how a Krasting rant ends.

This one seemed to start as another fiction novel with hopes of more lipstick or a red dress.

Instead this one turned out to be true, with a dildo in DeMarco,s Fannie.

Great stuff Bruce!

Thu, 01/10/2013 - 22:08 | 3143149 Ned Zeppelin
Ned Zeppelin's picture

Great tale, Bruce. 

Thu, 01/10/2013 - 21:47 | 3143080 HoofHearted
HoofHearted's picture

King Missile did a good job singing about this kind of a sandbox....

 

http://www.youtube.com/watch?v=67l13rnYnMs

Thu, 01/10/2013 - 21:17 | 3142981 Lonewar
Lonewar's picture

Actually, that is NOT what happened on 08/16/2012. On 08/16/2012 the Treasury forced FMN and FRD into a 3rd change to their Bail-Out agreement. This change stated that 100% of the profits made by FNM and FRD will now goto the Treasury as DIVIDENDS on the bail-out funds that kept the companies afloat. This was a change from the 10% Interest charged on the bail-out funds.

At that time, FMN and FRD had two profitable quarters in a row (And since a 3rd), and evidently the Treasury does NOT want these agencies to ever escape their grasp.

So Timmy G, probably on behalf of Obimbo, has made the first modern day slaves, in the literal sence of the word (Assuming you believe the SCOTUS that corporations are persons). Both agencies are NOT able to act in their best interest, and must turn over 100% of their profits to the treasury... Sounds like a slave to me.

The reason the stock has gone up again, is that they are actually profitable, and NOT via release of loss reserves either. So there are those of us, who think, well, these are two agencies that are collecting a 0.60% vig on 3 and 2 trillion dollars respectively, SOMEDAY they may actually get to break free of their chains, and at $1.40 per share with a top side of $50.00 per share if they do, lets take a bet. (The common was at $0.25 per share with a $60.00 top side) This is nothing more than a VERY long term Options bet with NO Maintainence requirement and NO possibility of a margin call. After all, the chance of these agencies going to $0 outside of systemic collapse is ZERO, which is the same chance of them being nationalized. (The government can NOT afford housing to completely collapse, which is what would happen if these agencies went away. Nor can it afford to nationalize them, which would put the National Debt at ~22 Trillion over night...)

So the government, just made slaves of them and is stealing ALL of the profits so they can NEVER get out from being slaves...

In the mean time, the $700 I invested in 2008 in FMN Perferred M series has grown to just over $12,000 today, not in a straight line, and not without getting into and out of the Common and Perferreds at different price points, but that $700 originally bought me 1000 shares of Perferred M and now I own 20,000 of common and 1,250 of Perferred M and if the stock ever gets back to the pre-2007 price, I get to retire...

That is my $700 bet, and that is why I keep following this stock.

Sat, 01/12/2013 - 22:48 | 3148045 damage
damage's picture

I don't know why I even bother to mention it anymore...

But SCOTUS never declared corporations as "people". They merely decided that the FEC had no power to strip the right of free speech away from individuals just because they formed a corporation. In Citizens United v. FEC they decided a non-profit organization (a type of corporation) could indeed spend corporate money on an anti-Hillary Clinton documentary even if it was close to election time.

Since you are so ignorant in this respect, even if you are correct otherwise, I'm immediately going to dismiss the rest of your comment as I'm so incredibly sick of this "SCOTUS declared corporations as people" nonsense which is just what the media wants you to think so they can be the only corporations which still have free speech.

Fri, 01/11/2013 - 14:57 | 3144967 SAT 800
SAT 800's picture

very interesting.

Fri, 01/11/2013 - 13:44 | 3144681 kaiserhoff
kaiserhoff's picture

Thanks, great summary.  What's the bid/ask on that?  Pinks always worry me, but as you say it's more like a warrant.

Fri, 01/11/2013 - 09:03 | 3143775 Its_the_economy...
Its_the_economy_stupid's picture

Thank You

Thu, 01/10/2013 - 21:15 | 3142978 Rustysilver
Rustysilver's picture

BK,

How the hell you find this stuff!

Fri, 01/11/2013 - 14:55 | 3144960 SAT 800
SAT 800's picture

Some people read things that are not internet blogs; this has been known to result in "education". Sometimes known as doing your homework.

Fri, 01/11/2013 - 09:42 | 3143870 LawsofPhysics
LawsofPhysics's picture

Bruce was a paper-pusher in the club.  Good for him, hope he has a good tribe to defend his "wealth".

Thu, 01/10/2013 - 20:58 | 3142928 Edmon Plume
Edmon Plume's picture

So, let me get this straight:  A stock for a "company" that is "owned" by the government, takes its orders from .gov, plays in a sandbox selectively regulated by .gov, can never fail in any meaningful sense, all while competing against private sector companies that pay taxes to prop up said entitity, falls off a cliff then pulls a phoenix.

In a free market this would be a sensational story.

Fri, 01/11/2013 - 01:42 | 3143485 economics9698
economics9698's picture

Political slush fund not company.

Thu, 01/10/2013 - 20:42 | 3142875 knukles
knukles's picture

Oh poop.

Thu, 01/10/2013 - 20:41 | 3142871 Rainman
Rainman's picture

Back in the day I kicked ass trading FNM, mostly on political scuttlebutt and other bullshit. No Mo Tho ! Excellent topic, BK.

Thu, 01/10/2013 - 22:37 | 3143218 boogerbently
boogerbently's picture

There it is !

Like clockwork, Bruce trying to get on steady at ZH.

No mention of SS, though!?!?!?

Must be distracted.

Fri, 01/11/2013 - 01:58 | 3143495 ceilidh_trail
ceilidh_trail's picture

Stop eating your heritage. You have posted all over the place today and said nothing. BK has posted twice and given more insight than you ever could. Just unplug your keyboard and rely on your mouse already.

Fri, 01/11/2013 - 09:52 | 3143897 boogerbently
boogerbently's picture

Or is it I've said nothing you wantd to hear?

Bruces "cure" for Soc. Sec. is to eliminate it. That is ignorant and shortsighted.

Most youngsters on this site complain of the brainwashed masses, yet have become so, themselves, where SS is concerned.

As far as my using my keyboard goes, I'm sorry the concept of a "Comments" section on this site eludes you.

Fri, 01/11/2013 - 14:51 | 3144936 SAT 800
SAT 800's picture

Why make false and defamatory claims about one of our rational posters? Are you going to gain friends and influence doing this? what's the point? Everyone but you knows that Bruce is a rational and reality oriented person who never mentioned at any time that he wanted to eliminate SS. I'd have to vote with the guy who told you to unplug your keyboard. take up another hobby that doesn't involve typing. This one is too hard for you.

Fri, 01/11/2013 - 13:34 | 3144635 Bruce Krasting
Bruce Krasting's picture

Actually, it is you that is ignorant. At least you are ignorant of what I have written about SS.

I've said, again and again, that SS has to be be saved. That across the board cutbacks would be a cruel outcome. That 70% of the boomers will NEED SS, while 30% don't need it at all.

I've said that this a boomer problem (fair or not), and that the boomers have to share a portion of the cost over the next 20 years. That leads me to means testing benefits, on both assets and income.

I have pushed on the issue of the Intergenerational Transfer of Wealth, and how the scales on this are heavily skewed to old over young.

Fri, 01/11/2013 - 11:38 | 3144224 Thisson
Thisson's picture

Bruce explains his opinions using facts and figures.  You give us none.  Social Security is simply another way for the government to steal.  Sorry you can't see that for yourself.  I can't wait for the thing to be shut down or to fail, so it stops leaching from my paycheck.

Fri, 01/11/2013 - 12:11 | 3144322 boogerbently
boogerbently's picture

Yours is the ignorance to whom my posts are directed.

I'll try and talk slow.

SS was such a GREAT program it amassed a HUGE surplus.

The surplus was designed in to pay for the large group of baby boomers that would be retiring.

The surplus was stolen to start other (welfare) programs.

If we DEFUND those other programs, and return that $$$ to SS we don't need to DEFUND SS.

Take off your blinders, you only see yourself being "cheated." If you allow SS to be ended, you are APPROVING me being cheated.

How about we "cheat" the people who have/had no right to our SS $$.

The govt. will NEVER "trust" us to save for ourselves.

The govt. will NEVER let old people starve or go without medical care.

They will initiate ANOTHER forced savings plan.....and RAID it before you can use it for its intended purpose if you let them.

Those who don't learn from history are destined to repeat it.

Don't be the "history" that repeated.

Your evaluation that SS is currently unsustainable, therefore eliminate SS, is as simplistic as the notion that people kill with guns, so, eliminate guns.

Most anti-SS people are unwilling to revisit their stance. They feel they already have their "research" on the matter completed.

Students getting SS funds, disability fraud, the cap at $103K.....there are LOTS of fixes to implement BEFORE cheating me out of my retirement.

 

 

 

 

 

Fri, 01/11/2013 - 10:13 | 3143955 Almost Solvent
Almost Solvent's picture

At least you vote your own comments up.

Fri, 01/11/2013 - 01:41 | 3143484 economics9698
economics9698's picture

I like reading Bruce's blogs and he is a good contributor.

 

Fri, 01/11/2013 - 09:09 | 3143791 mrdenis
mrdenis's picture

Absoutly ,right up ther with RM ......

Fri, 01/11/2013 - 13:06 | 3144505 Urban Roman
Urban Roman's picture

RM? ... Robotraders Mom?

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