Are Investors Optimistic Or Is There Market Manipulation?
By Grace Cheng
Stock investors are generally seen to be wearing bullet-proof vests these past few weeks. Oh, Citi missed earnings? No big deal. Fannie Mae (FMN: 14.28 0.00 0.00%) (the biggest US mortgage lender) had a bigger-than-expected $2.19 billion loss and has cut its dividend for the second time in six months? No biggie either, especially after federal regulators said it will cut surplus capital requirements from 20% to 15% once the company has raised $6 billion in capital in a move to ensure that it can buy and guarantee more mortgages. Fannie Mae stocks did an unbelievable move today, initially falling as much as 7.3% before U-turning up to gain 8.9% before the end of the trading day. Fannie Mae’s condition is very telling of the overall housing market situation in the US, as it owns or guarantees one out of every five housing loans. Instead of letting fear wash over them and keeping them drenched, investors changed their minds after drinking some beer, and the Dow industrials ended up 51 points higher for the day. Or could this have been a case of market manipulation?
Maybe investors do have nagging thoughts about a possible further deterioration of the housing market and general economy, but they chose not to to think about the negative, but about more hopeful outcomes. Institutional firms are too big and important to fail (look at the Fed’s rescue of Bear Stearns), much less Fannie Mae which was set up by the US government. If they get themselves in a pile of mud caused by either external circumstances or internal bad decision-making, they have to get rescued, simply because they must keep on functioning. Already many taxpayers are complaining about why they have to foot the bill each time for other people’s mistakes, especially when many of those other people own(ed) maseratis. This stock run-up reminds us of the stock rally late last year, just as the world began to see the unfolding of the subprime mortgage crisis.
Posted in Categories: Economy, Stocks.
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= Commodities, 
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FINALLY, ADVISORS ARE NOT ONLY ADMITTING BUT POINTING FINGERS AT MARKET MANIPULATION.
JUST WAIT UNTIL JPM Chase starts fielding all the law suits for the crap loan funds they sold to mom and pops at their branches instead of selling CD’s that they would have to compete on rates and actually pay back.