Wall Street Strategies
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Morning Commentary

NEXT CATALYST?

By Charles Payne, CEO & Principal Analyst
9/9/2019 9:30 AM

Question of the Week

Should Fannie and Freddie be returned to public shareholders and be released from government conservatorship?

Post your answer below.

I’ve been involved with the stock market for more than three decades, and I’ve seen over and over where a spat of fear and loud predictions of doom mask stealth rallies and rebounds. That’s what happened in the past two weeks, where commentators pointed to volatile and pending tariffs as signals of a correction.  

Amid the most intense hand wringing, the market turned, and we begin this week in the shadows of all-time highs for many equity indices.

The rotation out of bonds and equity safe havens, and the unlikely leadership from Consumer Discretionary and Industrials paved the way for the bounce. But now, we are in that post-employment report period that coincides with the end of the earnings season and the beginning of the Federal Reserve quiet period. 

The good news is that the Dow held the long-term trendline, closed above its 50-day moving average and, is coming out of a cup & handle formation. But for a news-driven market, will that be enough?

A close up of a mapDescription automatically generated

Late last week, the administration came one step closer to releasing Fannie Mae and Freddie Mac conservatorship, a move many consider controversial, but I think it’s long overdue. 

The Federal government began bailing out Freddie Mac and Fannie Mae in the third quarter of 2008 through the first quarter of 2012. Since then, there has been only one request for funds in 2017.  Meanwhile, repayment has been made through quarterly dividend payments that now significantly exceed the amount borrowed.

GSE Bailout History

Freddie

Fannie

Total

Draw

$71.64 billion

$119.83 billion

$191.98 billion

Dividend

$121.50 billion

$184.70 billion

$306.20 billion

 

Today's Session

Futures are higher on continued optimism around U.S.-China trade relations. Earlier, Treasury Secretary Steven Mnuchin said he takes it as a sign of "good faith" by China that officials will restart trade talks, which are expected to begin in early October. Separately, Mnuchin said he didn't see signs of a U.S. recession.

AT&T (T) is one of the most active stocks in pre-market hours after Elliot Management revealed a $3.2 billion stake in the company, as well as a plan that could bring a 65% gain in the stock by the end of 2021. 


Comments
No

w w on 9/9/2019 10:14:39 AM
Fannie and Freddie should definitely be returned to public shareholders and should be held accountable. If you want something ruined, let the government run it! The 2008 crash was a result of corruption and greed in the government lending business!

Judy Meer on 9/9/2019 10:34:20 AM
Thanks so much Judy...outside of military its almost always better to let the market place decide. It was the government's implicit guarantee that helped create the problem. CP

Charles Payne on 9/9/2019 10:49:25 AM
Yes. Let the market dictate the terms.

Yvonne Mattrocce on 9/9/2019 11:01:20 AM
Hello I think you're right. BTW the shares of both are soaring but there will be huge resistance from establishment in both parties to keep this cash cow in conservatorship. CP

Charles Payne on 9/9/2019 12:02:03 PM
No

Alejandro Bingochea on 9/9/2019 11:09:24 AM
Free Fannie and Freddie

Gina Henry on 9/9/2019 11:10:07 AM
Yes they should be set free

Elizabeth on 9/9/2019 11:10:20 AM
Yes, free them

Louis Marangolo on 9/9/2019 11:21:13 AM
Absolutely return it to the private sector! Government should not, repeat, should not be in charge of our mortgage market, especially now that we have publicly traded mortgages. Markets are best at determining prices. If they crash, so be it. Taxpayers should not be at risk of paying the bills.

Leelee on 9/9/2019 11:45:32 AM
I agree but the problem is for too long presidents used homeownership as key metric to argue for reelection. This lead to community reinvestment act under Carter which was put on steriods under Clinton. CP

Charles Payne on 9/9/2019 12:40:58 PM
This is overdue....but because 535 elected officials have a stake in housing market success, we shouldn't hold our collective breaths for a permanent change. As you have said, Charles, there is so much opportunity for political involvement (control) that this is probably too much to hope for.

James Deffke on 9/9/2019 1:59:26 PM
Absolutely they should be released to the open market!

Terry Hartlieb on 9/9/2019 2:30:07 PM
Yes, they should be returned to the market. Never should of been taken over. They never was insolvent enough to be taken over. What little problem they had they could of handled themselves.
In my opinion the real estate market needs FNMA and FMCC to maintain a market that the average taxpayer is able to purchase real estate.

Ken Anthony on 9/9/2019 2:50:26 PM
Never should have been ----not with gov.--- Can we get a claw back form Barney & Friend? --- Run by the (Congress & Friends) into a bankrupt org.-----Let them go fail.---wish i had an brain----smile---

john on 9/9/2019 4:50:04 PM
Well, we’ve seen what happens when the government decides that everyone should qualify for a home loan: banks collapse. We’ve seen what happens when the government decides that everyone should get a college loan: price inflation. So, yes, get the government as far away from the loan business as possible!

Jeffrey Oliver on 9/10/2019 7:01:17 AM
What happened to earnings controlling the price of stks jobs up earnings wages up consumer spending saving money but algorithms running market down yesterday morning bank stks up over 3% if u had a hedgefund would u be running stks down even Kramer said he could move mkt 100points got wall st upset or SEC is asleep or Trump haters have Accest to algorithms something is not right good stks down 20% With earnings way up


eco

garry brewer on 9/10/2019 9:19:37 AM
Ditto. Sounds like 100% of people who know how to handle money are in favor of market determination, while a vast majority of the 535 who are greedy for power are against it.

Bob G on 9/10/2019 9:19:44 AM
 

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