Fannie Mae & Freddie Mac

Dow is currently forming sub-wave ii as shown above. The next sub-wave, sub-wave iii should be interesting as I have explained previously. The current up trend will likely to see Dow reaching 10,500 level.

Fannie Mae (FNM) and Freddie Mac (FRE) were very active and dynamic since August 5. FNM moved from 0.57 to 2.04 (+257%) and FRE moved from 0.61 to 2.40 (+293%), the gain is fantastic. However, these two stocks are classified as "zombie" companies by many.

Possible wave count for FNM is as shown above, August 5 was the starting of sub-wave iii of wave 3, very dynamic and with high volume.

The reading for FRE is the same, sub-wave iii of wave 3, dynamic and with high volume.

These two mortgage houses have a combined mortgage guarantee at more than US$5 trillions, were judged as vital by the Government to a healthy housing market. Their stock prices from more than $50 before the financial crisis have dropped to less than $0.50 within 12 months. Yesterday, their prices managed to close above $2.00. Many analysts have issued warnings that these two stocks would ultimately go to zero at the end of the road. Bose George from Keefe, Bruyette & Woods Inc (an investment bank) was one of them. "These stocks are going to be worth zero," he said recently. The recent talk was that the Government will announce in February 2010 that these two companies to be wound down, and either be merged into a federal agency or have their bad mortgage assets split into a new government backed company. It is advised to take profit for these two stocks when they have completed their respective wave 3.