The Mortgage Market Issue

The Mortgage Crisis Continues

After a 777 point drop of the Dow Jones Industrial Average on September 29th, Jim Rogers and FreddieFallout look more and more prophetic. First Bear Stearns, then Fannie and Freddie, now Lehman and AIG. This financial situation, especially the home mortgage market, will not fix itself in the near term.

Analyzing a twenty year chart of FRE displays how bad things have gotten for the mortgage giant and all companies with any exposure to the subprime mortgage market. Before the mortgage disaster started, Jim Rogers had the foresight to predict that both Freddie Mac and Fannie Mae's balance sheets were very poor. He also realized that if the two mortgage giants balance sheets were bad, there must be a trickle down affect to the other companies in the industry as well. He originally shorted both Fannie and Freddie in March of 2006. At the time, Freddie Mac traded at $66.51 and Fannie Mae traded at $54.52. Many of the mortgage brokers and mortgage companies have tumbled with Freddie Mac and Fannie Mae. We now see that many of the banking institutes are forced to merge or file bankruptcy. It is an extremely difficult investing environment but there are still opportunities.