Someone lost a lost of money as the prices of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) hit multiyear lows on news that several analysts believed the federal government would have to take the two companies over. In all likelihood, the move would wipe out common shareholder.
Famous stock-picker Bill Miller of Legg Mason (NYSE: LM) may have been one of the casualties. According to work done by Reuters, Legg Mason, Capital Group, AllianceBerstein (NYSE: AB) and Fidelity lost a total of $4 billion on the mortgage company stocks over the course of last week's trading.
While all fund companies may have been hit equally, which no one can know exactly at this point, Miller's reputation as a leading fund manager is being devastated. After years as one of the most successful portfolio managers in the country, his fund has underperformed the S&P for two years.
It looks like Miller is going for a third.
Douglas A. McIntyre is an editor at 247wallst.com.











Reader Comments (Page 1 of 1)
7-12-2008 @ 8:26AM
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7-12-2008 @ 12:08PM
william lindblad said...
Doug: Nice article and it is presently a hot topic, however I have yet to read one article that tries to explain it. The big question is WHY are Fannie and Freddie in trouble? These are government sponsored entities designed to provide bonding, essentially mortgage insurance to the lending banks. This is the FHA system, HUD, Office of Federal Housing Oversight, etc. They are supposed to be holding notes that are traditional with little exposure to extensive risk. The HUD area would be the highest risk factor, but it had monetary caps. Most of this has been around since the 1930's, with Freddie added in the 1970's. This operation has been around for 75+ years and has never faced this type of crisis. WHY NOW??????
The only logical way they could have gotten into trouble is the obvious and that question seems to be the one that is being avoided. I for one, would like to know just how exposed these agencies are to the sub-prime market as it appears that they are and if so, WHY and HOW. They are both under government scrutiny and someone IS accountable.
Congress would be well advised to get some answers before they think of passing this bill to the taxpayer.
It is already suspected that there are institutional investors that have taken heavy loss due to the decline in stock value of the two F's and this will further exacerbate both public and Wall St. worries until it becomes clear as to who this is. This could be massive losses in insurance company reserves or retirement fund capital.
7-12-2008 @ 4:59PM
suprg1969 said...
Sell all your AIG stock before it tanks!
7-12-2008 @ 5:54PM
peggy said...
Freddie and Fannie are't fully covered by the government like Hud/Fha and Va loans are. Yes, they are in trouble because of sub prime loans they greedly bought in bundles...more so than anyone else....GREED is the word you are looking at. All who could sold their SOUL over money. How much money is too much?? The average person with any brains and common logic just wants a decent home,good schools for their children, drive an average car, pay their bills, decent paying job, and maybe be able to afford to take a one or two week vacation that doesn't cost alot of money and try and help out our fellow man in some small way.
7-12-2008 @ 7:01PM
suprg1969 said...
These losses are just the tip of the iceburg. Companies like AIG and Allstate have yet to post their real losses.