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Market Talk: Fannie, Freddie (FNM, FRE) Common Worthless - Barron's

Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) were down 22% and 25%, respectively, today following a negative Barron's article which suggested that common stock holders will likely be left with nothing.

According to the magazine, it is growing increasingly likely that the Treasury will recapitalize Fannie and Freddie in the months ahead, using its recent powers granted to it under the housing bill signed last month. They said such a move would almost certainly wipe out common stock shareholders and even preferred shareholders and holders of the GSEs subordinated debt could suffer losses.

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In an August 11th Barron's Online article, StreetInsider.com's own Lon Juricic was quoted as saying, "The question is will Freddie Mac be around in six months? When they go to raise capital, who's going to be there?" he says. "It's been trading like it's going to $0, and the Treasury hasn't detailed how they would structure any bailout, so there's concern that there's not going to be anything left over in the plan for common shareholders." Link

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Hedge Fund Trade of the Day - SAC Capital

Steven Cohen's SAC Capital released its latest 13F for the quarter ended June 30, 2008 late last week. Notably, Cohen's hedge fund bought a few banks and other financial firms including, SunTrust Bank (NYSE: STI), Fifth Third Bancorp (Nasdaq: FITB) and State Street (NYSE: STT). He also took big stakes in Target (NYSE: TGT) and Pilgrim's Pride (NYSE: PPC). Cohen nearly doubled his stake in Service Corp. International (NYSE: SCI). Cohen trimmed his positions in Research In Motion Ltd. (Nasdaq: RIMM) and Elan (NYSE ELN) and got rid of Aventine (NYSE: AVN) and Delta Airlines (NYSE: DAL).

13F Highlights

Analyst Call To Watch - Herbalife (HLF)

Canaccord Adams commented on Herbalife (NYSE: HLF) today, noting that MergerMarket reported that the company has hired an investment bank to review a potential private equity sale. In addition, the firm notes that the company has hired the general counsel for USANA, which recently reached a settlement with Barry Minkow and the Fraud Discovery Institute.

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