The survival of existing shareholders is contingent on stock going up. Stock price is driving the fundamentals. Interesting stuff. Don't think I will, can or should punt.
Peter Drucker chose one new area of study every three years in his life. For the next two years (till Dec 10), this is my focus. (a) Markets (b) Learn French (c) Geography of Russia and Middle East
Monday, July 14, 2008
Fannie and Freddie continued...
It is a very confusing situation. If Paulson wants to avoid moral hazard, he has to extinguish current shareholders. He has done that once to Bear Sterns shareholders. Will he do the same with Fannie and Freddie shareholders? If these stocks stay where they are, there is no way these companies can raise the requisite equity. So treasury will step in, which will involve wiping out existing shareholders. Now logic might not work and Paulson might change tracks. But I will go with logic.
The survival of existing shareholders is contingent on stock going up. Stock price is driving the fundamentals. Interesting stuff. Don't think I will, can or should punt.
The survival of existing shareholders is contingent on stock going up. Stock price is driving the fundamentals. Interesting stuff. Don't think I will, can or should punt.
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