Maybe he is short on the market lol.
Well, if he’s short Freddie Mac he’s up about 25% today. Freddie claims they need additional capital and wants to cut its divvy in half.
Last Trade as of 10:06 AM ET 11/20/07
Freddie Mac’s loss more than doubles; firm may halve dividend
Marketwatch - November 20, 2007 9:51 AM ET
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Symbol Last Chg
FRE Trade 28.30 -9.20
Real time quote.
NEW YORK (MarketWatch) — Freddie Mac’s shares sank about 30% Tuesday morning, plunging as its third-quarter loss more than doubled and as the company raised the possibility of cutting its dividend in half.
Shares of the McLean, Va.-based mortgage investor (FRE) fell about 28% to $27.29.
The wider third-quarter loss came about as mortgage prices collapsed and credit tightened, sparking additions to Freddie’s loss provisions.
“Weakening house prices and deteriorating credit have hurt Freddie Mac’s results, as well as those of other participants in the mortgage market,” said Buddy Piszel, chief financial officer, in a press release. “You can see the impact of these trends in our credit results and throughout our financial statements.”
It will take time for the mortgage market to turn around and improve, according to Freddie.
For the year to date, Freddie’s recognized $4.6 billion in net credit-related items on a pre-tax basis, Piszel said.
Freddie’s third-quarter loss grew to $2.03 billion, or $3.29 a share, from a loss of $715 million, or $1.17 a share, in the same period a year ago.
“The increased net loss, year-over-year, was primarily due to higher credit-related expenses and mark-to-market losses on the company’s portfolio of derivatives and credit-related items,” Freddie said in a press release.
Freddie said the fair-market value of its net assets fell by $8.1 billion in the quarter, adding added that it’s taken steps to address the challenges continuing to confront in the mortgage market.
Specifically, the firm said it has hired Goldman Sachs and Lehman Bros. to study capital-raising options. Freddie’s been having problems with its capital levels, like many other firms hit by the mortgage market’s problems.
“Capital constraints during the quarter limited Freddie Mac’s ability to take advantage of purchase opportunities for the retained portfolio,” Freddie said.
Sizable mark-to-market adjustments
In September, the company sold about $20 billion in unpaid principal balance of retained portfolio assets with an eye to regulators’ 30% mandatory target capital surplus.
Also during the latest quarter, the company recorded mark-to-market losses totaling $2.7 billion, wider than $1.5 billion in the third quarter of 2006.
The mark-to-market losses during the third quarter of 2007 were about evenly split between widening credit spreads on the value of the company’s credit guarantee activities as well as the impact of declining long-term interest rates on the value of the company’s derivatives portfolio.
If it’s unable to raise adequate capital, the company said that it may consider such measures in the future as limiting growth or reducing the size of Freddie’s retained portfolio, slowing purchases into its credit guarantee portfolio, issuing additional preferred or convertible preferred stock and issuing common shares.