"Treasuries fell amid speculation the U.S. is close to reaching a plan to help troubled mortgage finance companies Fannie Mae and Freddie Mac, easing the haven appeal of government debt."
Here are the first thoughts that come to mind:
- This is definitely meant to spur the market higher into the election. In the short term the S&P futures are up 15 but will it work longer term?
- While this does avert a disaster, does it change anything in the real economy?
- Judging by the market action today some market players had this information in advance. That's wrong.
- Will this be enough to get the XLF (financial spyder) to break out. In after hours the XLF is at 22.42 and flirting with a breakout.
- If the XLF breaks out will hedge funds cause a giant short squeeze in the financials? They are very short the sector and don't have a high tolerance for pain right now.
- Fannie and Freddie's combined market cap is 11 billion dollars. Even if the plan leaves the equity holders of Fannie and Freddie with nothing the positive liquidity effect on the financial system should dwarf the loss to shareholders.
- The more important thing to look at will be how it effects preferred shareholders as many financial companies hold preffered stock.
- If this does take the market higher I will want to short the market at some point.
- The only question is when.