Freddie, Fannie and AIG also benefited from the upsurge

Shares of Fannie Mae, Freddie Mac and AIG – the three financial institutions swallowed up by the U.S. government in the wake of the crisis last year, soared over the past three weeks and became the fastest appreciation securities on the New York Stock Exchange in early August.
Insurance conglomerate AIG, which for almost collapsed in September, with growth of 150% shares in the period after 3 August. Managed by state lenders Fannie and Freddie have recorded a jump of nearly 250%. „Such shares directly exploded recently,“ said Andrew Wilkinson of Interactive Brokers.
The combination of the circulating rumors, created momentum and low cost led to drastic jump, raised questions among analysts. They note that the government, holding senior preferred shares in three companies will receive dividends and principal payments before holders of ordinary shares. In the case of Fannie and Freddie amount of obligations to the state reduced the likelihood of ordinary shareholders to report profit growth in the near future. „The amount of movement in prices surprised many people,“ says Joe Kinahan of Thinkorswim.
The rise in Fannie and Freddie is due in part to stabilize the U.S. housing market and recent speculation that the White House would extend the tax credit for people who buy a home for the first time.
Trade was aided and authoritative analysis on long-term potential for both the lender gains produced by John Hampton of hedge fund Bronte Capital, investing in preferred shares of both companies.
Rising pressed busy with short sales, which also set a drop in the shares of the three financial institutions. These traders were forced to buy shares to close positions and to minimize losses. As a result, trading was unusually brisk.
During a session last week, almost all publicly accessible AIG shares changed hands. This is a major activity of daily trading – certain items are opened and closed within one day. Shares of AIG walked around $ 33.64 after tip they were nearly $ 1500, while those of Fannie and Freddie are near $ 2 to $ 66 from a peak in 2007

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Kiran Stacey
Sasuke Sholts