Even though Fannie Mae and Freddie Mac owe the government nearly $100 billion and must pay massive dividends each year to the U.S. Treasury, investors are piling in. FRE is up 181% and FNM is up 124% this year (1/1/09 - 8/24/09).
As the Washington Post points out, there is not much that is rational about that. ”It’s very hard to come up with scenarios where they’re worth any money,” Bose George, an analyst at Keefe, Bruyette & Woods, said of Fannie and Freddie.
These are just a couple of the many examples of the disconnect that frequently exists between stock prices and company fundamentals.
