TL;DR
A Reddit user boasts huge gains on Fannie Mae and Freddie Mac stock, but a closer look reveals a risky bet driven by hype, overlooking crucial historical context and potential market pitfalls.
Story
“I tried to tell you. +345%” screams the headline. It’s the kind of boisterous claim that makes my skeptical antennae twitch. Let’s unpack this. Someone on Reddit claims they’re up big on Fannie Mae and Freddie Mac (FNMA) stock. They’ve been “buying and buying” since the 2020 election, betting on Trump pulling these mortgage giants out of government conservatorship. Now, they boast a 200% gain. But here’s where the rosy picture starts to fade. They mention the stock was once $85 a share. That was twenty years ago during a completely different market. It’s like bragging about how tall you were as a baby – irrelevant to your adult height. Currently, FNMA trades around $5, and while a +345% jump sounds impressive, it’s from a rock-bottom price after the 2008 housing crash, a crash these very companies helped fuel. This isn’t “to the moon” potential; it’s a slow, uncertain crawl back from the brink. The poster attaches their Schwab account as “proof.” Posting your gains online is like waving a red flag in front of a bull – except the bull is the market, and it often gores boastful investors. Remember the GameStop frenzy? Hordes of amateur traders piled in, driving up the price, only to see it crash and burn, leaving many with scorched portfolios. Plus, the poster mentions Bill Ackman’s involvement. Ackman’s a big-name hedge fund manager, and when he publicly talks up a stock, it sometimes means he’s trying to pump it up so he can sell high and leave others holding the bag. There’s also the massive elephant in the room – the government’s 80% ownership stake. They’ll eventually want to sell those shares, potentially flooding the market and driving the price down. Imagine trying to sell your lemonade on the same corner where the town’s biggest lemonade factory suddenly opens up shop – it’s not a good look for your business. So, while a 200% gain sounds great, there’s a lot more to this story than meets the eye. Be cautious of hype, especially in the volatile world of penny stocks and companies with complicated histories like Fannie and Freddie.
Advice
Don’t get swept up in the hype. Do your research, understand the risks, and remember that past performance is not an indicator of future success. A stock’s history matters, especially when that history involves government bailouts and market crashes.
Source
https://www.reddit.com/r/wallstreetbets/comments/1hyzlp2/i_tried_to_tell_you_345/