Investors Dump Shares of Freddie Mac & Fannie Mae

Barrons is portraying a "curtain call" in store for shares of Fannie Mae and Freddie Mac, which fell over 20% each today on concerns of insolvency.  Barrons suggested that the government would be likely to bailout the two government sponsored entities (GSE's), wiping out its equity holders, preferred and common and even subordinated debt holders.  Both of these stocks are near multi decade lows and have dropped over 90% since 2007.

There is a concern over Fannie Mae's ability to withstand further losses in their sub-prime, Alt-A, and interest only loans.   

From my perspective, as a technical analyst, here are my thoughts.  I have seen a handful of stocks over the past 10 years exhibit the strength and speed of deterioration that has been seen in Freddie Mac and Fannie Mae.  Most of them are now 0.  There has been relentless selling pressure, couple with volume all the way down from 80 to 6 today.  There have been short squeezes along the way, which have clearly allowed larger traders to unload their shares.

These stocks are both going to 0 in my honest opinion.  Forget about what you hear fundamentally on these companies.  The market is telling us that they do not see a future in these stocks.  We have seen countless 20% down days in these stocks now and all with huge volume.  In a way, Fannie and Freddie are selling off like Enron, Worldcom, and Global Crossings did a few years back.  It is not controlled, it is a run, not walk, to the exits type of move. 

Notice the volume in the chart below.  There is a strong increase every time it makes a spike lower.  These spikes are on massive volume.