Professor Elam

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FRE FNM dropped from S & P 500

ONe needs to realize that the mantra of buy and hold needs a lot of shoring up from time to time.

Charles Dow constructed the original Dow INsudtrials in 1896. today only GE is still on that list, all the other stocks have changed. Indeed, if the folks tha construct such indices did not constatnly change them the big 'gains' racked up over the years would not exist.  Read how FNM and FRE are being droped from the S & P 500.  Neither has the $5 billion in market capitalization that is required to stay in that index.  Replacing older poor performing stocks with newer companies showing big gains keeps these markets going up. Ironically MSFT was added to the DOW even though it does not even trade on the New York Stock Exchange. By the time it was added, its glory days of annual increases were behind it.

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2 responses to “FRE FNM dropped from S & P 500”

  1. Trey Avatar
    Trey

    I also read that eventhough the government is taking control of Fannie, they will still pay 3rd quarter dividends to the shareholders. Is that right?

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  2. Dennis Elam Avatar
    Dennis Elam

    I hvae not read that but the dividend on the stock will be a minor item compared to guaranteeing anunknown quanity of bonds. Clearly FNM ceased doing what it was supposed to do and assuemd risk beyond its charter. YEt theSEC never stepped in and did anything in terms of regulation. Now the gobvernment has to pay much more than if they had done their job in the first place.
    As I said in class and on another response, the better question is, should th egovt be guaranteeing all these mortgages or should this be a private enterprise effort? The latter would depend on judgement and integrity of operation instead of guvt guarantees.

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