I took the other side of the Bill Miller trade (Aug 13: Bill Miller Continues to Boggle Me - Increasing Stake in Freddie Mac (FRE)) contending anyone buying was purely gambling and the end game would be for the common to be wiped out or close to it. Of course guessing the government's move is nothing like actually analyzing stocks in a normal environment, but this is not a normal environment. I contend what Bill Miller did was an act of desperation (gamble and go for the big win) akin to what some hedge funds have appeared to do as bets went against them - go in farther and deeper with more leverage. Myself, I've taken the completely opposite tact - in a market with no semblance of sense or direction/leadership I've made positions smaller, cash higher, and moved to higher ground trying to protect capital. Even if if means my performance looks shoddy of late and I don't "score" on a big gamble - the current positioning makes it impossible to really outperform the market but should also spare us from a complete battering. There will be times later to make lots of money, when things get easier. Until then, I won't be pulling a "Miller". Or an "Ospraie" (Sep 2: Ospraie Fund to Close)

Frankly folks, after living through 2000-2002 and personally seeing how destructive it can be on one's capital I don't understand the gambling mentality, but that's just me. I expect Fannie and Freddie stock to trade frantically and in crazy nature with wild swings - I'll leave that to the people who do their best work at slot machines. But I did say Freddie was the easiest short I've seen in a long while, and in "theory" it should be down 80% immediately. (not sure if theory counts for anything anymore) If you have a long term (ahem) time horizon and can handle 80% dilution, hey they should be great buys on the open Monday ;)

The Wall Street Journal has their take...

• The government's plan to take over Fannie Mae and Freddie Mac may help the housing market and boost the value of the firm's bonds, but it's a body blow to stockholders that include some of the country's best known mutual funds and biggest banks.
• Under the plan, the government will own 80% of the two companies, leaving common stock holders with the remaining 20%, or one-fifth of what they owned on Friday.
• Owners of the companies' $36 billion in preferred shares also fare badly.