Should i sell fnm right now?

Question

I bought it at 12.25 and now it's lower than 5. :(

Answer 1

I think you made a horrible decision. There is much uncertainty with the fate of fannie and freddie, even though they continue to reassure the public that they will not require additional capital from the Fed. (They are far more sensitive to even a slight rate of write-downs than other lenders since they guarantee half of the nations home debt).

Some have implied that, should fannie or freddie require additional funds, shareholders will be wiped out (that is, s******g the shareholders means taxpayers take a lesser hit). I have no good feelings about this situation, and I know that the government will not allow fannie and freddie to fail; but I have no assurance that the shareholders won't get screwed if those two enterprises get confiscated by the government.

What should you do? I think, since you've already lost this much, put a stop limit at just below the lowest support level and pray it goes up a little. If you get a $7 bid, get rid of it. This is not a bottom, nor an investment.

So long as you do not hear that they "need capital" or "credit" from the government, you should be relatively safe from being wiped out.  

Answer 2

Not anymore, since you have already lost significant portion of it, I would now wait and ride it out. It might take some time for Fannie to come up to the purchase price (if at all). It is not going to stay this low.

Ride it out.