Martha Stewart (search) is gearing up for her day in court. Sam Waksal is gearing up for seven years in prison. Now more scandal on Wall Street could be threatening the red-hot housing market and the value of your home. Why? Freddie Mac (FRE), a major source of money for the mortgage market is under a criminal investigation for possibly cooking the books. Could this scandal put an end to the housing boom?
Mike Norman of the Economic Contrarian Update says Freddie Mac and its sister agency Fannie Mae (FNM) are enormously important to mortgage creation and are both helping to feed the current housing boom. He says every bubble needs a catalyst to burst and Freddie Mac’s trouble is the catalyst that will burst what he calls the current “housing bubble” bringing demand for homes and prices down fast.
Dagen McDowell of Fox Business News disagrees. She says even if regulators find faulty accounting at Freddie Mac it will not affect the housing market.
Wayne Rogers of Wayne Rogers & Co says both Freddie Mac and Fannie Mae were invented to provide liquidity to the housing market, and he doesn’t believe accounting issues at Freddie Mac will hurt that liquidity or the market.
Jonathan Hoenig of Capitalistpig Asset Management says market’s tend to anticipate news, and home building stocks, bonds, and REITs are all still very hot, so he doesn’t see any impending problem in the real estate market.
Hilary Kramer of A&G Capital says Freddie Mac isn’t going to burst the housing bubble. She says the bubble will burst when people can’t afford their mortgages anymore when interest rates start rising.
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Hilary's "No Lie" Buy: Medtronic (MDT)
52-week high: $50.03
52-week low: $32.50
Friday's close (6-13-03): $49.00
Mike agrees with Hilary. He likes the stock. Wayne’s neutral on the stock.
Wayne's "No Lie" Buy: Leucadia (LUK)
52-week high: $40.27
52-week low: $27.62
Friday's close (6-13-03): $38.28
Wayne owns the stock and so does Terry. Hilary is cautious on the stock. She thinks the company is in too many different types of businesses, and says it took a huge write-off over a three-year period in its insurance business, and those issues concern her.
Jon's "No Lie" Buy: John Hancock Preferred (HPF)
52-week high: $26.00
52-week low: $23.50
Friday's close (6-13-03): $25.74
Wayne calls this a “very secure investment” with a good income stream.
Mike's "No Lie" Buy: Merck (MRK)
52-week high: $60.48