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Freddie, Fannie and Financials…

9 September 2008 9 Comments

With the government bailout of the two enormous organizations known as Fannie Mae and Freddie Mac, the stock market got a huge boost yesterday. Let’s look at potential implications and impacts on the overall market.

With regards to direct implications of the bailout, the number one impact is the expansion of government and the expansion of debt on the government’s books. While the bailout was probably necessary, I hope (but have little faith) that the government will do everything possible to prevent the inter-dependence of financial institutions in the future. The fact that a poorly run organization cannot be allowed to fail because it will have a domino effect on our entire financial system is unacceptable. Unravel the inter-dependence so a single, poorly run company can fail. If this restricts growth to an extent, so be it.

It seems the only losers in the bailout are the stockholders of Fannie and Freddie. The stocks lost most of their value. I have read some arguments that the value of the dollar will be impacted negatively due to the increase in government debt.

With the boost in stocks (other than Fannie and Freddie), the other financials definitely rallied. Since buying the Ultra Short Financial ETF (SKF), I’m down considerably on this position. It’s a small position, but of course, don’t like to see any positions lose ground. I’m holding the position since I think the upcoming round of financial earnings reports will be pretty ugly.

Going In A Totally Different Direction

I’m considering selling my wife’s car. Does any reader out there have any advice on what car I should buy to replace the car we’re selling? I’m looking for the best financial move here. I’m looking to spend probably in the 15-20k range and will probably buy something slightly used. I would appreciate any thoughts on a direction in this purchase decision. Leave a comment! Thanks!


  • jrandom42 said:

    What kind of car are you looking for? What is its main role? Who’s driving it? Answering these questions can narrow down your choices(a good thing). After that, choices become more personal and emotional. MSN Autos is a good starting point after you’ve answered these questions.

  • kevin duffey said:

    I’ll be driving it. Looking at probably a 4 door sedan, possibly Toyota Camry. Also, I kinda am intrigued by Kia’s.

  • jrandom42 said:

    Forget the Kia’s, the Spectra and other models have had a myriad of problems.

    Take a look at the Hyundai Elantra. I got my 2007 Elantra for less that $15,000 (Including tax, license, and extended warranty). It’s been bulletproof reliable, decently sprightly in performance, and I’m getting 34-39 MPG in mixed driving. It’s pretty huge inside for a 4 door entry level car, and the sunroof and killer stereo has added a dash of fun to what is my commuter car. As always, YMMV (Your Mileage May Vary). Consumer Reports rate it the best combination of economy, performance and reliability. Right now, Hyundai is offering $1000 rebates on the 2008 Elantras.

    As for used cars, the Civic, Corolla, Camrys, and Accords are the tops in sales for good reason. They also command top dollar, also for good reason. The certified used models are intriguing, but that depends on your view of used cars.

  • kevin duffey said:

    jrandom: That’s great information. Do you know anything about the Hyundai Sonata? I think it’s the next one up from the Elantra?

  • MoneyGrubbingLawyer said:

    The best financial move is almost always an older car, but that’s rarely much fun. The Camry is an excellent (albeit a little dull) car- reliable, comfortable, well equipped. Kia has some interesting offerings right now (the Magentis and Amanti, in particular) at excellent prices, but the depreciation can be horrid.

  • torbjorn rive said:

    Look into a 2007 Yaris. And I’m not even joking. I’ve never owned a car, but have rented and borrowed several Yari(?) and love them. You’ll get one for under 12k – and the mileage is great.

  • kevin duffey said:

    ha, unfortunately i need a 4 door sedan I think. I need to be able to drive clients around on occasion. Plus, as I’m in the starting a family process, it kinda makes sense to have the room. Our other car is an SUV so I don’t think we need a 2nd SUV, but a roomy sedan seems like a good option.

    Curious to see if anyone has any opinion on the Hyundai Sonata.

  • jrandom42 said:

    The Sonata is a direct competitor to the Camry and Accord, at least that’s how Hyundai has positioned it. Hyundai pretty much put all its expertise and experience into it, because of the high level of expectations set by Toyota and Honda. It’s a good car, but personally, it just felt too big and heavy to me. The power steering seemed a little aircraft carrier like, and the mileage was only OK (with the V6), compared to the Elantra. But then, this is my personal opinion. The inside is cavernous, and well laid out. I didn’t like the leather upholstery, but I don’t like any leather upholstery. It did look good, though. Also, the Sonatas (and Elantras) come with ABS and side curtain airbags standard, and have a 5 Star crash rating.

    It gets an MSN Auto user rating of 9.4 out of 10, and this is from the owners. Consumer Reports gives it a 79 out of 100 rating. Right now, Hyundai is giving $3000 rebates on the 2008 Sonatas.

    If you like the Camry and the Accord, the Sonata is at least worth a close look.

    Check out MSN Autos to get further details.

  • jrandom42 said:

    The Sonata is competitors with the Accord and the Camry. I didn’t like it, because it felt too big and heavy, the steering felt kind of numb, and I wasn’t impressed with the mileage of the V6 engine, but that’s all my own opinion. However, those who liked the Accord and Camry do like the Sonata. They say it’s a worthy competitor, and with standard ABS and side curtain airbags, a decent bargain. It also has a 5 star crash rating.

    Check out MSN Auto on what the user reviews have to say about the Sonata. Right now, Hyundai is offering $3000 rebates on the 2008 Sonatas.