One thing I've learned from the market. Figure out what is the logical thing, and do exactly the opposite. Works everytime!!! Heck, there is still old GM stocks trading at huge volumes. Talking about certified worthless!
WASHINGTON (AP) -- Investors are still trading common shares of Fannie Mae, Freddie Mac and American International Group Inc. by the billions, even though analysts say their prices are almost certain to go to zero.
All three are majority-owned by the government and are losing huge sums of money. The Securities and Exchange Commission and other regulators lack authority to end trading of stocks in such "zombie" companies that technically are alive -- until the government takes them off life support.
Shares of the two mortgage giants and the insurer have been swept up in a summer rally in financial stocks. Investors have been trading their shares at abnormally high volumes, despite analysts' warnings that they're destined to lose their money.
"People have done well by trading them (in the short term), but when it gets to the end of the road, these stocks are going to be worth zero," said Bose George, an analyst with the investment bank Keefe, Bruyette & Woods Inc.
Some of the activity involves day traders aiming to profit from short-term price swings, George said. But he said inexperienced investors might have the misimpression that the companies may recover or be rescued.
"That would be kind of unfortunate," he said. "There could be a lot of improvement in the economy, and these companies would still be worth zero."