Tuesday, September 30, 2008

Nine Years Ago

Here's an article from the September 30, 1999 edition of The New York Times called "Fannie Mae Eases Credit To Aid Mortgage Lending."

(Emphasis Added)
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

. . .

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

Hmph. Read that phrase "government-subsidized corporation" again, with emphasis on "government-subsidized." I also recommend dwelling a moment on the phrase "government rescue."

Here's my new investment strategy:

  • Learn about New Federal Regulation X (X = issue du jour).
  • Figure out the intended and unintended logical consequences of NFRX. Not hard--just engage the gray matter.
  • Invest my money accordingly.

For example, if NFRX is going to accidentally (hmph!) or unintentionally (double hmph!) result in a shortage of rubber bands (to use a stupid business school-type of example), then invest heavily in rubber band alternatives. Or short rubber band companies. You see what I mean.

As long as we as a nation accept such regulatory meddling in the markets, then I don't see how this strategy can possibly fail. Not a snowball's chance.

In 10 years I'll let you know if I was right. :o)

Via Brendan, who found the NYT article and who also hopefully likes my (our) new investment strategy idea!

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