Checkmate: Your Move Paulson

The chess game involving the GSE's seems to be hurtling toward a conclusion. If Hank Paulson let Bear Stearns' shareholders eat cake than Freddie and Fannie's shareholders might be about to get their just deserts.

Of course, the Treasury department remains coy....but the clock is ticking, and Barron's negative piece this weekend, which stated the semi-obvious, is taking its toll as the capital adequacy issues move back to the front burner:

``It is very, very likely to happen before the end of the third quarter,'' Ajay Rajadhyaksha, the head of fixed income strategy for Barclays Capital Inc., said in an interview. ``Without government help, we think there is very little chance of Freddie completing a significant capital raising.''

A rescue would include preferred stock with a seniority, dividend preference and convertibility right that would wipe out common stockholders, Barron's reported, citing an unidentified source in the Bush administration. Treasury Secretary Henry Paulson, who received the authority he requested from Congress to help the companies, has said a bailout won't be needed.

``We aren't going to comment on speculation,'' said a Treasury spokeswoman, Jennifer Zuccarelli. ``As the Secretary has said, we have no plans to use these authorities.'' Bloomberg

Richard Syron's appearance roughly two weeks ago on the Nightly Business Report was not very credible, but Hank and Richard bought time...for shorts to lay out more stock. And there is another loser here....

Hey Bill Miller, how u doin?

Legg Mason might want to rename the Value Trust fund “the Mule” given how stubborn Miller has been. While his performance over the past month has been stellar he is giving back some of the outperformance today as Freddie (FRE-NYSE) cracks $5, and the sordid GSE tale hurtles toward its inevitable conclusion.

Bill keeps buying the stock, recent filings show him buying another 30 million shares as he maintains his weighting near the top of his sheets.

Of course the Barron’s piece this weekend questioning the GSE’s has put Richard Pzena back on the hotseat..he has staked his reputation on his GSE thesis, but continues to find supporters in the investment community. If i am not mistaken he has actually received inflows of late and several respected money managers have been buying the battered shares of Pzena Investment Management (PZN-NYSE).

There is plenty of collateral damage here...but I am not sure how Hammerin’ Hank can pull a rabbit out of his hat here. But Pzena’s stock is up today, and if you want to buy the value stock of a value manager, here you go....
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PZN Six Month Chart...feeling lucky? Take your shot...and support one of your own, Wall Street

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Fannie, Freddie Fall as Barron’s Says Bailout Likely
Bloomberg
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