Emotional Memory

Paul McCauley from pimco was on Bloomberg(cnbc too) talking about how Paulson had to "Show us the Color of his Money". and the Pimco had picked up much of the Fanny freddy Debt, because the value had gone so far ot of whack.

He sounded like Dubja did Pre-Iraq. All boastful and full of hubris, "Calling Pauson's bluff".

For those of you who have ever had something bad happen, Like a Car Accident, or say a major breakup from a significant Other. You know that, for Months you relive the experience. Every time you step into a car, you have that Fear. and Periodically you lay in bed and relive the experience.

I wonder if that is what the market is trying to do, Relive the Fanny freddy experience. Now Certainly they have a ton of debt to roll over.... but it sounds like Pimco is picking it up, and some other people.... But to sell it at a profit to the treasury?...... Mother market says it either has value or not... Pimco wants to buy it... that is the value.

Certainly, The Shares could go to 1.50...Why should treasury care about the share price, and why buy Preferred shares, The best thing is to buy the debt at a Premium.

In fact Why not buy the Debt at 5% and sell Treasuries back to the market at 3.50%... The treasury should just play that spread, Fanny Freddy Debt, to Treasuries. Treasuries will never trade above Fanny Freddy Debt. Market force will force the two together, and that is a good and a bad thing. Brings up perceived Treasury risk, brings down Fanny Freddy risk, Reduces the cost of Mortgage borrowing.

But like I keep saying, Just cause I don't get it.... Doesn't mean it won't be a legit worry in the market.