Freddie Mac (OTC:FMCC) Relies On Investor Optimism and Some Promoting

Its first days of trading on the OTC market were hard for Freddie Mac (OTC:FMCC) stock and the recent good news received some promotional support to make the recovery signals look stronger.

Freddie Mac moved up again after the 52-week bottom on its first day of trading on the OTC market and after being oversold more than a month. Yesterday the price surged another 21.68% up to a close at $0.41 and the trading volume remains above the average, increasing further to reach over 22 million shares traded. Though, it looks like not only the pure optimism for Freddie’s future has driven investor demand these days.

A stock promoting website disclosed yesterday that Freddie’s stock has received some support on its way up the hill. That promoter is sending daily e-mails to its subscribers and states that its affiliates may trade themselves the promising stocks being alerted. Despite the clear conflict of interests, obviously a large number of investors actually considered the high-growth potential of FMCC, probably on the bottom being already hit and on the bullish MACD crossover.

Though, the market is still not consolidated and thus one cannot really expect that a stable uptrend has begun. Moreover, regardless of the recent optimistic news, Freddie’s fundamentals do not seem to imply this as well. Financial results are not improving and it is not clear when and if they will.

Freddie Mac still operates under the conservatorship, which means the business is being strictly observed and directed by governmental authorities (the FHFA). That already implies that future actions by the government might not always be favorable for Freddie’s operations, and the still decreasing home prices and mortgage rates add to the uncertainty. Regardless of outside factors, Freddie Mac expects further credit losses, as its portfolio still contains large number of borrowers that owe more than their property is worth.

Yesterday it was announced that FHFA, as Freddie’s regulator, may try to make large issuers of private mortgage bonds, from which Freddie Mac and other mortgage companies have suffered immense losses in the past, responsible for that losses and for not doing proper due diligence. Such claims sound difficult to prove and it is open if Freddie may expect to receive back the money already lost.

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