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We are getting into Fannie Mae (NYSE: FNM) this morning.  After what appears to be a recent bottom we are seeing confirmation of upside momentum in Fannie Mae (NYSE: FNM):

Recent bottom in Fannie Mae (NYSE: FNM):

Volume has been building in Fannie Mae (NYSE: FNM), which is showing us strength:

Stochastics for Fannie Mae (NYSE: FNM) are also in excellent position for a continued move to the upside:

Our daily chart is showing upside momentum:

Stocks to Watch for Monday September 8

Bond manager Bill Gross wants to spread the bailout wealth. Gross says in a commentary posted on the Pimco Web site Thursday that the government must “open up the balance sheet of the U.S. Treasury” to support Fannie Mae ( FNM ), Freddie Mac ( FRE ) and, in a new twist, “Mom and Pop on Main Street U.S.A.” as well.

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Barron's is portraying a "curtain call" in store for shares of Fannie Mae (FNM) and Freddie Mac (FRE), which fell over 20% each Monday on concerns of insolvency.  Barron's suggested that the government would be likely to bail out the two government sponsored entities [GSEs], wiping out its equity holders, preferred, common and even subordinated debt holders.  Both of these stocks are near multi-decade lows and have dropped over 90% since 2007.

Government officials are likely seeking to avoid a full-fledged takeover of the companies, said Bert Ely, an Alexandria, Va.-based banking industry consultant and a longtime critic of Fannie and Freddie. More likely, he said are less-sweeping moves to calm rattled debt investors.

Those include having the Federal Reserve or Treasury Department lend to the companies. A government purchase of shares, he said, is "the step of last resort."

We have been saying to steer clear of the Fannie/Freddie duo for quite some time now. It’s good to see that Barrons seconds our thoughts as they put out a pretty hard-hitting piece in their weekly issue over the weekend. A bounce in those stocks was inevitable, but it appears that it was short-lived and it’s finished.

This little blurb from Barrons says it all and underscores our bearish views on the companies:

"The almost inevitable government recapitalization of Fannie Mae and Freddie Mac will likely wipe out investors—and management," Barron's magazine says.

Assuming their assets were liquidated now, based on their fair-value reporting, Freddie Mac's (FRE) net worth would be -$5.6B, while Fannie Mae's (FNM) would fall to just $12.5B, from $36B at year-end.

Wall Street declines on Freddie Mac loss

Stocks retreated Wednesday, a day after a big rally, as troubled mortgage financier Freddie Mac reported a larger-than-expected second-quarter loss and touched off fresh concerns about the financial sector.

A lesson I learned from the Bear Stearns (BSC) fallout was that if you get into a stock when it hits rock-bottom, your investment can only go up. While I was a little late with the Bear Stearns opportunity (when it briefly traded at $2 and change); I see a potential opportunity for me (and like minded investors) to make good on the now notorious: Freddie and Fannie.