CollegeStock.com - The Only Blog for Your Bottom line -The Dean

Risk premiums for Fannie Mae (FMN) and Freddie Mac (FRE) debt rose this week as the spread between the yields on the 5 year bonds versus Treasury notes widened.    Investors began to question if Treasury Secretary Henry Paulson will step in to bail out the Government Sponsored Enterprises (GSEs) as the government reiterated that it doesn't plan to step in to the help the mortgage giants. 

On Monday, August 18^th's close, the spreads had widened 7.5 basis points to 103 basis points, the highest since March 17 according to Bloomberg data.  Fannie Mae and Freddie Mac equity performed poorly as shares have plunged 28.7% and 24% respectively, over the past two trading days. 

Treasury Secretary Paulson received new authority to make unlimited purchases of the stock and debt of Fannie Mae and Freddie Mac if he deems it necessary, as part of the new housing bill signed into law last month.  Uncertainty increased in the markets though when a Treasury spokeswoman stated on Monday that, "As the Secretary has said, we have no plans to use these authorities." 

Chairman Christopher Cox of the Security and Exchange Commission announced today that the SEC will propose new rules which would be focused on restricting naked short selling and market manipulation.  Chairman Cox told reporters in Washington that, "Our proposals will be designed to ensure the smooth functioning of markets and to support equally the important role of bets on the upside and the downside." 

Previously, the SEC announced temporary measures to limit short selling on Freddie Mac (FRE), Fannie Mae (FMN), and 19 brokerage firms which expired one week ago today on August 12.  During the four week period when the emergency ban was in place, the 19 financials gained 26%.  Since the temporary rules have expired the S&P 500 Financial Sector Index is down 10.8% and is down nearly 50% from its high in February of 2007. 

Chairman Cox stated that the SEC was examining the effects of requiring traders to actually arrange to borrow stock shares before selling them short.  The SEC is expected to announce new rules which will be aimed at curtailing naked short selling in all companies, not just the previously affect 19 companies. 

Once again I got a bit too trigger happy. Yesterday I covered my WFC short for an +8% gain and sold my SKF (Ultrashort Financials ProShares) for a +6% gain but as you can see from today’s action, I left a lot of $$$ on the table.

Fortunately, as soon as I was 100% cash, I bought DIG (Ultra Oil & Gas ProShares) at $76.34 and already sold today for another +6% gain. Not too shabby, but these quick fingers are still limiting profits.

Well, the time has come - Yahoo (YHOO), Microsoft (MSFT), and Google (GOOG) are all being sued by an entire country. The three American technology giants were all slapped with lawsuits yesterday from the Indian Supreme Court for attempting to profit off of Indian citizens’ desire for male children.

In India, nearly 900,000 unborn girls are killed every year in an effort to control the sex of infants. The advertisement of products and techniques necessary to do this are expressly outlawed under India's Pre-conception and Pre-natal Diagnostic Techniques (Prohibition of Sex Selection) Act.

Technically, the companies themselves are not producing the advertisements, but they are allowing vendors to display them on their search engine websites for any average joe to see. Microsoft and Yahoo have not yet commented on the situation, but Google is standing its ground.

"We don't hold the telephone company liable when two callers use the phone lines to plan a crime," says Rishi Jaitly, a policy analyst at Google India. "For the same reasons, it's a fundamental principle of the Internet that you don't blame the neutral intermediaries for the actions of their customers."

So how will this effect the earnings of the mega-companies? The Dean thinks that that all depends on what Americans think about the ethics surrounding sex selection politics in India. But definitely brace yourself for a possible uprising from the religious right, which could lead to a hasty witch hunt against the three corporations.

As you may have heard, the market sucks right now. As an investor, how can you continue to make money despite the economic downturn? Here are 3 simple things you can do to protect your funds and keep your cool when it seems that all is lost.

(1) Remember the big picture.
When making investments, you can’t listen to every little hem and haw you hear on ABC about the current condition of the stock market. TV personalities make their living off of pretending that every rise and dip is going to be the end of the world, so just take a step back from the evening news report and relax.

(2)Take advantage of tax write-offs.
Money Magazine says that “if you sell stocks, bonds or funds in taxable accounts for less than you paid, you can subtract the loss from gains elsewhere in your portfolio. If you have more losses than gains, you can write off up to $3,000 of the excess against ordinary income.” Sweet.

(3) Do your research.
This isn’t the first time that the market has gone sour, and it won’t be the last. Try picking up some classic investment literature that was written for the purpose of doling out sage advice to harried investors. Some good places to start are "The Little Book of Common Sense Investing" by Vanguard founder John Bogle and "Your Money and Your Brain" by Jason Zweig.