Are Freddie, Fannie, Citi and AIG Really Risky Stocks?

The market was a bit quiet on Friday. The drop in the major indexes was small and the volume was even lighter than it seemed, as Citi, AIG, Fannie and Freddie once again made up over 25% of the NYSE's total volume.

The talking heads are noting that risk taking has come back into the market as traders bid up the prices of risky issues like FRE, FNM, C and AIG. But are these stocks really risky? All have been left for dead by the large traders, but somehow have survived. None of them are out of the woods completely, but the worst seems to be over for them. So perhaps they are really not as risky as some would have us believe. In any event, I own some shares in all of them (except for AIG, which I might buy on a pullback).

Another trade I did this week, which I did not mention earlier, was a purchase of 1,000 SOMX (Somaxon Pharma) at $2.46 a share. I have several biopharmas now at very low prices. If one of them pays off the way HGSI or DNDN did, I really will not care what the others do. It is kind of like having several call options that do not expire. These positions are such a small part of my portfolio, that we can buy them and wait for ages to see what happens. This is what we did with DNDN, which we owned for over a year before it made its spectacular move to the upside.