Fannie Mae (QB) (FNMAS) News

Fannie Mae Preferreds Offer Election Opportunity
https://seekingalpha.com/article/4723054-fannie-mae-preferreds-offer-election-opportunity

Summary
Preferred stock of Fannie Mae and Freddie Mac should rise sharply if Donald Trump wins.
Recent prices are out of line with the election odds.
I estimate the potential gains and losses for investors in the immediate aftermath of the election based on the 2016 and 2020 patterns.

In July, I wrote about why junior preferred stock issued by Federal National Mortgage Association (OTCQB:FNMA) and Federal Home Loan Mortgage Corporation (OTCQB:FMCC) were a good bet in the event of a Donald Trump victory in November and possible recapitalization.

The article received more than 100 comments, with some disagreeing with my thesis that a second Trump administration would release the two mortgage guarantee firms from government control, since it failed to do so the first time around.

One difference is the Trump team would no longer have to surmount obstacles such as the objections of Mel Watt, the anti-release head of the Federal Housing Finance Agency, for much of the term. Legacy agency directors are no longer an issue due to a Supreme Court decision that allows presidents to replace such officials before their terms end. Trump blamed Watt in a 2021 letter to Senator Rand Paul urging "full privatization."

The Wall Street Journal recently reported that Trump allies including economist Larry Kudlow are working on a privatization plan.

In this article, I want to go beyond the July one by quantifying the expected gains and losses in the immediate aftermath of the election.

While the politics were complex in the immediate aftermath of the 2008 conservatorships, the Democrats' wish to keep them in government hands has been clear since the Obama administration imposed a net worth sweep on the companies' profits in 2012, requiring them to return virtually all profits to the Treasury.

After a period in which some Congressional Republicans seemed to favor abolishing the two mortgage giants entirely, the Trump administration made its position clear by ending the net worth sweep in 2019, allowing the companies to rebuild capital.

There have been two elections since the sweep was imposed, with one win for each party, and the stock prices have reflected this.

The following chart shows the closing prices of some highest-volume preferred issues the Friday before the 2016 and 2020 elections, and again at the close of the inauguration week the following January. The effect on the share prices was almost symmetrical.

Issue Coupon Liq. Pref. Recent price % of Pre-2016 2017 Inaug. % gain Pre-2020 2021 Inaug. % gain
full value election price price election price price
FNMAS Floating 25 4.31 17% 4.09 8.85 116% 9 4.44 -51%
FNMAT 8.25% 25 3.92 16% 4.05 8.58 112% 8.2 5.02 -39%
FMCKJ Floating 25 4.189 17% 4.05 8.28 104% 8.8 5.52 -37%
FNMFN Floating 50 6.48 13% 6.8 14.75 117% 14.31 9.06 -37%

Sources: Yahoo Finance, author's spreadsheet

Let's use FNMAT as an example. Note that the recent price of $3.92 is similar to what it was when Barack Obama was president, just before Trump scored his upset victory.

In the next three months, the price more than doubled, to $8.28 on the Friday following Inauguration Day. This is the same party-in-power swap that would occur this year if Trump triumphs.

But when Democrat Joe Biden won in 2020, the price declined 39% to $5.02 by Inauguration Week. The path was bumpy, as investors were unsure of the outcome until Congress confirmed the result in the early hours of January 7, 2021.

With the current odds of the race around 50-50, this looks like a straight-up bet. If Trump wins, a doubling is likely before the inauguration.

Risk Factors
Since the result wouldn't be as much of an upset as 2016, the move could be somewhat less.

If Kamala Harris wins, expect prices to fall nearly in half as investors will likely have to wait at least four more years for a recapitalization.

A double from 4 to 8 is worth twice as much as a halving to 2 costs, so the odds seem favorable as long as Trump has better than a 33% chance of victory. (If there were three elections and Harris won twice, the $4 total loss would equal the gain from the one Trump victory.)

In theory, one could hedge against a Harris victory by buying a stock or ETF that would likely benefit from continued Democratic control of the regulatory agencies, such as in renewable energy.

Note that this analysis only covers the period until the inauguration. Once the new president takes office, price changes will depend on the progress (or lack of same) toward recapitalization, which likely would see them converted to shares of a new common issue at liquidation preference value.

FNMAT is only selling at 16% of liquidation preference, so this would mean a gain of sixfold. Former Federal Housing Finance Agency director Mark Calabria has estimated it will take two to three years for the recap to take place.

In some ways, my analysis is similar to that of SA's main expert on the GSEs, Glen Bradford. However, I view the underpricing as being natural because of the risk-aversion of the market as a whole, and thus believe the stocks are unlikely to rise significantly until after the election unless Trump's odds improve to near-certainty.

Conclusion
Investing in Fannie and Freddy preferreds is risky, but if you think Trump has at least a 50/50 chance of winning, it could make sense to buy them as a short-term play, regardless of whether his administration ultimately succeeds in returning the mortgage insurers to private hands. If you also think Trump would complete the recapitalization, the trade would become a long-term investment.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

This article was written by
Vlae Kershner

Preferred stock is a bunch of garbage. Best to own the commons. Sky is the limit. So go ahead open your wallet and fill it up with the commons. You’re gonna love the way your brokerage account looks I guarantee it.

If the right people are put in place in his cabinet then yes I hope so and it's looking like that. The polls are showing a good win for shareholders

Whatever u say faduhduhduhdummy.

It was rhetorical...
Sure it was, Pumpkin!

You are always trying to find out what those evil preferred shareholders have to say so you can rant about it into the ether.


Commons to the moooooooooooon!

lol, trust me, I could care less. 😂🤣. It was rhetorical, I knew the answer dummy. I have no faith or trust in anything u say or do.🐐🐐🐐🐐

You insult me and then ask me to do you a favor...LOL
Get bent!

funny how ur one of the few lemmings who can see his junk on X. I guess u gotta believe in fantasies??? I can only see what u post, cant see the rest, can u post the whole thing????

From the CEO of Fannie Mae: How Sound is Fannie Mae?
Fannie Mae has been in conservatorship since 2008, following the housing crisis. But Almodovar said that today’s Fannie Mae differs from the one before the Great Financial Crisis. For one thing, the agency’s development of…— Tim Pagliara (@timpagliara) September 5, 2024

Bloomberg interview with John Paulson...at the 9:30 mark he is asked if privatizing FnF would be a potential accomplishment in Trump's next term.
https://www.bloomberg.com/news/audio/2024-09-05/bloomberg-talks-john-paulson-podcast

this stayed green today, that is a good sign, for now anyhow. almost everything in the market was RED.

came to see what Ps were up to, not so much different then Cs, and to note wise guy is gone on commons, if only i could do more than one post per day, nah who cares. I thought maybe he was over here, guess not.

Nice run today for preferreds...polls have turned in the right direction.
Bought more FMCCG since it is always lagging behind.

Oh wow. Junk stock the preferreds. Headed to one cent. Bradturd should take notice. On the other hand commons headed to the moon say $325 plus or minus a few cents. Big time turd the preferred shares.

they go up and down together, it really just a question of % difference, if u had the time it could be traded. on the way up i mean

Probably those numbers will reverse shortly.

Now Fnma is down 14% and Fnmas down 3%.

actually FNMAS is down same % as FNMA

Next stop five cents.

Oh wow. Massive drop in the premarket. Good. Poor Bradford. Yeah too bad.

LOL.

Sherwin williams to da rescue...4.9 t0 5.01 in minutes and little volume🤣

No punches pulled straight forward assessment. Buuut I believe Ps, as in every other company that has Cs and Ps, has value according to the health of the commons, which is supposed to reflect the value of the company. If commons were around Par value, Ps would be worth Par territory also. thats how the world of stocks works, no matter what the KTCarneyCircus thinks says or does.

The preferred shares are pure garbage. No value. Useless really. Crap. Dumpster. Landfill material. Turd. Oh wow.

A president doesn’t need congress to release FnF. They didn’t need congress to put them in CS, they don’t need them to get them out.

Someones loading up on Freddie $50 pr JPS today ! low volume and 4 of the stocks have tanked by 60 to 70 cent each ! looking at the trade volume these are buys not sells. Someones wanting them!!!!!
FMCGG
FMCCI
FMCCH

Why would you say that! It's a guess right? It won't be anywhere near those highs in March 2025, and that's a guess too!
If DJT wins the election in Nov 6th sworn in Jan 6th, then it's going to take a few months to right the ship and start the ball rolling! Hell it might take 3 years to see any action as there's more important things that need taken care of first!

The latest polls show the GOP is going to win the Senate back and most likely the house again. But still the filibuster is one hurdle. So in order for there to be any action for congress on Fannie Mae and Freddie Mac it's going to take time. Even if the POTUS signs an executive order it's still going to take time!

Absolutely!!! Or more, I don’t subscribe to the Com v Pref bull💩. I hope prefs go to the moon, coms will be on that rock too.

To be fair, if so, so will FNMAS.

Wonder how many preferred

FNMAS hit $6 a few minutes ago...need my 50's to catch up

Marked...

I believe you are quite correct. Best to buy the commons only.

Absolutely, I never got this prefs v com BS.

After today his resolve to clean this country up will amplified.

Com’s will be 50-100 by March 2025. Mark this post.
I don't see that but I pray you are right...I would like to see both preferred and common holders do well.

Com’s will be 50-100 by March 2025. Mark this post.

Ps also spiked at days end. so its GSE wide something driving it.

Preferreds turn to fall to 3.xx started..

JPS are rallying! Is it because the saga now shows that JPS are the best investment. Words of wisdom saying that a conversion of some sorts is expected but only a haircut for JPS could be on the cards. Makes for a better investment for sure

Very good day for FNMAS. Slow trickle up continues and broke $5...20% Par

R/S of common in order to uplist to a major exchange?
JPS , What to do with them all? Nothing? or a reduced share of the companies? Still at 50% on todays prices it's a far better beat than common shares
I never thought in a million years the NWS would withstand legal scrutiny, so any of the various scenarios that have been put out into the ether would not surprise me.

My guess is the govt, embolden by its numerous court victories, will not be kind to commons in any manner so I have swapped a majority of mine for JPS.

R U Sure? Wasn't it meant to stop Feb 4th 2024 ?? If this is continuing to grain interest that was Judges plan for them to settle and not drag this out!!
Not sure where you got the Feb 4th date from...My understanding is Lamberth granted interest to shareholders going back to August 2012 until final judgement is entered.

On October 24, 2023, the Court ruled that the Fannie Mae junior preferred shareholder plaintiffs were entitled to prejudgment interest, and awarded simple interest on the $299.4 million damage award, accruing from the date August 17, 2012 until the date on which judgment is entered, at a fixed rate of 5% over the Federal Reserve discount rate as of August 17, 2012. Fairholme Funds, Inc. v. Fed. Hous. Fin. Agency, No. 1:13-cv-1053 (RCL), 1:13-mc-1288 (RCL), 2023 WL 7002665, at *1, 9 (D.D.C. Oct. 24, 2023).
https://casetext.com/case/fairholme-funds-inc-v-fed-hous-fin-agency-5/

With any possible release one must ask the questions :

R/S of common in order to uplist to a major exchange?
JPS , What to do with them all? Nothing? or a reduced share of the companies? Still at 50% on todays prices it's a far better beat than common shares!

R U Sure? Wasn't it meant to stop Feb 4th 2024 ?? If this is continuing to grain interest that was Judges plan for them to settle and not drag this out!!

Really do they want to keep draging this out now the interest has stopped on the award?
Not following...interest hasn't stopped on the award. Interest is "accruing from the date August 17, 2012 until the date on which judgment is entered at a fixed rate of 5% over the Federal Reserve discount rate as of August 17, 2012."

We aren't going to have final judgement for quite a while...We are closing in on a year since the favorable jury verdict and we haven't even gotten to the appeals part yet. I expect to see 3-4 years of interest on that award when all is said and done.

And still the delay for a final end to this ruling judgement and a payout for shareholders. Really do they want to keep draging this out now the interest has stopped on the award?

I bet investors are starting see the out come from common to JPS and that any consolidation for release will be a hair cut for JPS and below a $1 for commons .

If it plays out to this tune then consider JPS will be 50% of par before Nov 5th

New 52 week high...we haven't seen these prices since the SC screwed us on 6/23/21

Reminds me of the price swings before the sweep. Let er rip potatoxhip.