Fannie Mae Preferred S (FNMAS)

[44centsAKAchoccake]

This is a preferred board, not a common board. I don't really want this board to be inundated by commoners again. So, I'll focus on the preferreds.

I don't really know and I haven't looked at trading volume data, but I suspect that some preferred holders sold after Judge Lamberth's decision and locked in their losses. The preferreds tend to be illiquid so if someone sold big and there wasn't a lot of interest from buyers, then that might explain why the preferreds took a big hit. Obviously, the pounding we took in October was painful, but the situation is pretty far from hopeless.

I still feel that the preferreds are a good place to be. It's buy and hold, hold and hope, but FnF are profitable, have more than repaid taxpayers, and should do ok for the next 20 years or so (until the next round of stupidity and/or a systemic shock). Both, the Courts and Congress are extremely important going forward, but, really, Tsy and FHFA made the 3rd Amendment and they can change it. I'm afraid though it might go all the way to SCOTUS before the litigation ends. The Court of Claims might be our best bet. SCOTUS would be more likely to step in if they need to resolve conflicting decisions from the DC Court of Appeals and the Court of Claims.

My only thought on the commons is that I don't know how much dilution there will be. Exercising the existing warrants seems likely but it could be even worse than that. For example, they would need to raise $200 b [my best guess based on a 4% common equity ratio], so existing commoners could end up with 3% or 4% of FnF's total common equity.