Fannie Mae Preferred S (FNMAS)

[big-yank]

H.R.4913, the Mulvaney bill, opens new impetus for improved valuation of preferred FNMA stock series. Under Mulvaney, warrants are kept by government and converted to shares and 80% dilution. Based on common share trading values before conservatorship ($7.04 on the close of trading session, pre-UST announcement) FNMA would see a revised S/P of approx. $1.40/common share. Preferred shares would not see any dilution and should hold their present value.

This isn't a huge advantage, but... given a choice... I always prefer to avoid taking a 19% haircut on any portfolio holding. Preferreds offer a superior liquidation preference and a substantial divvy coupon upon exit from conservatorship at the 5% threshold of reserves against risk-assessed assets.

JMHO.