Fannie Mae Preferred S (FNMAS)

[Donotunderstand]

tainted

exactly

the rightful owners are equity to include common

assume a new and true BOT or BOD is created for an ongoing concern called F and F .... OUT of cShip

that company gets say 90 billion or whatever from the over 10% payments - maybe more ?

what do you think the BOT would do with that money

three choices are available

pay it to the Treasury - if still needed - to buy out of the preferred share obligations

keep it to build up capital as an ongoing concern as it will need a ton of capital

give it out to preferred share holders as if those preferred shares were cumulative

Somehow I think the first two are 100000000 miles ahead of the third

i.e. only when the Sr Pfds are discharged and then only when the new F and F are fully capitalized will any profit be declared in the true sense of profit - available for distribution

That is not around the corner - and when it happens - yup pfds will be paid first - and may be the only stock to get dividends for years

I hold preferreds with common because there may be a wind down of F and F - even as that looks less likely

If F and F (FAIRHOLME) wins the case - and big money is sent to F and F .... and they sit on it to increase capital .... and then they are legislated into wind down ..... then that money would go to preferreds TO BUY THEM BACK

That would use up all of the cash IMO - and would likely get close to face value on pfds and leave common with nothing

So - wind down with cash on hand from a court case is a win for preferreds but not common (if any equity win)

So - no wind down - but continued ongoing concern - then the value of the common will jump a lot more (as a factor of current price) then the value of preferreds ((which can be called back at face and likely will not trade higher - a worry I want to have)

sorry if that did not make sense but I hope it did as to why hold both -- as in different unfolding scenrios may treat common and preferred differently. In brief - a slight win will benefit preferreds and not common. A complet win benefits common more then preferreds

A loss in congress and courts and we all lose

I hold both