Fannie Mae-No Politics (FNMA)

[kthomp19]

- next, I bought FnF common just days before the cship ... which was also just days after our trustworthy gov't told us they were sound

You truly were screwed by the government. You have my sympathy, for whatever that's worth.

- I have held on because I believe in the rule of law (maybe stupidly), but I'm realizing that I probably should swap some of my common for jrpfd as a hedge. Problem is, I don't know squat about comparing/buying the jrpfd - SO IS THERE ANY ADVICE ON WHERE I SHOULD START IN CHOOSING WHICH JRPFD's TO BUY? TIA for any advice (btw, I invest through Schwab and not sure if I would trust their advice on a matter like this)

Some platforms allow all juniors (both variable and fixed dividend rates) to be purchased, some only allow the fixed. One way to find out is to put in a buy limit order a decent amount below the bid (FNMAS trades around $6.40, so try a 100 share buy limit at $6.10): if you get an error then you probably just plain can't buy that series.

I can only buy the fixed dividend rate prefs, so I have spread my money around a bunch of them, buying in chunks when the price looks good. If a conversion to common happens based on par value, low dividend yielders should outperform. If dividends get turned back on, high dividend yielders should do better.

Some links that should help:
Fannie Mae Preferred Stock Circulars (at the bottom of the page)
Fannie Mae OTC Symbols
Freddie Mac Preferred Stock Information (has both links to circulars and OTC symbols)
OTCBB FNMAS Level 2 quote (replace FNMAS in the url with any other symbol, including FNMA and FMCC for the commons)

Good call on not trusting Schwab here. I think they would do something like my broker: advise me not to buy them at all.

- does anyone know if the warrants get 80% of pre-RRR commons, or post-RRR. If the former, would that make the gov't more sensitive to diluting themselves if the RRR is draconian for the common?

The warrants are "magic": they give Treasury 79.9% of the commons no matter when they are exercised. So if a junior pref to common conversion happens before the warrants are exercised, even current junior pref holders could get screwed by the warrants.

That said, the existence of the warrants is, in my mind, a great positive (!) for current common shareholders because it gives Treasury an incentive to not dilute the commons too heavily.

- Finally, there appears to be 4 possible sources of dilution: warrants, recap, jrpfd conversion and, god forbid, srpfd "repurchase". We have been crushed in the courts, but those efforts are far from over and I find it a bit difficult to believe a RRR that dilutes common to likely less than 5% would be possible while all the existing suits remain in play.

If a senior pref to common conversion or "repurchase" happens, god help us all.

My likely scenario has the juniors converting to end the lawsuits, but it has to be voluntary so they will need to get a good enough deal to play ball.