Fannie Mae-No Politics (FNMA)

[kthomp19]

What will happen is the NWS will end, risk capital will be raised over several years, the GSEs will be reformed with some form of explicit government guarantee that is paid for by the GSEs on an ongoing basis.

What evidence or reasoning do you have for these statements?

The first doesn't fit this administration's timeline. Mnuchin is committed to ending the conservatorships during this presidential term, and Calabria has talked about a sense of urgency. Neither of these comport with a multi-year timeline.

The second (explicit guarantee) requires Congress. That makes you just about the only one who believes Congressional action will actually happen.

We may see Fannie and Freddie Merge.

This is antithetical to the desire for more competition expressed by both Calabria and the administration. If this is to happen, it would have to be under a new president and FHFA director.

However, even if this plan takes a few years to implement, what is exciting is the street will price it into the shares immediately when confidence in the execution of that plan is established.

The problem with such a long timeline is that a new president can blow it up with his or her choice of Treasury secretary and FHFA director. Either of those is enough to cause the whole process to grind to a halt.

These shares will likely be worth between $12 and maybe up to $25.

Since your hypothetical situation is based on something that won't happen (according to Calabria and the administration), the share price estimates are meaningless.

This is also a great opportunity if they resume dividend yield. How often in the history of the market can you acquire 5%+ coupons for under $10 per share? Amazing really. The investment may just be to hold these and soak up the dividends each year.

A share price under $10 is no barrier to dividends, even at 5+%.

If you are going to invest mental energy, invest it in repeatedly contacting your elected officials, journalists, attorneys, and drumming up social awareness. That is far more powerful than you realize. People in Washington often want to stay in Washington. We've seen time and time again where they must betray their special interests to ensure they get re-elected. The GSEs are a political "investment" so you need to engage in the politics to move the needle.

By far the best part of this post. It's spot on. We want our front to appear educated, enlightened, and erudite.