Fannie Mae-No Politics (FNMA)

[kthomp19]

I honestly don't like sharing numbers because I'm not a fortune teller and I don't intend to sway anyone to believe my numbers are the right numbers. No matter how much math I put into it, I am pretty certain that my model, and all other predictions on this board are likely to be wrong.

Without some sort of mathematical model, how can you possibly compare the merits of an investment in FNMA or FMCC to the juniors or any other possible investment out there?

I wasn't on this board back then, but prior to 2012 I highly doubt anyone was predicting the NWS. I don't know how the Conservatorship will end, but it may be equally unpredictable.

The NWS was not an apocalyptic event to share prices. The Supreme Court's Collins ruling was far worse. If the end of conservatorship is as positive as the NWS was negative, it will hardly bump the share prices at all.

I'm not going to give you a number that you will then quote back to me in the future. The situation is fluid, and I'm constantly making adjustments.

This sounds like weaseling to me. Show your work.

And in and case you already did give me numbers: $38 per share with warrants and $190 without. I just want to know more details about how you got them. You said that you're constantly making adjustments so I won't hold you to whatever number you happen to quote forever into the future, but as of now I do have something to anchor on.

And only a portion of my portfolio is dedicated to high-risk.

Smart. Effective portfolio management doesn't depend only on expected value but also variance of returns. Since so much of the common expected value in your model hinges on something you think has a 1% chance of happening (seniors and warrants both cancelled), slight deviations to that 1% would have a huge effect on your distribution of potential returns.

So I'm not buying based on an actual value number of today but on mathematical probabilities of what could happen in the future.

Expected value, discounted to the present, is an actual value number today. Comparing that to the prevailing market price allows one to decide if an investment is worthwhile. That means the two things you mentioned are actually one and the same.