Fannie Mae-No Politics (FNMA)

[Rodney5]

What’s it worth? Estimated 85% - 55% of the S&P 500…

S&P 500 P/E ratio average and relative values over the last 10 years Based on the available information:

The S&P 500 forward P/E ratio averaged 18.1over the last 10 years. Therefore, 85% of this average would be approximately 15.39 (18.1 * 0.85). And 55% of this average would be approximately 9.955 (18.1 * 0.55).

When Fannie Mae and Freddie Mac are released from conservatorship, their price-to-earnings (P/E) ratios could potentially increase significantly, but the exact number is uncertain and depends on various factors. During their conservatorship, their P/E ratios have been close to zero or very low. Historically, Fannie Mae's P/E ratio has fluctuated relative to the S&P 500, reaching 85% in 1998, but falling to 45% when political risk became a concern. A key factor determining the P/E increase would be the extent to which investors perceive less political and regulatory risk after the release.

One of the biggest factors affecting the P/E ratio would be the perceived risk associated with government control and potential future policy changes. If investors believe that the companies will operate with greater autonomy and less government intervention, they may be willing to pay a higher price for the stock relative to earnings.

The capital requirements imposed on Fannie and Freddie to exit conservatorship will also play a role. If they need to raise significant capital through equity offerings, it could dilute existing shareholders and potentially temper the increase in the P/E ratio.

Overall market conditions, including interest rates and the health of the housing market, will also influence the valuation of Fannie and Freddie.

Pre-Conservatorship:
Before being placed in conservatorship, Fannie Mae's P/E ratio relative to the S&P 500 rose steadily from 55% in 1990 to 85% in 1998, reflecting strong earnings growth and investor confidence.