Replies to post #372455 on Fannie Mae-No Politics (FNMA)

[kthomp19]

P/E only means Price to Earnings; this doesn't include the redemption value of the junior preferreds.

Unless you mean that you expect FnF to redeem the junior preferreds at par as part of a settlement. I disagree with that: FnF will need capital badly and it is far cheaper in the short term to just turn the dividends back on, which costs far less than $19B per year. Heck, the dividends are non-cumulative so FnF could decide to wait a year or two before turning them back on. As long as a promise to do so exists, the junior preferreds will approach par, appeasing those plaintiffs (Berkowitz, etc).

Also, I don't see a scenario in which the extra $65B that FnF have paid over the senior preferred value gets kept by the government AND the warrants get exercised. Why would the plaintiffs as a whole agree to that? Getting the preferreds redeemed at par (or getting their dividends turned back on) won't satisfy common holders like Ackman.

[big-yank]

Garbage. Fannie Mae earnings have been inflated by approximately $3 B per year by government eliminating the payment of dividends that were historically delivered to shareholders. Including this $3 B gaffe in computing a 10X S/P is a mistake even freshman business school majors would be unlikely to make. It's a 30% over-inflation.

[Donotunderstand]

I understatnd

But for the historical metrics - EPS and resultant PE afforded by the market ..........

Did Fannie have a 4% capital surplus?

Might not such surplus be viewed as worth 3-6 dollars a share ?

(assumes that any implicit guarantee before or now is not priced into the PPS - but that Fannie never carried an explicit 4% capital cushion?)