Replies to post #452104 on Fannie Mae-No Politics (FNMA)

[HoldenWalker99]

Preferred worth 50% of par TODAY if dividends resume in 10 YEARS (discounted 7%, assuming preferred shares go to par in 10 years and dividends resume, does not include impact of future dividends).

150% upside TODAY in the worst positive outcome scenario. Obviously worth $0 in negative outcome scenario. Other positive outcome scenarios include return to par value sooner, favorable conversion to common or preferred shares called and replaced.

[contrarian bull]

Juniors going to get paid - show me the detail

Look at f&f's latest quarterly report. Not counting the current DTA issue their net worth is zero. Which means all debt obligations have matching assets. So all debt should be paid - including junior preferred at the bottom of the list.

This assumes their quarterly report's balance sheet is accurate. If it is not, or if market forces suddenly change the mark-to-market value of their assets, yeah the juniors might not get paid.

Once their net worth is back up to 6B - the risk for juniors is reduced, and the potential for commons increases dramatically.

For now I'm trying to keep an even split between juniors and common, but have been weighting in favor of freddie vs fannie due to higher per share retained earnings and better capitalization.