Replies to post #457221 on Fannie Mae (FNMA)

[RickNagra]

Hey Amelia that was a great question which equally deserves a great answer.

The current price $1.53 is an insult. It is interesting that $1.50 was the price for the longest time during the Obama era. Then as soon as Trump was elected the price jumped. Fast forward 1.5 years later we are right back to this price. The market essentially gave up on Mnuchin. In reality the market is wrong. Mnuchin is our savior. He has a strong mortgage background and once told Congress at a hearing he knows more about the mortgage market then anyone else in the room. Everyone shut up real quick. There is no doubt Mnuchin in the next one year will act swiftly to solve this whole problem in an administrative manner.

But here is the current problem. A few months ago Mnuchin was doing an interview. I forget which interview it was but the host asked in the last five minutes now that tax reform is done what is next. Without being prompted Mnuchin bought up the GSE topic. He stated he was expecting a legislative solution but given that midterm elections are coming up it is unrealistic a solution will come before that time. The elections are November 6th. Mnuchin just handed the Shorts the perfect gift. Absolutely nothing will happen before the midterm elections. This is precisely why the Shorts are able to brutally and ruthlessly bring down the price without any fear. They have no fear and no worries. There is no need to cover until after the elections. In my nine years here I have never seen this level of shorting. Clark and Ada have recently commented on this unprecedented shorting. It is routinely 30-40% and up to 70% on occasions. The Shorts are trying to induce panic selling. They have until Nov 6th to gobble up as many cheap shares as possible. However after this period the covering will start. They have to cover. Anything can happen. This covering alone with send the PPS to $3. It would be foolish to sell shares at this level. Longs will start buying in anticipation of the administrative action from Mnuchin. Now PPS should rise to $5. All said and done within one year price should end up between $8-13 as per the Moelis Plan. It is a crappy plan that favors the government and induces maximum dilution to the Commons. Yet even with this massive dilution we still end up at $8-13.

Fast forward 10-15 years from now. Conservatorship is a distant memory. Fannie and Freddie will perform a share buyback like all companies in order to establish investor confidence. Assume they buy back 50% of the diluted shares which is quite reasonable. A quick mathematical calculation using my patent pending proprietary algorithm reveals a price of $30 or more. However realistically speaking they will probably buy back even more of the shares hence causing concentration.

Wow. To go from today's price of $1.53 to $30+ in 10-15 years yields an annual return of 190-290%. That is what is going to happen here. There should be no doubt. There should be no hesitation. This should be a no brainer. The only thing required now is patience. Unfortunately too many people lack patience. The folks who bought General Growth Properties and American Airlines had patience. They made a killing. These same folks are now holding onto Fannie and Freddie common shares. They maintain their patience. They will make even more of a killing this time around.

What will you do ? Are you the prey or the predator ?

Hey Rick, before you left this board, you said $8 pps will be when release happens, $20 pps will be 10 years down the road, $20 will be 20 years or so, something like that, do you still see the same numbers?