Replies to post #497828 on Fannie Mae-No Politics (FNMA)

[kthomp19]

Say what? That doesn’t even make sense from the perspective of basic English, let alone technically.

Perhaps I need to be more thorough then?

Otting said that capital will be going from $6B (present) to $150-200B. That means that the White House plan (that everyone has signed on to) includes recapitalizing the companies.

The terms of the NWS don't allow the companies to build capital, because all the built capital would get swept to Treasury the next quarter. In fact, the terms of the original SPSPAs don't allow for a capital build either while the seniors are in place.

Therefore, the NWS will not continue because it prevents a recap. Technically it isn't over yet, but effectively it is. In fact, the senior preferred shares also will cease to exist in their current form because by section 5.2 of the original SPSPA, all capital raised from stock sales (either common or preferred) must go towards paying down the senior liquidation preference (and thus wouldn't actually recap the companies). So we can actually go a step further: the seniors, as they exist now, are not long for this world. They will either have to be cancelled or converted to some other form of equity.

If you still don't understand this, it isn't my fault. I have been as clear as I can.

If you base the stock’s performance off of random posters’ predictions, then you really shouldn’t be in the stock market whatsoever.

Agreed. As I have said before, the less reasoning someone provides, the more skeptical you should be of their conclusions. Corollary: if someone provides no reasoning at all, you should ignore what they say.

If anyone thinks the end of the NWS is priced into the stock already, then you must sell if you’ve bought or short this and put your money where your mouth is.

I will be more clear: the end of the NWS should be priced into the stock now for anyone who is actually paying attention. Otting's words mean the NWS will not continue, we just don't know the exact end date yet.

I also disagree with your statement, for the record.

Send us a screenshot of your short position if you’re so positive about this.

I disagreed with your statement above, so I am not short the commons. In fact, I have never shorted a stock in my life.

I actually want the commons to do well, just after some or all of my juniors get converted. I have never hated the commons per se, I just think that owning the juniors now is a cheaper way to get the common upside in the future, and avoid the potential downside.