Replies to post #597222 on Fannie Mae-No Politics (FNMA)

[Guido2]

In a nutshell. Thanks.

[kthomp19]

Preferred stocks can make an attractive investment for those looking for a higher payout than they'd receive on bonds and dividends from common stocks. But they forgo the safety of bonds and the uncapped upside of common stocks.

The reason the prefs have upside beyond par is the possibility of a conversion. I place a high probability on it, given that we have heard Calabria (in a TV interview), Mnuchin (in Treasury's plan), and Phillips (in two separate talks) talk about it.

There's also my thesis that the commons' greatest reasonable upside is still less of a gain from here than the prefs, even without a conversion. Given how heavily weighted towards the prefs the big-money investors are I think they, in aggregate, agree.

[Donotunderstand]

yes

JPS (in normal cases) is a way to get steady income - and higher interest than a bond from same company

That higher interest comes with added risk as the investment is equity that behaves like debt but is treated as equity in an 11 (and not debt)