Replies to post #711024 on Fannie Mae-No Politics (FNMA)

[FOFreddie]

Hey Money Robot,

Personally I think the JPS get paid out with divs from 2012 so 150 to 175% of PAR. What I think is dangerous is the slippery slope where it is ok where one class can get screwed where the other class gets what is fair.

DJT will make any deal an issue and if the commons get screwed he will make political hay out of saying that JB is siding with the RINO and lib dem hedge fund guys. Also if they can screw the FMCC shareholders they can screw the Farmer Mac and other GSE entity investors in the future. Just a bad precedent - there is enough money here for the UST to make a humongous return and where all the shareholders are treated fairly.

Check out the last paragraph of the CBO report regarding Farmer Mac if you are interested.

[JOoa0ky]

Great post. I agree 100% black and white....BUT....life is not black and white...there is gray....the gray area is that we cannot write off the commons because you do not know the outcome...mainly...we do not know what the size(assets) of the new utility will be.

@400b, commons will get paid.

Jps are the better bets here. Priority...yes....I agree...good post you wrote....but....we cannot completely write off the commons just yet...based on we do not know the outcome and that outcome can have a variable of 400b.

There are other variables too...like...the gov using some of the divies towards principal...not net 0...but some....enough to still show taxpayer a hefty profit..etc...etc...

Commons are a riskier legitimate play...go figure....

My friend... my spirit is with you but if you have been in this for more than a decade as I suspect you have been... there is no longer any reason for you to own any commons.

The lost of time value and the impending risk of dilution to zero makes no sense.

If you just started a common position within the last 1-2 years I would say go for it and hold...

But if you've been in this long enough you need to walk away with something. At this price point for JPS the reward to risk significantly outweighs what commons can do, especially if you take into account all the lost years of time value.

To be completely honest, I first got into this because of Ackman's presentation. At my cost basis, I was expecting a 10x return but lo and behold it has been nearly a decade since then. Since the beginning a lot of rumors about dilution have always been floating around but I've been rejecting it. Gradually over time I've become more accepting over it. In fact if I looked through a couple of my previous investments, especially in ultra deep water drilling and a supermarket chain... there had been restructurings and in all instances all legacy common holders had been left with far less than 1%. Not quite sure why I forgot about all of that. The ultra deep water drilling got restructured twice actually haha... Total wipe out.

I unwound my entire commons position last month and am now sitting 100% in JPS. My initial expectation of 10x return is still there but albeit with a lot less risk. I need to walk away with something after all of these wasted years.