Replies to post #774120 on Fannie Mae-No Politics (FNMA)

[LuLeVan]

Mr. Market disagrees with you. The JPS are trading around 8% of PAR and the Commons are trading 700% higher than GB's target price for the GSE equity.

I already told you the reason. JPS trade low because no one knows when recap/release will take place. Commons are trading in fantasy land anyway.

"Mr. Market" can be a complete idiot at times. Hedge funds thrive on this fact.

[kthomp19]

Mr. Market disagrees with you.

So what? If I agreed with Mr. Market I would only own the S&P 500. The entire purpose of picking individual stocks is because one thinks they are either undervalued (in which case one buys) or overvalued (sells or shorts) by the market.

I believe the JPS are worth PAR but I cant ignore what Mr. Market is saying on the relative risk/return of JPS and Common.

Don't get too caught up in recent price movements. Click here to see a 5-year chart of the FNMAS to FNMA ratio. Mr. Market is constantly changing his mind.

This is after relentless posts saying that Commons are worthless or worth $ 0.10 max.

There are equally relentless posts saying the commons are worth things like $38 or $190 or even higher. Why not call those out too?

I have to assume that the potential return for Common is greater that the 12.5 multiple for JPS because all agree that Common are much more risky than JPS.

That's only if you assume that the market is correctly pricing both the commons and juniors. And if you truly believed that you really shouldn't own either one; it would be extra risk with no extra return.