Replies to post #780755 on Fannie Mae-No Politics (FNMA)

[Clark6290]

Everyone here has at a minimum doubled their investment, lil bro a 100 bagger. It is amazing that folks always buy at the exact low and sell at the exact high.

[LuLeVan]

If I had to recommend one junior pref series to buy right now it would be FMCKJ.

I agree.

Historically, the price of FNMAT has averaged about 15 cents below that of FMCKJ, and the price of FMCKJ has averaged about 15 cents below that of FNMAS.

So for example:

FNMAT = $2.50
FMCKJ = $2.65
FNMAS = $2.80

I only owned FNMAT for a few years (until summer 2023) because it was the cheapest (liquid) JPS and therefore gave you the most face value for the amount invested.

However, last summer there was a rally in FNMAT for which I had no explanation. At times, FNMAT even rose a few cents above the price of FNMAS. I took the opportunity to switch completely from FNMAT to FNMAS. The number of JPS held remained the same, but I expected the historical price differences to return sooner or later.

Indeed, FNMAS has regained the lead in recent weeks. FNMAT is now in second place and FMCKJ is in last place.

Current prices:

FMCKJ = $2.85
FNMAT = $3.00
FNMAS = $3.15

I have therefore rotated (for several times) into the cheapest of these three JPSs in recent weeks. The sales/purchases freed up money that I could use to buy more JPS. Thanks to these arbitrage trades, I have been able to increase my total number of JPS by around 10% over the last few weeks without having to invest any fresh money.

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Including interest, the Lamberth damages are:

FMCKJ = $0.69
FNMAT = $0.86
FNMAS = $0.84

(my estimates, including PJ interest)

The fact that FMCKJ is currently the cheapest is probably due to the lowest damage paid (there is no PJ interest for Freddie JPS).

This means that if FNMAS costs 15 cents more than FMCKJ, the "Lamberth advantage" is already priced in. Currently the FNMAS-FMCKJ difference is 30 cents, so you get about 15 cents per share for free by switching from FNMAS to FMCKJ without losing the Lamberth advantage. And that's exactly what I've done in recent weeks, albeit with only a third of my FNMAS position so far.