Replies to post #115391 on Fannie Mae-No Politics (FNMA)

[MonestHind]

DrM's post is touching on the best case scenario...which is the government cashing in, reducing their role, and opening the companies to private investment.

MASSIVE DILUTION IS THE RESULT OF THE BEST CASE SCENARIO.

...which is why analysts say Fannie and Freddie are not a good long term investments at this point in time.

If the right things begin to happen, there will be plenty of time to capitalize.

It all comes down to the fact that now simply isn't the time to INVEST in these companies. It is, however, a situation worthy of awareness.

[obiterdictum]

That is the way that Fannie Mae and Freddie Mac are currently computing earnings per share. They included the diluted estimate in their financial reports. However, that is a what if financial scenario made for a certain reason since the warrants have not been exercised. It is simply one of those uncertainties that are a part of being under a conservatorship and the PSPAs.

It would not make sense in any shape or form for the US Treasury to exercise the warrants at this time when still under conservatorship and especially at the current market price. There is little benefit to be gained for the US Treasury. Only a billion and change.

While under the conservatorship and the PSPAs the value of the GSEs is not being realized. So making considerations about the GSEs while they are in conservatorship are not useful. For example, the GSEs make great profits. Yet because of the PSPAs, all of those profits are swept into the Treasury. So bashers come along and say, stupido, all profits are swept into the Treasury. You are crazy to invest.

Well that sort of contradiction comes up because we speak about Fannie and Freddie as if they were out of the conservatorship and not under the PSPAs and at the same time the bashers have limited foresight and think only in the moment. Two different views on the same financial phenomena.

So those going long anticipate the future looking forward to the moment when the GSE future is clear and certain and the pps rises to its previous highs or higher.

Those going short, or doing day, swing and/or flip trading are interested in the run or runs or falling knives.

Those caught at a high pps on the last run hope for a good run above 5.00-6.00 so they can recover losses and perhaps go on for gains or even go long if it looks better with unrelaized gains in their accounts.

Those caught short and unable to cover in a high range sit and wait for the pps to fall so they can recover their losses.

And so on.

Fannie and Freddie offer something for all. We just have to know where we stand, what type of trader or investor we are and then carry out our plans as we see fit based on our own DD.