The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Chris Pascale on March 18, 2023, 04:14:18 PM
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Not making a recommendation; just sharing.
Fannie Mae (FNMA) shares are about 40 cents right now. Last year I started putting a few hundred per teaching paycheck into shares and have about 9,000. Currently down 23%.
If FNMA never shuts down, it stands to reason at some point it'll do well, or institutional investors will use it to churn their billions into more billions. As an adjunct I'll get 14-16 paychecks this year, so might just be tossing $4,200-4,800 into a dumpster fire.
If anyone has any thoughts to share, feel free.
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Eh, there's now common law telling you that Treasury can take FNMA's earnings right out of your shareholding hands.
But, who care argue against hopes of a return to a whole dollar share price one of these years.
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*who can argue against.
Oops. Best of luck.
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There's more "there" there than most growth stocks, and the potential upside is huge if you buy in at 40 cents. 10x seems very likely, and 100x very possible eventually.
But, of course, it's been down for 15 years, and there's nothing to say it couldn't stay down for another 15.
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On Thursday, I said to friends, "I look like a real genius here, but we'll see how it really goes."
Like with all things, we'll see what really happens.
I'm going to keep putting $300 per teaching paycheck into it.
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It's definitely a lotto ticket, except we can only guess at the possible payout odds. Are you investing a large (>5%) chunk of your investments into speculative assets like this one?
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It's definitely a lotto ticket, except we can only guess at the possible payout odds. Are you investing a large (>5%) chunk of your investments into speculative assets like this one?
I didn't think of it as a large percentage, but your 5% note makes me realize it is.
$300 of every teaching paycheck (get about 14-16 a year) since last Summer has gone into it.
Not including my wife's retirement contributions, in the last 12 months I've invested about $35,000, about about 14% went into a crazy scheme.
ETA: This is my only current crazy scheme. I sometimes have others, but they usually only get my time, not much money.
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Well, don't let me talk you out of gambling. I've argued diversification with people who were 100% Apple stock in 2013, called Bitcoin a stupid con in 2016, and once bought a put option on Netflix in 2011! I'm kinda a curmudgeon.
If FNMM and FMCC shares really have 10x to 20x upside as some people say (https://seekingalpha.com/article/4615124-fannie-mae-and-freddie-mac-lottery-tickets-with-much-better-odds), and only 100% downside, then they're a lot more rational than lotto tickets. Plus, if you think there is any chance at all of Donald Trump getting re-elected, or even if you want to hedge the possibility, a small allocation to these shares make sense. You can bet DT and his buddies own shares.*
If $35k could go 10x or 15x, that could be an early retirement checkmate. Maybe just invest until you have a life-changing upside potential, and then focus on building a diversified portfolio while you wait for your outcome.
*
(https://static.seekingalpha.com/uploads/2022/8/10/4165061-16601660224125435.jpg)
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$35,000 will be my total investing this year - mostly into the TSP, a 403(b) and a Roth.
My current FNMA investment is about $6k and I have over 12k shares.
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Another profitable Q for Fannie Mae. https://www.marketscreener.com/quote/stock/FEDERAL-NATIONAL-MORTGAGE-120786975/news/Fannie-Mae-Reports-Net-Income-of-4-7-Billion-for-Third-Quarter-2023-45196881/
An argument against investing is that the Fed Gov't won't release the conservatorship. However, we have so many [wise investors] in the House and Senate, and they might surely see the rightness of freeing up this wonderful business from the shackles of tyranny that lay it down upon the cold cold ground.
Be free, FNMA! Be free!
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Well it's almost doubled since the OP, now FNMA is $0.75.
I could see Fannie and Freddy being auctioned off as a deficit reduction measure to resolve the debt ceiling. However, Democrats might fear this move would crash the housing market or send mortgages skyrocketing (or be blamed even if those things happened anyway) under Biden's watch.
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Well it's almost doubled since the OP, now FNMA is $0.75.
I could see Fannie and Freddy being auctioned off as a deficit reduction measure to resolve the debt ceiling. However, Democrats might fear this move would crash the housing market or send mortgages skyrocketing (or be blamed even if those things happened anyway) under Biden's watch.
Yep, and that's why I have to keep reminding myself that it's completely out of my hands.
An old thread on another forum had a guy saying (5+ years ago) how he was totally going to get rich very soon with Fannie Mae. Everyone was like 'dude, don't get crazy,' and he responded with "That's it! I'm all in."
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Well it's almost doubled since the OP, now FNMA is $0.75.
I could see Fannie and Freddy being auctioned off as a deficit reduction measure to resolve the debt ceiling. However, Democrats might fear this move would crash the housing market or send mortgages skyrocketing (or be blamed even if those things happened anyway) under Biden's watch.
Yep, and that's why I have to keep reminding myself that it's completely out of my hands.
An old thread on another forum had a guy saying (5+ years ago) how he was totally going to get rich very soon with Fannie Mae. Everyone was like 'dude, don't get crazy,' and he responded with "That's it! I'm all in."
How do you plan for this story to end?
If you sell now, you have bragging rights on doubling a small investment. Most people aren't going to look up the current stock price, so even if you experience FOMO others will not know about it.
If you wait, you could have FOMO over not selling now, and you could lose the existing profits. Or the stock could keep rising, and the story could get better.
I'm not the one investing in it, so I don't know enough to have an opinion. Just encouraging you to have a plan.
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Well it's almost doubled since the OP, now FNMA is $0.75.
I could see Fannie and Freddy being auctioned off as a deficit reduction measure to resolve the debt ceiling. However, Democrats might fear this move would crash the housing market or send mortgages skyrocketing (or be blamed even if those things happened anyway) under Biden's watch.
Yep, and that's why I have to keep reminding myself that it's completely out of my hands.
An old thread on another forum had a guy saying (5+ years ago) how he was totally going to get rich very soon with Fannie Mae. Everyone was like 'dude, don't get crazy,' and he responded with "That's it! I'm all in."
How do you plan for this story to end?
Like all stories do - in a body bag.
Current price per share is $0.51
Holdings are 13.7k shares
Right now, I'm just watching. My mentality will change as my holdings change. If it goes to a penny, I'll feel as bad as anyone would for having put $7,000 (current investment) into a dumpster full of gasoline that meets a long-overdue match. If it goes to $2 or $3, I might be a lot less aloof.
What may help me hang in there beyond doubling or tripling my money is that I'd bought Netflix shares in 2004 and sold them like a week later. In 2007-ish I was offered to buy into the Naked juice company for $10,000, and didn't feel like I could.
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How's your mentality changing today? ;)
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How's your mentality changing today? ;)
Looks like you have a "double". If you sold half now, you have 'riskless upside'. Might change the psychology as the stock gyrates from here...
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That big pop was a bit fleeting ... @Chris Pascale why'd you chose just FNMA and not FMCC?
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Oh man.... This has played out for you very well in your gamble. My best advice is take your winnings NOW. Maybe wait until there's another quick spike and sell at the peak. I don't want to be the bringer of bad news but I think you're going to be in for a near-total loss if you stay in this.
I'm not a financial advisor and you're free to do as you please. I don't think you're dumb and clearly you have your own reasons, but this would be a big no-go for me even as a gamble. I think you got lucky, should be proud, and should pull it, for what it's worth.
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Oh man.... This has played out for you very well in your gamble. My best advice is take your winnings NOW. Maybe wait until there's another quick spike and sell at the peak. I don't want to be the bringer of bad news but I think you're going to be in for a near-total loss if you stay in this.
I'm not a financial advisor and you're free to do as you please. I don't think you're dumb and clearly you have your own reasons, but this would be a big no-go for me even as a gamble. I think you got lucky, should be proud, and should pull it, for what it's worth.
Can you elaborate why? Do you think the GSEs are going to stay in conservatorship forever or they lose market share or something else?
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Oh man.... This has played out for you very well in your gamble. My best advice is take your winnings NOW. Maybe wait until there's another quick spike and sell at the peak. I don't want to be the bringer of bad news but I think you're going to be in for a near-total loss if you stay in this.
I'm not a financial advisor and you're free to do as you please. I don't think you're dumb and clearly you have your own reasons, but this would be a big no-go for me even as a gamble. I think you got lucky, should be proud, and should pull it, for what it's worth.
Can you elaborate why? Do you think the GSEs are going to stay in conservatorship forever or they lose market share or something else?
Main problem being I predict housing prices will inflate in 2024 and another big problem is returns go to gov not shareholders. It's a pink-sheet stock for a reason, and that alone doesn't mean shit but..... I feel like a have a good idea why OP said it's a huge gamble - because IT IS. I think he's investing WAYYYY too much ($300 per paycheck?).
There are many other penny/dollar stocks that he could do far better on. I'd consider the gamble over, pull it, take winnings and invest in something that delivers quicker and higher returns in less time.
There's many more profound factors here that I could pick apart regarding this stock but it's not my investment. I'm just saying on this one, take what you made and never look at it again. He could hold it for a few years and do really well, but he could do even better in 3 months or even 30 days with same amount in a different stock.
OP knows what he's doing and it's his choice but there are much easier ways to double his current gains on much more sane stocks.
BTW I don't read too much into GSEs in general but any pink sheet without stockholders especially when managed by gov and involving the housing market.... It's not even a red flag it's like a triple-X red flag with a big black skull on it.
Also I don't see anything here worth being curious about, it's a lump of coal in my opinion. Totally aware that OP already stated the same, more or less. If it weren't a government proceeds type deal, I wouldn't even have bothered posting (although my sentiment about the investment would generally be the same).
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Tuesday, I spent the day hanging with my 2nd daughter after she had her wisdom teeth out, so didn't see the share price until after. Wednesday, I was driving to Boston with my younger 2 for an overnight getaway (a Ben & Jerry's cone in Harvard Square is about the price of tuition). When it closed at $0.90, I was up 11 cents (almost 14%) from my last buy, which I was happy about.
I only have 15,800 shares, so a penny moves my position $158. Current gain is about 78%. I cannot say how I'd be feeling if this was 150,000 shares or 1,000,000, but right now I mostly feel neutral. I'm happy to be up, but uninspired to do much more than watch/wait.
@LightStache, to answer why FNMA instead of FMCC: No reason. They seem the same to me, which may speak to how little I know about what I'm doing. After all, they are supposedly 2 entities, so why not go evenly into them in the event 1 lasts and the other doesn't?
@WayDownSouth, you are helping me think about when I should take my money back, plus some. I've had a sell order in at $10 from the beginning in case it spikes and I'm not around. However, what is the price at which I will not buy any more? At that point, why not take a gain? I mean, if it's too expensive to buy more, it's too expensive not to cash out.
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Interesting, obviously this is a years-long play that's entirely dependent upon them exiting conservatorship and, to a lesser extent, if/how the Treasury offramps its stake.
Federal law expects exits (i.e. assumes the conservatorships are temporary), but doesn't specify a timeline, which has blown way past anyone's expectations when this all went down in 2008. The current regulatory plans and financial activities of both GSEs, retaining earnings since 2019, are on a path to exit once that year's regulatory reserve requirements are met. According to my rough math, that could be as soon as 2028, around the 20th anniversary of the conservatorships. It could be sooner because those reserve requirements may have been set arbitrarily high for political reasons, so might be lowered in the future, meaning a faster exit. I'd expect significant movement if a Republican wins POTUS '24.
On the other hand, executive agencies love power and I could see FHFA HODLing. If there's another catastrophe, it would be pretty easy for Congress to make the arrangement permanent, wiping out all publicly-traded stock. Or FHFA moves the goalposts father down, undermining investor confidence with the same effect.
But these companies are kicking off a massive $9B/yr in earnings. If they were fully public today with a 15x P/E, FNMA would be at $37.90 and FMCC at $43.54.
That's the reason I asked about your choice between FNMA and FMCC, because FMCC has a higher fair value based on this theoretical EPS. I suspect FMCC trades at a lower market cap because its top line revenue is significantly lower.
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I'd expect significant movement if a Republican wins POTUS '24.
Yea I’m thinking this is the angle. Trump promised to privatize these companies but never got around to it.
The objection is that if Fannie/Freddie were fully privatized, the US government would have to fill a $9B hole or increase the budget deficit. The political difficulty of either option suggests that only a politician with an extreme lack of care about either tax hikes or the national debt could do it. Trump doesn’t care about the deficit, as evidenced by his first term.
But I suspect privatization of Fannie and Freddie would look a lot like the privatization of state owned enterprises in Russia during the 90’s. I.e. insiders buy up shares at pennies on the dollar right before the government divests itself, and hence the political class pays back the oligarchy for its support. I wonder if Trump’s insiders and associates are loading up on shares in anticipation of a favorable giveaway. This scenario is a lot less hypothetical than a lot of blue chip companies’ growth models.
Note that investing in this scenario also has a hedging function. A fully private mortgage industry would charge rates much higher than what Americans currently enjoy, and 30Y fixed rate loans could go away, since they are merely products of a subsidy. Shorter loans and higher rates could depress home values. Imagine 5 or 10 year loans at 7% or 8% being the lowest payment financing option.
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Tuesday, I spent the day hanging with my 2nd daughter after she had her wisdom teeth out, so didn't see the share price until after. Wednesday, I was driving to Boston with my younger 2 for an overnight getaway (a Ben & Jerry's cone in Harvard Square is about the price of tuition). When it closed at $0.90, I was up 11 cents (almost 14%) from my last buy, which I was happy about.
I only have 15,800 shares, so a penny moves my position $158. Current gain is about 78%. I cannot say how I'd be feeling if this was 150,000 shares or 1,000,000, but right now I mostly feel neutral. I'm happy to be up, but uninspired to do much more than watch/wait.
@LightStache, to answer why FNMA instead of FMCC: No reason. They seem the same to me, which may speak to how little I know about what I'm doing. After all, they are supposedly 2 entities, so why not go evenly into them in the event 1 lasts and the other doesn't?
@WayDownSouth, you are helping me think about when I should take my money back, plus some. I've had a sell order in at $10 from the beginning in case it spikes and I'm not around. However, what is the price at which I will not buy any more? At that point, why not take a gain? I mean, if it's too expensive to buy more, it's too expensive not to cash out.
In that case if I were you I'd determine what that value is where you won't buy anymore. I suspect you're getting close? It looks to me like it's going to see a spike to $1.25 - $1.40 soon - I'd personally set a sell order for 50% of your shares at that point, then set another sell order for $2.50 (10%), and another for $10 (40% of your remaining shares just in case it does a supernove up to $10 for some odd reason. You could play with those percentages as you'd like to, but $158 gain per penny is good and if your last percentage value increase was 14%, I wouldn't buy much more.
Good luck, man. It will be interesting to see what happens with that stock for sure but don't forget there's 1,000 more just like it to dabble with. If you're truly comfortable than stick with it but try to focus more on the % than the $... This is the trick to not losing often for me at least and I've got around 80% win / 20% loss record historically intraday trading these exact kinds of stocks (although rarely swing trading anything - I get too anxious so I prefer to invest heavy, buy & sell very quick when they're volatile).
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I'd expect significant movement if a Republican wins POTUS '24.
Yea I’m thinking this is the angle. Trump promised to privatize these companies but never got around to it.
The objection is that if Fannie/Freddie were fully privatized, the US government would have to fill a $9B hole or increase the budget deficit. The political difficulty of either option suggests that only a politician with an extreme lack of care about either tax hikes or the national debt could do it. Trump doesn’t care about the deficit, as evidenced by his first term.
But I suspect privatization of Fannie and Freddie would look a lot like the privatization of state owned enterprises in Russia during the 90’s. I.e. insiders buy up shares at pennies on the dollar right before the government divests itself, and hence the political class pays back the oligarchy for its support. I wonder if Trump’s insiders and associates are loading up on shares in anticipation of a favorable giveaway. This scenario is a lot less hypothetical than a lot of blue chip companies’ growth models.
Note that investing in this scenario also has a hedging function. A fully private mortgage industry would charge rates much higher than what Americans currently enjoy, and 30Y fixed rate loans could go away, since they are merely products of a subsidy. Shorter loans and higher rates could depress home values. Imagine 5 or 10 year loans at 7% or 8% being the lowest payment financing option.
I appreciate your comments! For the last few years earnings have been retained by the GSEs, not paid out to the Treasury. Under the current agreements (Dec 2020), Treasury's liquidation preference increases by the cumulative amount of retained earnings. Once the GSEs have retained enough to meet their regulatory capital requirements, then Treasury payments resume and to-be-determined commitment fees start.
That means upon exit Treasury would make bank with its liquidation preference and warrants, putting a little dent in the annual budget deficit and a miniscule dent in the debt. Regardless, if an exit is done through regulation and not legislation, I doubt budget impacts will be a driving consideration.
In theory the Treasury commitment fee will remain post-exit, allowing the GSEs to retain their sovereign debt ratings and maintain the status quo in the residential mortgage markets.
So in theory there's a viable exit plan under the current framework. As we've seen though, the PSPAs can easily be amended, so the massive risk here is just politics.
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Not much to add besides noting that FNMA is up to 1.35 with some high volumes. Apparently some feel FNMA's prospects of being released are better with a Trump return and the big increase is at least partly due to his resurgence.
For now I'm glad I established a position after seeing this thread, so thanks original poster! Who knows what the future holds though...
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Tuesday, I spent the day hanging with my 2nd daughter after she had her wisdom teeth out, so didn't see the share price until after. Wednesday, I was driving to Boston with my younger 2 for an overnight getaway (a Ben & Jerry's cone in Harvard Square is about the price of tuition). When it closed at $0.90, I was up 11 cents (almost 14%) from my last buy, which I was happy about.
I only have 15,800 shares, so a penny moves my position $158. Current gain is about 78%. I cannot say how I'd be feeling if this was 150,000 shares or 1,000,000, but right now I mostly feel neutral. I'm happy to be up, but uninspired to do much more than watch/wait.
@LightStache, to answer why FNMA instead of FMCC: No reason. They seem the same to me, which may speak to how little I know about what I'm doing. After all, they are supposedly 2 entities, so why not go evenly into them in the event 1 lasts and the other doesn't?
@WayDownSouth, you are helping me think about when I should take my money back, plus some. I've had a sell order in at $10 from the beginning in case it spikes and I'm not around. However, what is the price at which I will not buy any more? At that point, why not take a gain? I mean, if it's too expensive to buy more, it's too expensive not to cash out.
In that case if I were you I'd determine what that value is where you won't buy anymore. I suspect you're getting close? It looks to me like it's going to see a spike to $1.25 - $1.40 soon - I'd personally set a sell order for 50% of your shares at that point, then set another sell order for $2.50 (10%), and another for $10 (40% of your remaining shares just in case it does a supernove up to $10 for some odd reason. You could play with those percentages as you'd like to, but $158 gain per penny is good and if your last percentage value increase was 14%, I wouldn't buy much more.
Good luck, man. It will be interesting to see what happens with that stock for sure but don't forget there's 1,000 more just like it to dabble with. If you're truly comfortable than stick with it but try to focus more on the % than the $... This is the trick to not losing often for me at least and I've got around 80% win / 20% loss record historically intraday trading these exact kinds of stocks (although rarely swing trading anything - I get too anxious so I prefer to invest heavy, buy & sell very quick when they're volatile).
@LightStache as I mentioned above, the spike up happened and you saw mid $1.40's today. I don't know where you're at on this, but I'd get rid of a little bit of that soon - regardless of if you follow my percentage recommendations above or not (you probably shouldn't because you should always take your own moves when making your own investments), however, consider where it's at right now and how far you've came.
You stand to put your self in a point where you can sell some to secure initial investment and stand with a good amount.
Next stop for this stock is unknown to me because I haven't recharted it since my message above but the advice on dumping some of it is still sound. If you don't you may make more - but if you don't you also may lose. Making a "safety sale" and taking profits is never wrong. Figure out your own math and make a move is my advice. I'll see if I have time to revisit it in the next day or two and provide my input for whatever it's worth.
Good luck, either way.
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IDK, I suspect the rally will continue. Trump has more favorable opinion polling according to 538, and has structural advantages in the electoral college. This is a trade similar to DWAC and it could rally for a while.
Now at $1.45. Might buy a couple thousand just for fun.
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IDK, I suspect the rally will continue. Trump has more favorable opinion polling according to 538, and has structural advantages in the electoral college. This is a trade similar to DWAC and it could rally for a while.
Now at $1.45. Might buy a couple thousand just for fun.
I also suspect it will too but for how long and how high? If he can sell 50% or less with solid realized gains and hold the rest, his remaining holdings are literally free. That's how you win and keep winning without gambling. IMO... Never ever ever ever wrong to pull profits especially if it leaves you with a free chunk to hold. Just my 2 cents.
However, Cheap Bastard, I do not really think public politics is going to have much influence on the result. I think it's more of the result of several market catalysts most of which are going to be (or already are) manipulated heavily.
This is truly an interesting one to watch.
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IDK, I suspect the rally will continue. Trump has more favorable opinion polling according to 538, and has structural advantages in the electoral college. This is a trade similar to DWAC and it could rally for a while.
Now at $1.45. Might buy a couple thousand just for fun.
Did you buy at $1.45 and cause this dip? :P
I don't like the most recent Bloomberg article characterizing Fannie and Freddie as "meme-like" Trump plays. They're two of the most profitable companies on the planet, other end of the spectrum from GME or AMC.
Of course if FNMA and FMCC run up to $50 that'd be an amazing exit opportunity. My concern is that they become known solely as a Trump trade, run up to $10 before the election, then crash if Trump loses. Instability will make Treasury and FHFA more cautious about release.
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Did you buy at $1.45 and cause this dip? :P
Guilty. I had about $400 in spare dividend cash sitting around and thought "I'll let it ride". Follow me for more shorting opportunities. :P
I don't like the most recent Bloomberg article characterizing Fannie and Freddie as "meme-like" Trump plays. They're two of the most profitable companies on the planet, other end of the spectrum from GME or AMC.
Of course if FNMA and FMCC run up to $50 that'd be an amazing exit opportunity. My concern is that they become known solely as a Trump trade, run up to $10 before the election, then crash if Trump loses. Instability will make Treasury and FHFA more cautious about release.
I think the play is to hold Fannie and Freddie until just before the election and sell the rumor. It's a 50/50 election right now, but the prices of these stocks do not fully reflect a 50% chance, or even a 20% chance, of privatization. As the odds improve, selling opportunities can be expected to emerge. I think selling the government's controlling shares in these entities offer Trump (or Haley, honestly) a good gimmick to "pay for" more tax cuts, and so they may be mentioned further down the campaign trail. The more he talks them up, the more tax cuts can be justified by the idea of selling the shares.
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Did you buy at $1.45 and cause this dip? :P
Guilty. I had about $400 in spare dividend cash sitting around and thought "I'll let it ride". Follow me for more shorting opportunities. :P
I don't like the most recent Bloomberg article characterizing Fannie and Freddie as "meme-like" Trump plays. They're two of the most profitable companies on the planet, other end of the spectrum from GME or AMC.
Of course if FNMA and FMCC run up to $50 that'd be an amazing exit opportunity. My concern is that they become known solely as a Trump trade, run up to $10 before the election, then crash if Trump loses. Instability will make Treasury and FHFA more cautious about release.
I think the play is to hold Fannie and Freddie until just before the election and sell the rumor. It's a 50/50 election right now, but the prices of these stocks do not fully reflect a 50% chance, or even a 20% chance, of privatization. As the odds improve, selling opportunities can be expected to emerge. I think selling the government's controlling shares in these entities offer Trump (or Haley, honestly) a good gimmick to "pay for" more tax cuts, and so they may be mentioned further down the campaign trail. The more he talks them up, the more tax cuts can be justified by the idea of selling the shares.
My most recent buy was about that, but I decided to finally make a Freddie Mac purchase instead, and may do that with the coming checks this semester.
Regarding outlook: I'm not sure if this can even be compared, but Fannie Mae will likely post 2023 profits around $15 billion+, and Netflix has $5.4 billion for 2023. The latter trades at over $500/share with about 1/3 of the shares. Since we live in a perfect world where things only make sense, Fannie Mae should be $500 right now.*
*For those who are about to say or Netflix should be $1.00, I have already plugged my ears and began yelling, so can't hear you.
I have a sell order to take my money back at $2.00 - 4,400 shares - and if it went nothing but up after that, I'd need a Gamestop-like frenzy to not sell some shares at $10, $20, etc.
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Regarding outlook: I'm not sure if this can even be compared, but Fannie Mae will likely post 2023 profits around $15 billion+, and Netflix has $5.4 billion for 2023. The latter trades at over $500/share with about 1/3 of the shares. Since we live in a perfect world where things only make sense, Fannie Mae should be $500 right now.
I don't think that math works. FNMA has 5.9B fully diluted shares compared to 444M for NFLX, so NFLX has 92% fewer shares, not 1/3.
If you take $15B of theoretical earnings and divide by 5.9B shares, you get an EPS of 2.54. Multiplied by a 12x P/E ratio (same as NFLX) you get $30 per share.
...not that traditional valuation matters much at this point
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Regarding outlook: I'm not sure if this can even be compared, but Fannie Mae will likely post 2023 profits around $15 billion+, and Netflix has $5.4 billion for 2023. The latter trades at over $500/share with about 1/3 of the shares. Since we live in a perfect world where things only make sense, Fannie Mae should be $500 right now.
I don't think that math works. FNMA has 5.9B fully diluted shares compared to 444M for NFLX, so NFLX has 92% fewer shares, not 1/3.
If you take $15B of theoretical earnings and divide by 5.9B shares, you get an EPS of 2.54. Multiplied by a 12x P/E ratio (same as NFLX) you get $30 per share.
...not that traditional valuation matters much at this point
I may have used a more sophisticated method than you. I googled total shares FNMA and got this...........nope, can't paste a screen shot of a top result that I didn't click on.
Thanks for the reply.
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Did you buy at $1.45 and cause this dip? :P
Guilty. I had about $400 in spare dividend cash sitting around and thought "I'll let it ride". Follow me for more shorting opportunities. :P
I don't like the most recent Bloomberg article characterizing Fannie and Freddie as "meme-like" Trump plays. They're two of the most profitable companies on the planet, other end of the spectrum from GME or AMC.
Of course if FNMA and FMCC run up to $50 that'd be an amazing exit opportunity. My concern is that they become known solely as a Trump trade, run up to $10 before the election, then crash if Trump loses. Instability will make Treasury and FHFA more cautious about release.
I think the play is to hold Fannie and Freddie until just before the election and sell the rumor. It's a 50/50 election right now, but the prices of these stocks do not fully reflect a 50% chance, or even a 20% chance, of privatization. As the odds improve, selling opportunities can be expected to emerge. I think selling the government's controlling shares in these entities offer Trump (or Haley, honestly) a good gimmick to "pay for" more tax cuts, and so they may be mentioned further down the campaign trail. The more he talks them up, the more tax cuts can be justified by the idea of selling the shares.
I have a sell order to take my money back at $2.00 - 4,400 shares - and if it went nothing but up after that, I'd need a Gamestop-like frenzy to not sell some shares at $10, $20, etc.
I don't share the same political outlook as you guys and that's okay. I simply don't buy into that because IMO it's mere theater. But what you wrote in bold & italic above I think is pretty intelligent. If you only need $2 to walk away with 11k+ free shares, you're doing well. However I'd be careful still - if it dips below the $1.10 point in the next 30 days I'd consider recovering your $4,400 and holding out on the others as you said until you hit X, or X, or whatever you may decide the numbers will be. They're going to change on you if your strategy or data changes.
Good luck, I hope to see you hit $2 before March and watch this baby ride right up the hill for you throughout the year.
Cheap Bastard, you have some great political points and I won't disagree that theoretically they could play out very easily I just disagree with the whole idea of politics. I'm in the "SELECTED, not ELECTED" part of the park. I just simply don't play it nor believe it to be legit in any form. Your quick technical breakdown of the math is also admirable.
One cool thing about trading is there's nobody between you and all the money - except your keyword/mouse, a brokerage, and your ability. Everyone's strategy is different and there's innumerable strategies that can consistently perform. It's cool to read the various situations & opinions here without it feeling like we're on a trading forum or an app like Stocktwits (if you've ever been there, I apologize for even mentioning it and bringing back the bad memories).
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@WayDownSouth, your caution is very smart. My feeling is that if the price drops or stagnates, I get to buy in for a longer period. I'd be content to do so for as long as 5 years [not because 5 years is a magical number, or will bring the "right" amount of shares; it's just a number I typed]. In that time, I could find myself selling early shares, but my incomes are as secure as any can get, and growing, so I think I can hang in there and ride this pony - be it into a sunset or off a cliff.
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I don't share the same political outlook as you guys and that's okay. I simply don't buy into that because IMO it's mere theater. ...
Cheap Bastard, you have some great political points and I won't disagree that theoretically they could play out very easily I just disagree with the whole idea of politics. I'm in the "SELECTED, not ELECTED" part of the park. I just simply don't play it nor believe it to be legit in any form.
Another take: We can speculate on the odds of any of these things coming true, but if they don't, the value of FNMA or FMCC shares could land anywhere between 33 cents and 2 dollars - where they ranged during the Biden administration during a time when there was no thought of privatization. So already this is a less risky bet than rolling the dice on a company which might be heading toward bankruptcy, like many meme stocks.
Finally, one's own political opinions or forecasts might take a back seat to the need for hedging. Privatization of these New Deal era programs would likely expose them to the same financial realities predominant everywhere else in the world. This might mean an end to the unique government risk insurance that enables 15 and 30 year fixed rate mortgages here in the U.S. Within a few years, we could become a nation where a 5 year ARM is the longest-term loan homeowners can obtain. 15-30 year fixed rate loans simply do not make economic sense, which is why private companies don't offer them anywhere else in the world.
This might have good effects, such as insulating government coffers from future housing crises, removing market distortions, or making McMansions uneconomical, but it might also cause a housing price collapse, reduce the home ownership rate, or result in a long period of below-inflation housing appreciation.
As a homeowner, I have to think about how much wealth I would lose from such a development, and how I could compensate myself through FNMA or FMCC stock gains. This is a point where the politics become beside the point, and the very real risk to one's unhedged real estate exposure is the main topic. There is also the chance you make money on Fannie/Freddie and do not experience RE losses, in addition to the risk you lose both ways.*
With FNMA having only a $1.55B market cap, and FMCC at only $709M, these national giants are each smaller than a typical microcap retail bank with a few dozen branches, or about where GME was in late 2020. It would be easy for the price to hit $2 if they got even a little bit of attention.
*The lose both ways scenario might look like a shady deal to sell FNMA or FMCC to a politically connected bank, SPAC, or political ally for far below their value in public markets. This would be the Russia in the 1990s privatization scenario. It also might look like a housing correction early in Trump's second term that puts the elimination of mortgage subsidies on the back burner.
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I don't share the same political outlook as you guys and that's okay. I simply don't buy into that because IMO it's mere theater. ...
Cheap Bastard, you have some great political points and I won't disagree that theoretically they could play out very easily I just disagree with the whole idea of politics. I'm in the "SELECTED, not ELECTED" part of the park. I just simply don't play it nor believe it to be legit in any form.
Another take: We can speculate on the odds of any of these things coming true, but if they don't, the value of FNMA or FMCC shares could land anywhere between 33 cents and 2 dollars - where they ranged during the Biden administration during a time when there was no thought of privatization. So already this is a less risky bet than rolling the dice on a company which might be heading toward bankruptcy, like many meme stocks.
Finally, one's own political opinions or forecasts might take a back seat to the need for hedging. Privatization of these New Deal era programs would likely expose them to the same financial realities predominant everywhere else in the world. This might mean an end to the unique government risk insurance that enables 15 and 30 year fixed rate mortgages here in the U.S. Within a few years, we could become a nation where a 5 year ARM is the longest-term loan homeowners can obtain. 15-30 year fixed rate loans simply do not make economic sense, which is why private companies don't offer them anywhere else in the world.
This might have good effects, such as insulating government coffers from future housing crises, removing market distortions, or making McMansions uneconomical, but it might also cause a housing price collapse, reduce the home ownership rate, or result in a long period of below-inflation housing appreciation.
As a homeowner, I have to think about how much wealth I would lose from such a development, and how I could compensate myself through FNMA or FMCC stock gains. This is a point where the politics become beside the point, and the very real risk to one's unhedged real estate exposure is the main topic. There is also the chance you make money on Fannie/Freddie and do not experience RE losses, in addition to the risk you lose both ways.*
With FNMA having only a $1.55B market cap, and FMCC at only $709M, these national giants are each smaller than a typical microcap retail bank with a few dozen branches, or about where GME was in late 2020. It would be easy for the price to hit $2 if they got even a little bit of attention.
*The lose both ways scenario might look like a shady deal to sell FNMA or FMCC to a politically connected bank, SPAC, or political ally for far below their value in public markets. This would be the Russia in the 1990s privatization scenario. It also might look like a housing correction early in Trump's second term that puts the elimination of mortgage subsidies on the back burner.
Many great points there - I think that believing in "x" group, or being political (or having a particular popular political preference) is one thing that makes trading difficult at times. For me, none of that shit affects my emotions, so I'm able to make decisions easier without "feeling" like Trump or Biden or any party in particular is a good reason to invest. However, I can easily "see" why government under certain situations or administrations can cause a variety of change within an industry or even a single stock. Likewise, it's sometimes a political decision - irrelevant of the "party" who makes it - which causes a specific result. A simple regulation in an unrelated industry, for example with a shockwave effect or a drip-down effect.
I enjoy your analysis, you have a lot more experience than I do and I have a lot, but again, while I know a little about everything my expertise is sniping penny stocks and doing technical analysis of charts and data. I'm very micro (almost nano) in what I look at to determine a buy, but I do understand and enjoy the depth of the macro because it concerns the greater economy.
I'm not a US homeowner as I mostly live abroad however my fear is as I bolded above - that the US may ditch the 15 and 30 year and that the result would be a negative one, creating a larger wealth gap that likely puts everyone here into the lower part of the gap. Even if you're able to keep what you own.
When I evaluate the macro of EVERYTHING economic, market, financial....... Let's just say I don't see the economy doing well at all. I think the stock market itself will flourish until the last second possible during this situation, but I also think that living, investing, and just generally enjoying life for the great majority of people will become much more difficult. I think these recently "hard economic times" will look like small waves compared to the coming rough seas. But that's just my best educated guess based on the available data.
I think your view and perspective is wise, broad, complete, and pretty fair in all areas. IMO that what tells me you're a good investor and know what to look at. For example, I always consider what could go wrong before considering the pros. You seem to at least consider these things and are apparently open and non-emotional about what might play out. Good stuff. I'm sure you're sitting very comfortably. Either that or you're just a poor cheap bastard with a strong understanding of genuine economics. Either way, I'm not judging...
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@WayDownSouth, your caution is very smart. My feeling is that if the price drops or stagnates, I get to buy in for a longer period. I'd be content to do so for as long as 5 years [not because 5 years is a magical number, or will bring the "right" amount of shares; it's just a number I typed]. In that time, I could find myself selling early shares, but my incomes are as secure as any can get, and growing, so I think I can hang in there and ride this pony - be it into a sunset or off a cliff.
Well if you're in that position, as you said, you can just ride it out and forget about it. But even if the loss if pocket change, it's still knowing, learning, and actually beating the game that makes it fun.. Right? How well can we speculate and how well does it stand up to (or exceed) the speculation of the same asset by "experts"? (So tired of those "experts")... Anyway as I said I wish you luck and I'll be taking a peek at this regularly to see how it plays out.
Cheap Bastard just mentioned some excellent points above that are very worthy of consideration for your investment.
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Investment bank that previously called Fannie Mae at $1.25 now says Freddie Mac @$2.50 and Fannie Mae @ $2.00
https://www.investing.com/news/stock-market-news/freddie-mac-shares-upgraded-on-election-speculation-93CH-3315396
Time will tell.
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Tuesday, I spent the day hanging with my 2nd daughter after she had her wisdom teeth out, so didn't see the share price until after. Wednesday, I was driving to Boston with my younger 2 for an overnight getaway (a Ben & Jerry's cone in Harvard Square is about the price of tuition). When it closed at $0.90, I was up 11 cents (almost 14%) from my last buy, which I was happy about.
I only have 15,800 shares, so a penny moves my position $158. Current gain is about 78%. I cannot say how I'd be feeling if this was 150,000 shares or 1,000,000, but right now I mostly feel neutral. I'm happy to be up, but uninspired to do much more than watch/wait.
@LightStache, to answer why FNMA instead of FMCC: No reason. They seem the same to me, which may speak to how little I know about what I'm doing. After all, they are supposedly 2 entities, so why not go evenly into them in the event 1 lasts and the other doesn't?
@WayDownSouth, you are helping me think about when I should take my money back, plus some. I've had a sell order in at $10 from the beginning in case it spikes and I'm not around. However, what is the price at which I will not buy any more? At that point, why not take a gain? I mean, if it's too expensive to buy more, it's too expensive not to cash out.
It looks to me like it's going to see a spike to $1.25 - $1.40 soon...
Well I called that part, been taking a look - you missed out on a nice top at exactly $1.40 on January 24th... I'm sure you are aware but I was just looking at this again today - I don't think you're going to see $1.60 anytime soon. Looks like it's going back to the teens to sit for the next 3 months but I didn't really dig into the chart too deeply. Let's hope it plays out better than it looks.
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Tuesday, I spent the day hanging with my 2nd daughter after she had her wisdom teeth out, so didn't see the share price until after. Wednesday, I was driving to Boston with my younger 2 for an overnight getaway (a Ben & Jerry's cone in Harvard Square is about the price of tuition). When it closed at $0.90, I was up 11 cents (almost 14%) from my last buy, which I was happy about.
I only have 15,800 shares, so a penny moves my position $158. Current gain is about 78%. I cannot say how I'd be feeling if this was 150,000 shares or 1,000,000, but right now I mostly feel neutral. I'm happy to be up, but uninspired to do much more than watch/wait.
@LightStache, to answer why FNMA instead of FMCC: No reason. They seem the same to me, which may speak to how little I know about what I'm doing. After all, they are supposedly 2 entities, so why not go evenly into them in the event 1 lasts and the other doesn't?
@WayDownSouth, you are helping me think about when I should take my money back, plus some. I've had a sell order in at $10 from the beginning in case it spikes and I'm not around. However, what is the price at which I will not buy any more? At that point, why not take a gain? I mean, if it's too expensive to buy more, it's too expensive not to cash out.
It looks to me like it's going to see a spike to $1.25 - $1.40 soon...
Well I called that part, been taking a look - you missed out on a nice top at exactly $1.40 on January 24th... I'm sure you are aware but I was just looking at this again today - I don't think you're going to see $1.60 anytime soon. Looks like it's going back to the teens to sit for the next 3 months but I didn't really dig into the chart too deeply. Let's hope it plays out better than it looks.
I want to reply How dare you say I missed the top! I bought those shares, too, but according to my buying history, I'd be a liar. My last FNMA purchase was @ $1.00 on January 5.
On 2/15 I started buying Freddie Mac shares. Those were $1.1065, and I'll buy some more this week.
The 40 days between purchases wasn't me being savvy. It's because my adjunct pay has a gap between semesters.
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Tuesday, I spent the day hanging with my 2nd daughter after she had her wisdom teeth out, so didn't see the share price until after. Wednesday, I was driving to Boston with my younger 2 for an overnight getaway (a Ben & Jerry's cone in Harvard Square is about the price of tuition). When it closed at $0.90, I was up 11 cents (almost 14%) from my last buy, which I was happy about.
I only have 15,800 shares, so a penny moves my position $158. Current gain is about 78%. I cannot say how I'd be feeling if this was 150,000 shares or 1,000,000, but right now I mostly feel neutral. I'm happy to be up, but uninspired to do much more than watch/wait.
@LightStache, to answer why FNMA instead of FMCC: No reason. They seem the same to me, which may speak to how little I know about what I'm doing. After all, they are supposedly 2 entities, so why not go evenly into them in the event 1 lasts and the other doesn't?
@WayDownSouth, you are helping me think about when I should take my money back, plus some. I've had a sell order in at $10 from the beginning in case it spikes and I'm not around. However, what is the price at which I will not buy any more? At that point, why not take a gain? I mean, if it's too expensive to buy more, it's too expensive not to cash out.
It looks to me like it's going to see a spike to $1.25 - $1.40 soon...
Well I called that part, been taking a look - you missed out on a nice top at exactly $1.40 on January 24th... I'm sure you are aware but I was just looking at this again today - I don't think you're going to see $1.60 anytime soon. Looks like it's going back to the teens to sit for the next 3 months but I didn't really dig into the chart too deeply. Let's hope it plays out better than it looks.
I want to reply How dare you say I missed the top! I bought those shares, too, but according to my buying history, I'd be a liar. My last FNMA purchase was @ $1.00 on January 5.
On 2/15 I started buying Freddie Mac shares. Those were $1.1065, and I'll buy some more this week.
The 40 days between purchases wasn't me being savvy. It's because my adjunct pay has a gap between semesters.
I'm just giving you a hard time while claiming a little bragging right about my price prediction. I know you're fine where you sit and you're more than willing to ride it out.. BTW when I said "teens", I meant one dollar and teens, just to clarify.
You still hold a good amount and there's an opportunity here for sure but I think it's going to hold pretty stale just above a dollar for awhile.
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I'm just giving you a hard time while claiming a little bragging right
It's all good. Your advice has been very welcome.
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FNMA is up 9.5%.
FRCC is up 5.8%.
Any idea why? The broader markets are heading down today.
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FNMA is up 9.5%.
FRCC is up 5.8%.
Any idea why? The broader markets are heading down today.
Damn, I didn't see that coming! I was going to chart it out a little deeper but I still don't think it would have made a difference in my prediction. I thought it was going to take a seat for a while, for sure!
There's always a reason. I'm going to look into it tomorrow and give my input if I have a chance to find anything worthy of mentioning.
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Fannie is still holding up, a bit shaky according to charting but not bad at all IMHO!
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$1.65 @ChrisPascale! Tried to tag you in a thread but it won't let me tag you... Here is a link... Looks like a nice little catalyst, don't you think? @ChpBstrd might weigh in on his opinion of the influence caused here.
As always I'd DEFINITELY be pulling at least a little profit today but... MAN.. You might get your $2.00 wish as early at this week.
https://forum.mrmoneymustache.com/real-estate-and-landlording/a-'seismic-shift'-in-real-estate-fees/msg3242923/#msg3242923 (https://forum.mrmoneymustache.com/real-estate-and-landlording/a-'seismic-shift'-in-real-estate-fees/msg3242923/#msg3242923)https://
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$1.65 @ChrisPascale! Tried to tag you in a thread but it won't let me tag you... Here is a link... Looks like a nice little catalyst, don't you think? @ChpBstrd might weigh in on his opinion of the influence caused here.
As always I'd DEFINITELY be pulling at least a little profit today but... MAN.. You might get your $2.00 wish as early at this week.
Just checked the price and said, better head over to MMM.
It's nice to be right for the moment, especially since a minute before that I was steaming some peas and thought 'I'll add some lima beans' and dumped in about 20 little onions! They're not bad, actually.
I feel neutral. It helps that I've been working on this for a couple years, I think, and said I'd start buying shares a couple before that, but didn't.
I'd ask that you not be vicariously stressed, but don't think I should tell you how to feel - that's what the news is for.
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$1.65 @ChrisPascale! Tried to tag you in a thread but it won't let me tag you... Here is a link... Looks like a nice little catalyst, don't you think? @ChpBstrd might weigh in on his opinion of the influence caused here.
As always I'd DEFINITELY be pulling at least a little profit today but... MAN.. You might get your $2.00 wish as early at this week.
Just checked the price and said, better head over to MMM.
It's nice to be right for the moment, especially since a minute before that I was steaming some peas and thought 'I'll add some lima beans' and dumped in about 20 little onions! They're not bad, actually.
I feel neutral. It helps that I've been working on this for a couple years, I think, and said I'd start buying shares a couple before that, but didn't.
I'd ask that you not be vicariously stressed, but don't think I should tell you how to feel - that's what the news is for.
Lol, enjoy your onions AND your gains... That announcement about real estate happened after market close Friday. I had a feeling it would impact this position one way or another. Glad to see it's in your favor!
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"The Bulls Are in Control" so I'm getting ready for a good laugh on today's dip.
https://seekingalpha.com/article/4679030-federal-national-mortgage-association-stock-bulls-control-buy
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Interesting, obviously this is a years-long play that's entirely dependent upon them exiting conservatorship and, to a lesser extent, if/how the Treasury offramps its stake.
Federal law expects exits (i.e. assumes the conservatorships are temporary), but doesn't specify a timeline, which has blown way past anyone's expectations when this all went down in 2008. The current regulatory plans and financial activities of both GSEs, retaining earnings since 2019, are on a path to exit once that year's regulatory reserve requirements are met. According to my rough math, that could be as soon as 2028, around the 20th anniversary of the conservatorships. It could be sooner because those reserve requirements may have been set arbitrarily high for political reasons, so might be lowered in the future, meaning a faster exit. I'd expect significant movement if a Republican wins POTUS '24.
On the other hand, executive agencies love power and I could see FHFA HODLing. If there's another catastrophe, it would be pretty easy for Congress to make the arrangement permanent, wiping out all publicly-traded stock. Or FHFA moves the goalposts father down, undermining investor confidence with the same effect.
But these companies are kicking off a massive $9B/yr in earnings. If they were fully public today with a 15x P/E, FNMA would be at $37.90 and FMCC at $43.54.
That's the reason I asked about your choice between FNMA and FMCC, because FMCC has a higher fair value based on this theoretical EPS. I suspect FMCC trades at a lower market cap because its top line revenue is significantly lower.
I've tried to understand how conservatorship ends and am hoping someone has a better handle on that and is willing to explain or share speculation. I couldn't find much online. The gov't can exercise a warrant (link below) to purchase up to "79.9% of the total number of shares of Common Stock outstanding on a Fully Diluted basis on the date of exercise" at a tiny piece of a penny/share until 9/7/28, as compensation for the '08 bailout. It seems the warrant could be the mechanism to take (keep?) most of the value and end conservatorship. Based on the above comment from last year, if current outstanding shares would be worth ~$38 and then the gov't takes 80% of the value, does that suggest the diluted, post-warrant price might be one-fifth of that, ~$7.50? If a dividend was implemented the feds would get 80% of that, still a big chunk of income, the little people would get the remaining 20% and would have to stop their legal actions complaining about the net worth sweep. It doesn't sound that unreasonable...
https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/FNM/warrant/Fannie-Mae-Warrant.pdf
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Wow these twins have really taken off the past two weeks. Is there a specific catalyst or just momentum?
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Wow these twins have really taken off the past two weeks. Is there a specific catalyst or just momentum?
Makes no sense based on share price reactions to the same old performances, but how long can a company make billions and people think it's a penny stock?
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Wow these twins have really taken off the past two weeks. Is there a specific catalyst or just momentum?
Makes no sense based on share price reactions to the same old performances, but how long can a company make billions and people think it's a penny stock?
Forever, really. Soooo close to that $2 with Fannie! I would have exited this position yesterday 100%.
BUT...
I (as Chris Pascale) would be changing a stop-loss at $1.64 and move that $2.00 sell order up to "sell 25% at $2.25" just in case this is the beginning of something that is going to continue going wayyyyy up the hill. At least for now I'd do that if I were him. But I am not and, as I said I would have already exited completely yesterday.
This is a really nice run lately.
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$1.65 @ChrisPascale! Tried to tag you in a thread but it won't let me tag you... Here is a link... Looks like a nice little catalyst, don't you think? @ChpBstrd might weigh in on his opinion of the influence caused here.
As always I'd DEFINITELY be pulling at least a little profit today but... MAN.. You might get your $2.00 wish as early at this week.
https://forum.mrmoneymustache.com/real-estate-and-landlording/a-'seismic-shift'-in-real-estate-fees/msg3242923/#msg3242923 (https://forum.mrmoneymustache.com/real-estate-and-landlording/a-'seismic-shift'-in-real-estate-fees/msg3242923/#msg3242923)https://
IDK. I don't see the immediate connection between breaking up a private realtor cartel and breaking up the government-sponsored mortgage cartel.
Politicians are still going to be wary of privatizing Fannie and Freddie this year because they won't want to take the blame for the increase in mortgage rates which would occur immediately thereafter. That said, 2025-2028 is anyone's guess, because whoever wins the presidency will be a lame duck (assuming the continuation of the US Constitution) looking for quick liquidity to justify their tax cuts or jobs programs.
The best case I can imagine for a privatization this year would be if Biden put in motion a multi-year plan in November or December after losing to Trump. This would be a payback timebomb, getting Trump back for leaving Biden with a shitty withdraw plan from Afghanistan. I don't see that happening, because Biden doesn't seem to be that vindictive or organized. He's not prepared to do something on this issue.
The handful of spare change shares I own are speculations that Trump will say something this year implying that privatization is on the table as a way to pay for tax cuts. Why would he do that? Two reasons: To precipitate a housing crash while Biden is still in office OR to pay back his supporters who invested in Fannie or Freddie stock. Either scenario fits Trump's personality and interests. Him just saying something would cause FNMA or FMCC to more than double from here.
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Wow these twins have really taken off the past two weeks. Is there a specific catalyst or just momentum?
Makes no sense based on share price reactions to the same old performances, but how long can a company make billions and people think it's a penny stock?
Forever, really.
I love this very correct answer.
For the long play, after taking my money back, 8 or 10 years doesn't sound unreasonable (surely someone said that in 2014), but a $10, $20 and/or $30 share price will surely get me to take some money out to do a few fancy things, like buy the used Subaru Forester mama's been wantin', or promote whatever book/project I'm in the middle of.
Speaking of which, I had a talk at Boston University Friday. Like a dope, I didn't realize my collar was flipped up, so let's just pretend I was being cool!
https://www.linkedin.com/feed/update/urn:li:activity:7177677993807376384/
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It's interesting to see an "urban planning enthusiast" with a Twitter handle of "New Urbs" getting published in American Conservative.
Are conservatives about to start viewing government sponsored entities like FNMA as a part of market-distorting liberal overreach, or even socialism? Will they soon be making the case that government meddling in housing markets is why prices became unaffordable, and promising frustrated young renters that a purge of the government entities will restore affordability to housing markets?
https://www.theamericanconservative.com/we-have-always-subsidized-suburbia/ (https://www.theamericanconservative.com/we-have-always-subsidized-suburbia/)
What image springs to mind when you picture “federally subsidized housing”? Most people imagine a low-income public housing tower, a homeless shelter, or a shoddy apartment building.
Nope—suburban homeowners are the single biggest recipient of housing subsidies.
The system masks a huge amount of government intervention. It isn’t evident to the average person, because it works through obscure mechanisms like insurance and financing terms. These don’t look like conventional cash subsidies, but they distort incentives, supply, and demand in the same way.
It actually makes political sense. If Democrats choose to defend the government's pet mortgage companies, they will be perceived as stalwarts of the status quo by lots of frustrated young people who would like to buy a home. They will be perceived as supporting the interests of wealthy older homeowners, if not landlords, at the expense of the youth. Why wouldn't conservatives put them into this position, and declare themselves modern-day reformers? There are enough refugees from California alone to swing some states.
At an aesthetic level, we've already seen a rejection of late-20th-century modernism in Trump's December 2020 executive order (https://www.npr.org/2020/02/13/805256707/just-plain-ugly-proposed-executive-order-takes-aim-at-modern-architecture) for classical architecture in federal buildings. The next step to watch for is a re-imagining of urban housing along some revisionist narrative of traditional appeal. Could the cons seize the concept of new urbanism by its roots in tradition and cultural heritage, and promote it as the better way to live without government subsidies? Will Democrats then try to defend suburbia?
The parties are realigning after the mutual failure of their older visions, and today's politics look a lot different than 20 years ago, so anything is possible.
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Look at these incredible similarities between Freddie and Fannie... IMO it says same people buying the same stock. Seems to have peaked right around the time when this happened:
https://forum.mrmoneymustache.com/real-estate-and-landlording/a-'seismic-shift'-in-real-estate-fees/msg3242923/#msg3242923 (https://forum.mrmoneymustache.com/real-estate-and-landlording/a-'seismic-shift'-in-real-estate-fees/msg3242923/#msg3242923)
Seemed to begin growing as that process began last year... Interesting to say the least.
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The twist is that Fannie / Freddy are not rent-seeking entities that are directly increasing the costs of home ownership. They are, if anything, subsidies whose removal would raise mortgage rates.
So instead the government is going after closing costs (https://finance.yahoo.com/news/new-target-in-biden-administrations-war-on-junk-fees-mortgage-closing-costs-091036289.html?.tsrc=fin-srch) and realtor commissions (https://www.cnn.com/2024/03/15/economy/nar-realtor-commissions-settlement/index.html).
These are probably band-aids, and mortgage rates need to be 1-2% higher, as they would be in an unsubsidized private market, to deflate the housing bubble.
The case for Fannie/Freddy privatization is purely speculation that Trump will do it for his own political reasons.
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I've got some shares that are still in the black but I'm considering just closing out my position and taking some modest gains. Current cost basis is $1.24.
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I've got some shares that are still in the black but I'm considering just closing out my position and taking some modest gains. Current cost basis is $1.24.
Maybe not a bad idea. Now that the Republican primary is over, Trump will likely be reaching out to moderates. That might not jive with ranting about mortgage socialism.
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My portfolio took a $4,590 slide on Friday, but I'm up 135% on Fannie.
Averages are about $0.55 on Fannie (purchase range is $0.40 - $1.00) and $1.26 on Freddie (range is $1.065 - $1.57).
For me, nothing's changed. When my next $350 out of my last teaching paycheck clears in the Schwab acct I'll buy some more Freddie shares.
ETA at noon the next day: As with the way down, for no discernable reason, the Friday slide has mostly headed back up.
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My portfolio took a $4,590 slide on Friday, but I'm up 135% on Fannie.
Averages are about $0.55 on Fannie (purchase range is $0.40 - $1.00) and $1.26 on Freddie (range is $1.065 - $1.57).
For me, nothing's changed. When my next $350 out of my last teaching paycheck clears in the Schwab acct I'll buy some more Freddie shares.
ETA at noon the next day: As with the way down, for no discernable reason, the Friday slide has mostly headed back up.
You still have a pretty strong support around $1.25, I'd say you're not doing bad at all but I think you should have pulled some when you were nearing $2 as I said above... I have the feeling this may pickup to over $2 based on a few specific observations but I think that if it happens it won't be until August. Maybe a $1.80 tap before then is my best guess. I'm just noting this to see how it plays out and have a little history here. Not to say "I told ya so!"... You know what you need and want. I wouldn't follow anyone's advice but I do like to pick away at these from time to time and see "what if"...
Are you putting more into Freddie and Fannie or moving solely into Freddy at this point?
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By "moving solely" I meant solely adding new money into Freddy while holding the Fannie.
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Just Freddie for the coming months to make the investments more even. Have about 2400 FMCC and 16,000 FNMA.
I'm feeling good about it, and am happy to keep buying more shares at the same pace. I'm also not that excited about taking the money back at $2.00, but maybe that'll change when I actually have it.
This thing is either a printing press, or a dumpster full of kerosene. Eventually, the switch is going to flip, connect the circuit, and, not to get too technical, will go boom or blammo.
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[snip]
The case for Fannie/Freddy privatization is purely speculation that Trump will do it for his own political reasons.
There's a case to exit conservatorship independent of Trump. The existing laws and agreements are setup for an exit when sufficient capital is retained. Once they've hit those thresholds, it'll be legally difficult for the executive branch to keep them detained. Of course all that can be changed given enough cause, but that's not the current course.
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Just Freddie for the coming months to make the investments more even. Have about 2400 FMCC and 16,000 FNMA.
I'm feeling good about it, and am happy to keep buying more shares at the same pace. I'm also not that excited about taking the money back at $2.00, but maybe that'll change when I actually have it.
This thing is either a printing press, or a dumpster full of kerosene. Eventually, the switch is going to flip, connect the circuit, and, not to get too technical, will go boom or blammo.
I bet you're happy you decided to switch over to FMCC for the last few months. Now that FMCC has closed the gap with FNMA, and considering FNMA's more bigly revenue, I think they're evenly valued now.
ETA: I have 16,793 shares of FNMA and 25,481 share of FMCC. If you consider them together, it's my largest single position and I'm no longer accumulating. Now I wait for '28.
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I decide to close out my FNMA position and take a modest profit. My cost basis was around $1.24, and I sold at $1.47. 18% return over 3 months. Of course, it was only 100 shares so not very meaningful in the grand scheme of things.
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Regarding outlook: I'm not sure if this can even be compared, but Fannie Mae will likely post 2023 profits around $15 billion+, and Netflix has $5.4 billion for 2023. The latter trades at over $500/share with about 1/3 of the shares. Since we live in a perfect world where things only make sense, Fannie Mae should be $500 right now.
I don't think that math works. FNMA has 5.9B fully diluted shares compared to 444M for NFLX, so NFLX has 92% fewer shares, not 1/3.
If you take $15B of theoretical earnings and divide by 5.9B shares, you get an EPS of 2.54. Multiplied by a 12x P/E ratio (same as NFLX) you get $30 per share.
...not that traditional valuation matters much at this point
I may have used a more sophisticated method than you. I googled total shares FNMA and got this...........nope, can't paste a screen shot of a top result that I didn't click on.
Thanks for the reply.
Revisiting this with an actual 2023 income of $17.4B produces an EPS of ~2.95 x 12 PE = $35.40.
For FMCC with 2023 income of $10.5B gives you an EPS ~4.70 x 12 PE = $56.40.
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I decide to close out my FNMA position and take a modest profit. My cost basis was around $1.24, and I sold at $1.47. 18% return over 3 months. Of course, it was only 100 shares so not very meaningful in the grand scheme of things.
18% is great, and in less than a year.
It's not worth the stress if it stresses you out. I'm personally not feeling much of anything over it. My overriding thought is I'm right about this. Am I really, though? Time will tell. After all, all companies go to ZERO at some point, and that's 1 of the 2 possibilities on this.
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Regarding outlook: I'm not sure if this can even be compared, but Fannie Mae will likely post 2023 profits around $15 billion+, and Netflix has $5.4 billion for 2023. The latter trades at over $500/share with about 1/3 of the shares. Since we live in a perfect world where things only make sense, Fannie Mae should be $500 right now.
I don't think that math works. FNMA has 5.9B fully diluted shares compared to 444M for NFLX, so NFLX has 92% fewer shares, not 1/3.
If you take $15B of theoretical earnings and divide by 5.9B shares, you get an EPS of 2.54. Multiplied by a 12x P/E ratio (same as NFLX) you get $30 per share.
...not that traditional valuation matters much at this point
I may have used a more sophisticated method than you. I googled total shares FNMA and got this...........nope, can't paste a screen shot of a top result that I didn't click on.
Thanks for the reply.
Revisiting this with an actual 2023 income of $17.4B produces an EPS of ~2.95 x 12 PE = $35.40.
For FMCC with 2023 income of $10.5B gives you an EPS ~4.70 x 12 PE = $56.40.
Thanks for the update. I'm holding about 16k FNMA and 2.7k FMCC. Just sent another $350 to Schwab, and it'll clear on Tuesday. When teaching paychecks come back in the Fall, I'll get back to it again.
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Regarding outlook: I'm not sure if this can even be compared, but Fannie Mae will likely post 2023 profits around $15 billion+, and Netflix has $5.4 billion for 2023. The latter trades at over $500/share with about 1/3 of the shares. Since we live in a perfect world where things only make sense, Fannie Mae should be $500 right now.
I don't think that math works. FNMA has 5.9B fully diluted shares compared to 444M for NFLX, so NFLX has 92% fewer shares, not 1/3.
If you take $15B of theoretical earnings and divide by 5.9B shares, you get an EPS of 2.54. Multiplied by a 12x P/E ratio (same as NFLX) you get $30 per share.
...not that traditional valuation matters much at this point
I may have used a more sophisticated method than you. I googled total shares FNMA and got this...........nope, can't paste a screen shot of a top result that I didn't click on.
Thanks for the reply.
Revisiting this with an actual 2023 income of $17.4B produces an EPS of ~2.95 x 12 PE = $35.40.
For FMCC with 2023 income of $10.5B gives you an EPS ~4.70 x 12 PE = $56.40.
Thanks for the update. I'm holding about 16k FNMA and 2.7k FMCC. Just sent another $350 to Schwab, and it'll clear on Tuesday. When teaching paychecks come back in the Fall, I'll get back to it again.
At what point will you stop?
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Regarding outlook: I'm not sure if this can even be compared, but Fannie Mae will likely post 2023 profits around $15 billion+, and Netflix has $5.4 billion for 2023. The latter trades at over $500/share with about 1/3 of the shares. Since we live in a perfect world where things only make sense, Fannie Mae should be $500 right now.
I don't think that math works. FNMA has 5.9B fully diluted shares compared to 444M for NFLX, so NFLX has 92% fewer shares, not 1/3.
If you take $15B of theoretical earnings and divide by 5.9B shares, you get an EPS of 2.54. Multiplied by a 12x P/E ratio (same as NFLX) you get $30 per share.
...not that traditional valuation matters much at this point
I may have used a more sophisticated method than you. I googled total shares FNMA and got this...........nope, can't paste a screen shot of a top result that I didn't click on.
Thanks for the reply.
Revisiting this with an actual 2023 income of $17.4B produces an EPS of ~2.95 x 12 PE = $35.40.
For FMCC with 2023 income of $10.5B gives you an EPS ~4.70 x 12 PE = $56.40.
Thanks for the update. I'm holding about 16k FNMA and 2.7k FMCC. Just sent another $350 to Schwab, and it'll clear on Tuesday. When teaching paychecks come back in the Fall, I'll get back to it again.
At what point will you stop?
I'm not sure. When I was buying at $0.40, I wasn't sure I'd pay more than a dollar, but when it was nearly $2.00, I would have bought at that price had my funds cleared. I'm very comfortable with this gamble, and feel like the more time I get, the better off I'll be.
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It still has support and is climbing at the rate of a dead sloth, but nonetheless climbing! I'd stay in it at this point for a bit but if it doesn't break $2 by EOY then I'll be saying "told ya so!"...
I'll think you'll do well. I wouldn't be buying more right now though, I would only be buying under $1.30 but that's me.
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https://www.marketwatch.com/story/dont-listen-to-unscrupulous-dealers-promoting-this-trump-trade-analyst-says-8a022e0d?mod=home-page (https://www.marketwatch.com/story/dont-listen-to-unscrupulous-dealers-promoting-this-trump-trade-analyst-says-8a022e0d?mod=home-page)
Whalen argued that Trump, if elected, would ultimately decline to privatize the entities because the move would seriously disrupt the mortgage market, with unpredictable results for the American middle class.
“Through the end of last week, the two leading stocks in the world of mortgage finance were unlisted penny stocks issued by Fannie Mae and Freddie Mac,” Whalen wrote. He concluded that investors in these shares “take short-term trading profits rather than playing the long game that certain unscrupulous dealers are promoting.”
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It still has support and is climbing at the rate of a dead sloth, but nonetheless climbing! I'd stay in it at this point for a bit but if it doesn't break $2 by EOY then I'll be saying "told ya so!"...
I'll think you'll do well. I wouldn't be buying more right now though, I would only be buying under $1.30 but that's me.
The dead sloth gave me a chuckle, but dead sloths are always funny. If you wind up with a "told ya so," I'll commend you. It's pretty sweet to be able to shove being right in someone's face. Almost as good as being like, 'I feel so bad to be right about this.'
I still check the stock price about every day - many times morning and night - and would both like for it to just 100x already, and for it to hang out another few years so I have more shares.
What I'm not going to do is dump any funds other than my teaching income into it. I mean, sure, I'm very sure that I'm right about this, but that doesn't really mean anything.
An article came out today with some ass-wipe saying that if Fannie Mae comes out of conservatorship it will surely fail. Why? Cuz, I guess. He didn't say why, exactly, and didn't cite the billions in profits. Perhaps he's taking the long view, where the Sun goes cold, we go cold, and then Fannie Mae has no loans to..........geez, I'm not sure what they do with the loans. Little help?
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I think Fannie and Freddie have fallen off the radar as ways to gamble on a second Trump presidency. DJT has been a better proxy for Trump's odds.
Trump can start selling shares (https://finance.yahoo.com/news/trump-clear-cash-media-shares-120712032.html) on about September 20. This, plus his falling poll numbers versus the new Democratic nominee have tanked the price of DJT.
I predict Trump will quietly sell a small portion of his DJT shares to fund his campaign and legal bills, and that this will tank the price of DJT. However, DJT options almost certainly have this risk priced in. Furthermore, a relief rally or short squeeze may occur if he for whatever reason fails to sell, or if Kamala Harris commits a major gaffe or falls behind in the polls. So it's too radioactive to touch, IMO.
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I think Fannie and Freddie have fallen off the radar as ways to gamble on a second Trump presidency. DJT has been a better proxy for Trump's odds.
I mostly agree, but they do seem to be tracking Trump's polling still, including rising today on the news that Kennedy will drop out and endorse Trump.
On a slightly more rational note, they also rose noticeably last week after the FNMA CEO Priscilla Almodóvar posted an infographic on LinkedIn (https://www.linkedin.com/posts/priscilla-almodovar_fannie-mae-continues-to-reduce-its-capital-activity-7229216984591204353-apyK) showing improvements in their capital reserve position over time.
That implies some investor expectation of a recap and release under the current PSPA capital framework, which is a likely scenario under a Harris administration or is that too optimistic?
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The day after the debate, GSEs sank by 10%. Today they're up ~8% owing to election-related coverage in WSJ. This still shows a strong sensitivity to the election, which I don't like, because it implies a lot of pain if Harris wins.
The more recap-and-release becomes associated with Trump, the more resistance Dems will have to doing it during a Harris term. Ackman and Paulson are working against their own interests taking a hard pro-Trump stance. They should do what everyone else does and play both sides, or just STFU.
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I think Fannie and Freddie have fallen off the radar as ways to gamble on a second Trump presidency. DJT has been a better proxy for Trump's odds.
I mostly agree, but they do seem to be tracking Trump's polling still, including rising today on the news that Kennedy will drop out and endorse Trump.
On a slightly more rational note, they also rose noticeably last week after the FNMA CEO Priscilla Almodóvar posted an infographic on LinkedIn (https://www.linkedin.com/posts/priscilla-almodovar_fannie-mae-continues-to-reduce-its-capital-activity-7229216984591204353-apyK) showing improvements in their capital reserve position over time.
That implies some investor expectation of a recap and release under the current PSPA capital framework, which is a likely scenario under a Harris administration or is that too optimistic?
How many shares does Priscilla Almodóvar own? This is public information on an SEC Form 4 or Form 3.
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I think Fannie and Freddie have fallen off the radar as ways to gamble on a second Trump presidency. DJT has been a better proxy for Trump's odds.
I mostly agree, but they do seem to be tracking Trump's polling still, including rising today on the news that Kennedy will drop out and endorse Trump.
On a slightly more rational note, they also rose noticeably last week after the FNMA CEO Priscilla Almodóvar posted an infographic on LinkedIn (https://www.linkedin.com/posts/priscilla-almodovar_fannie-mae-continues-to-reduce-its-capital-activity-7229216984591204353-apyK) showing improvements in their capital reserve position over time.
That implies some investor expectation of a recap and release under the current PSPA capital framework, which is a likely scenario under a Harris administration or is that too optimistic?
How many shares does Priscilla Almodóvar own? This is public information on an SEC Form 4 or Form 3.
Looks like 0. I think the current rules prohibit stock-based comp until the capital reserve requirements are met.
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What do you know, this bet would have paid off!
Headline: Freddie and Fannie’s Zombie Preferreds Surge on Trump Win (https://finance.yahoo.com/news/trump-win-supercharges-freddie-mac-162708622.html)
@Chris Pascal are you still holding?
In hindsight it was a dumb bet not to take. 50/50 odds of a small loss or a big gain.
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What do you know, this bet would have paid off!
Headline: Freddie and Fannie’s Zombie Preferreds Surge on Trump Win (https://finance.yahoo.com/news/trump-win-supercharges-freddie-mac-162708622.html)
@Chris Pascal are you still holding?
In hindsight it was a dumb bet not to take. 50/50 odds of a small loss or a big gain.
Thanks for thinking of me. I have held and will continue to buy.
I'm not unhappy with the results, but not feeling elated, greedy, anxious, etc.
Very comfortable with buying/holding.
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Thanks for thinking of me. I have held and will continue to buy.
I'm not unhappy with the results, but not feeling elated, greedy, anxious, etc.
Very comfortable with buying/holding.
Care to share the price at which you would stop buying? And the price when you would start to sell?
I'm thinking to take some gains if/when it reaches $3 but that's a pretty arbitrary number.
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Thanks for thinking of me. I have held and will continue to buy.
I'm not unhappy with the results, but not feeling elated, greedy, anxious, etc.
Very comfortable with buying/holding.
Care to share the price at which you would stop buying? And the price when you would start to sell?
I'm thinking to take some gains if/when it reaches $3 but that's a pretty arbitrary number.
Next month I'll probably sell $9,000 worth to pay my daughter's Spring tuition, but don't have a set price right now.
When I was buying shares for under a $1.00 in 2022 and 2023, I thought for sure at $2.00 I'd withdraw all the capital, but as it approached that number I adjusted it upward to something like $5.00 or $6.00. I currently have a SELL order of 2,500 shares @ $40, but I'm not sure if I'll wait for it to get that high.
When I see that Fannie Mae made more money in 2023 than:
- Netflix ($830/share)
- Capital One ($185/share)
- GE ($183/share)
- Tesla ($330/share)
- Zoom Video Communications ($85/share)
I just see that it has to go up much higher if it is to keep existing. Now, it could stop existing, which is why I'll curb my messages by saying something like this could be a printing press, but it could also be a dumpster full of kerosene.
Following a subReddit on this, there's a couple people saying the real values of FNMA/FMCC are about $40, and if the warrants are withdrawn, the values will be more like $200, but the other side of that is that the stocks could be diluted like crazy and in that scenario someone is guess-timating $5. These "real values" don't necessarily mean anything, though. After all, we saw GME go up to something like $800, and that was not the real value per share, and there are companies that have never made a profit, but somehow have a price per share. An example here is WNDW. They lose millions every year, but sometimes go up in value despite having no sales. It's weird.
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Maybe the rationale is that the next tax cut bill will have to find sources of revenue to offset the fiscal damage and reduce the risk of an illiquidity event in the US treasury market (like former British PM Liz Truss experienced after floating a similarly implausible budget).
And if they don't offset some of the damage, and the bond market does seize up, then they will be forced to privatize anyway.
So maybe privatizing Fannie and Freddie is less of an idea than it is an inevitability, for a ruling party that wants to prioritize tax cuts in a country with a 136% debt-to-GDP ratio that spends more on .
I think the timing of privatization would be set to occur after the 2028 election cycle, so that the consequences land on someone else's desk. But moves could occur this year to lock in that outcome.
For example, the government could sell convertible bonds against its Fannie/Freddie stock that can be exercised in five years. Such bonds would provide immediate relief against interest expenses. They'd also serve as a separate source of liquidity for a government facing the risk of revolt in the treasuries marketplace, thereby making such a revolt less likely.
This plan would be a time bomb for the housing market, and the consequences would eventually prove highly unpopular, but it checks all the boxes as the logical thing to happen next. Even the potential loss of 15 and 30 year mortgage options could be mitigated for a time if the newly privatized companies were required to provide these services for a certain number of years as part of the terms of their privatization.
Note that this doesn't mean current shareholders won't be diluted. The convertibles would likely be for NEW shares, unless the ruling party wants to reward their insiders in what would be the biggest corruption scandal of the 21st century. So current shares essentially include a call option on that corruption scenario happening. I mean, they could still go waaaay up even per the terms of a dilutive offering. But the real reward would be if the capitalization structure of these giants was rebuilt to put everyone in common shares, rather than having a preferred/voting class that soaks up the earnings and a common class that gets nothing.
I'm actually more interested now than I was before the shares doubled.
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I think the timing of privatization would be set to occur after the 2028 election cycle, so that the consequences land on someone else's desk.
What consequences?
There's this idea floating around that the government exiting its stake will inevitably lead to a rating downgrade from sovereign level. The downgrade will 1) increase mortgage rates and 2) cause the GSEs to lose their competitive edge against private sector rivals.
But I fail to see why the government couldn't continue the same limited guarantee it provides today. It's literally the plan -- the government gets guarantee fees in exchange for its support. If nothing changes regarding the government's backing of the GSEs, rating agencies would have no logical reason for a downgrade.
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I think the timing of privatization would be set to occur after the 2028 election cycle, so that the consequences land on someone else's desk.
What consequences?
There's this idea floating around that the government exiting its stake will inevitably lead to a rating downgrade from sovereign level. The downgrade will 1) increase mortgage rates and 2) cause the GSEs to lose their competitive edge against private sector rivals.
But I fail to see why the government couldn't continue the same limited guarantee it provides today. It's literally the plan -- the government gets guarantee fees in exchange for its support. If nothing changes regarding the government's backing of the GSEs, rating agencies would have no logical reason for a downgrade.
The specific consequences I'm thinking of are the elimination of 15-30 year fixed rate mortgages. These products are only available in the U.S. because of the government subsidy. In the rest of the world, people finance their homes for five years at a time, because it doesn't make good business sense to hold risky loans of such extreme duration - at least not at the sort of interest rates we are accustomed to, maybe 1-2% above treasuries. The loss of such loan options would be deeply unpopular.
So yes, it is possible the government finds a way to extract cash out of Fannie and Freddie while also ensuring 15-30 year loans are still government-guaranteed and underwritten. A return to the pre-2008 status quo is one possibility. But these companies might be worth more if they weren't forced to buy products which don't make sense, and which occasionally blow up or suffer extreme devaluation as we learned in 2008 and 2022. A short-sighted politician looking to extract the most cash as possible might set Fannie and Freddie free in exchange for a bigger payout that could be used to justify a bigger tax cut. If the consequences could be shifted to a time beyond their term, there's no downside.
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I think the timing of privatization would be set to occur after the 2028 election cycle, so that the consequences land on someone else's desk.
What consequences?
There's this idea floating around that the government exiting its stake will inevitably lead to a rating downgrade from sovereign level. The downgrade will 1) increase mortgage rates and 2) cause the GSEs to lose their competitive edge against private sector rivals.
But I fail to see why the government couldn't continue the same limited guarantee it provides today. It's literally the plan -- the government gets guarantee fees in exchange for its support. If nothing changes regarding the government's backing of the GSEs, rating agencies would have no logical reason for a downgrade.
The specific consequences I'm thinking of are the elimination of 15-30 year fixed rate mortgages. These products are only available in the U.S. because of the government subsidy. In the rest of the world, people finance their homes for five years at a time, because it doesn't make good business sense to hold risky loans of such extreme duration - at least not at the sort of interest rates we are accustomed to, maybe 1-2% above treasuries. The loss of such loan options would be deeply unpopular.
So yes, it is possible the government finds a way to extract cash out of Fannie and Freddie while also ensuring 15-30 year loans are still government-guaranteed and underwritten. A return to the pre-2008 status quo is one possibility. But these companies might be worth more if they weren't forced to buy products which don't make sense, and which occasionally blow up or suffer extreme devaluation as we learned in 2008 and 2022. A short-sighted politician looking to extract the most cash as possible might set Fannie and Freddie free in exchange for a bigger payout that could be used to justify a bigger tax cut. If the consequences could be shifted to a time beyond their term, there's no downside.
^This seems very Trumpy. Maybe the "call option" on this scenario is pretty valuable.
I mean, I assume that's the reason it already bounced up so much. But with most of the potential value still unrealized, there's room for a lot of surprises.
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I think the timing of privatization would be set to occur after the 2028 election cycle, so that the consequences land on someone else's desk.
What consequences?
There's this idea floating around that the government exiting its stake will inevitably lead to a rating downgrade from sovereign level. The downgrade will 1) increase mortgage rates and 2) cause the GSEs to lose their competitive edge against private sector rivals.
But I fail to see why the government couldn't continue the same limited guarantee it provides today. It's literally the plan -- the government gets guarantee fees in exchange for its support. If nothing changes regarding the government's backing of the GSEs, rating agencies would have no logical reason for a downgrade.
The specific consequences I'm thinking of are the elimination of 15-30 year fixed rate mortgages. These products are only available in the U.S. because of the government subsidy. In the rest of the world, people finance their homes for five years at a time, because it doesn't make good business sense to hold risky loans of such extreme duration - at least not at the sort of interest rates we are accustomed to, maybe 1-2% above treasuries. The loss of such loan options would be deeply unpopular.
So yes, it is possible the government finds a way to extract cash out of Fannie and Freddie while also ensuring 15-30 year loans are still government-guaranteed and underwritten. A return to the pre-2008 status quo is one possibility. But these companies might be worth more if they weren't forced to buy products which don't make sense, and which occasionally blow up or suffer extreme devaluation as we learned in 2008 and 2022. A short-sighted politician looking to extract the most cash as possible might set Fannie and Freddie free in exchange for a bigger payout that could be used to justify a bigger tax cut. If the consequences could be shifted to a time beyond their term, there's no downside.
^This seems very Trumpy. Maybe the "call option" on this scenario is pretty valuable.
I mean, I assume that's the reason it already bounced up so much. But with most of the potential value still unrealized, there's room for a lot of surprises.
I doubt it. If we can foresee it, then so will everyone else. Everyone knew the TCJA expiration was a way to game CBO deficit estimates, but those didn't matter so it passed. The 30 year mortgage is a cornerstone of the American housing economy. Even Trump couldn't make moves that would foreseeably put that at risk.
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I think the timing of privatization would be set to occur after the 2028 election cycle, so that the consequences land on someone else's desk.
What consequences?
There's this idea floating around that the government exiting its stake will inevitably lead to a rating downgrade from sovereign level. The downgrade will 1) increase mortgage rates and 2) cause the GSEs to lose their competitive edge against private sector rivals.
But I fail to see why the government couldn't continue the same limited guarantee it provides today. It's literally the plan -- the government gets guarantee fees in exchange for its support. If nothing changes regarding the government's backing of the GSEs, rating agencies would have no logical reason for a downgrade.
The specific consequences I'm thinking of are the elimination of 15-30 year fixed rate mortgages. These products are only available in the U.S. because of the government subsidy. In the rest of the world, people finance their homes for five years at a time, because it doesn't make good business sense to hold risky loans of such extreme duration - at least not at the sort of interest rates we are accustomed to, maybe 1-2% above treasuries. The loss of such loan options would be deeply unpopular.
So yes, it is possible the government finds a way to extract cash out of Fannie and Freddie while also ensuring 15-30 year loans are still government-guaranteed and underwritten. A return to the pre-2008 status quo is one possibility. But these companies might be worth more if they weren't forced to buy products which don't make sense, and which occasionally blow up or suffer extreme devaluation as we learned in 2008 and 2022. A short-sighted politician looking to extract the most cash as possible might set Fannie and Freddie free in exchange for a bigger payout that could be used to justify a bigger tax cut. If the consequences could be shifted to a time beyond their term, there's no downside.
^This seems very Trumpy. Maybe the "call option" on this scenario is pretty valuable.
I mean, I assume that's the reason it already bounced up so much. But with most of the potential value still unrealized, there's room for a lot of surprises.
I doubt it. If we can foresee it, then so will everyone else. Everyone knew the TCJA expiration was a way to game CBO deficit estimates, but those didn't matter so it passed. The 30 year mortgage is a cornerstone of the American housing economy. Even Trump couldn't make moves that would foreseeably put that at risk.
Not gonna lie - in my imagination, it goes like this:
1. At some point the Pres or a surrogate says “we’ve heard of this idea, but are not gonna do it”
2. That was so the family and friends can buy cheap. They buy.
3. “Hmm, conditions changed. Maybe we’ll do it.”
4. Various demonstrations of intent and progress occur. Prices rise. People get upset.
5. The insiders sell.
6. The Pres decides not to do it any more.
In other words, actually wrecking the mortgage market isn’t needed to do a lucrative pump and dump.
That’s my imagination, though.
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I think the timing of privatization would be set to occur after the 2028 election cycle, so that the consequences land on someone else's desk.
What consequences?
There's this idea floating around that the government exiting its stake will inevitably lead to a rating downgrade from sovereign level. The downgrade will 1) increase mortgage rates and 2) cause the GSEs to lose their competitive edge against private sector rivals.
But I fail to see why the government couldn't continue the same limited guarantee it provides today. It's literally the plan -- the government gets guarantee fees in exchange for its support. If nothing changes regarding the government's backing of the GSEs, rating agencies would have no logical reason for a downgrade.
The specific consequences I'm thinking of are the elimination of 15-30 year fixed rate mortgages. These products are only available in the U.S. because of the government subsidy. In the rest of the world, people finance their homes for five years at a time, because it doesn't make good business sense to hold risky loans of such extreme duration - at least not at the sort of interest rates we are accustomed to, maybe 1-2% above treasuries. The loss of such loan options would be deeply unpopular.
So yes, it is possible the government finds a way to extract cash out of Fannie and Freddie while also ensuring 15-30 year loans are still government-guaranteed and underwritten. A return to the pre-2008 status quo is one possibility. But these companies might be worth more if they weren't forced to buy products which don't make sense, and which occasionally blow up or suffer extreme devaluation as we learned in 2008 and 2022. A short-sighted politician looking to extract the most cash as possible might set Fannie and Freddie free in exchange for a bigger payout that could be used to justify a bigger tax cut. If the consequences could be shifted to a time beyond their term, there's no downside.
^This seems very Trumpy. Maybe the "call option" on this scenario is pretty valuable.
I mean, I assume that's the reason it already bounced up so much. But with most of the potential value still unrealized, there's room for a lot of surprises.
I doubt it. If we can foresee it, then so will everyone else. Everyone knew the TCJA expiration was a way to game CBO deficit estimates, but those didn't matter so it passed. The 30 year mortgage is a cornerstone of the American housing economy. Even Trump couldn't make moves that would foreseeably put that at risk.
Not gonna lie - in my imagination, it goes like this:
1. At some point the Pres or a surrogate says “we’ve heard of this idea, but are not gonna do it”
2. That was so the family and friends can buy cheap. They buy.
3. “Hmm, conditions changed. Maybe we’ll do it.”
4. Various demonstrations of intent and progress occur. Prices rise. People get upset.
5. The insiders sell.
6. The Pres decides not to do it any more.
In other words, actually wrecking the mortgage market isn’t needed to do a lucrative pump and dump.
That’s my imagination, though.
Yea I think when one accepts that the Democrats are going to be a minor regional party for the next generation, and that we now have a ruling party with a firm grip on the electorate and courts packed with toadies, ideas about how "they can't" do whatever no longer make sense. Do we think popularity limits the behavior Recep Erdogan, Vladimir Putin, Nicholas Maduro, Xi Jinping, or Viktor Orban?
The concept of a presidential pump-and-dump makes sense in the context of a 78-year-old president who is selling cryptocurrency and NFTs, steering foreign dignitaries and lobbyists to his overpriced hotel, and who once took people's tuition money for a fake university. He was legally bulletproof and unaccountable before he became the supreme leader of the ruling party in U.S, with control over all 3 branches of the government and about half of the media.
Consider selling on the next big pump, to get in alignment with the pattern.
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Part of my "evidence" was the price of DJT. I looked at a graph of that recently and it spiked wildly to 50 before the last election, but then in the last couple days before election, it crashed to 30ish and has stayed there, more or less. My interpretation is that insiders hedged the election by pumping for a couple of weeks, finishing their sales a couple days early (mostly at 45-50), and then ceased pumping. 30 turned out the the "real" price.
I have no way to prove any of that except the prices. If insiders were the ones, though, it's interesting to me that that one stock peaked prior, while other securities perceived as Trump-related (TSLA, crypto, and of course FNMA) rose most after the election instead of before. With DJT being most directly of benefit to the Pres and his associates, at least its behavior fits the story, while the others appear to result from the enthusiasm of outsiders.
For a FNMA pump to benefit the Pres, he or his proxies have to first load up. Doing that and pumping it appear not to have happened during the election runup. Will they happen during this administration, I don't know.
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Part of my "evidence" was the price of DJT. I looked at a graph of that recently and it spiked wildly to 50 before the last election, but then in the last couple days before election, it crashed to 30ish and has stayed there, more or less. My interpretation is that insiders hedged the election by pumping for a couple of weeks, finishing their sales a couple days early (mostly at 45-50), and then ceased pumping. 30 turned out the the "real" price.
I have no way to prove any of that except the prices. If insiders were the ones, though, it's interesting to me that that one stock peaked prior, while other securities perceived as Trump-related (TSLA, crypto, and of course FNMA) rose most after the election instead of before. With DJT being most directly of benefit to the Pres and his associates, at least its behavior fits the story, while the others appear to result from the enthusiasm of outsiders.
For a FNMA pump to benefit the Pres, he or his proxies have to first load up. Doing that and pumping it appear not to have happened during the election runup. Will they happen during this administration, I don't know.
The price action of DJT can easily be explained by the Illuminati and Lizard People (I-LP) conspiring to influence the election. That stock bears the President-elect's name so it was the important one to manipulate ahead of the election. The I-LP used their control of major brokerages to stop low priced sell orders from executing. Now that the election's over, they had to allow some volatility to maintain the appearance of free markets. Totally agree that Ackman, Trump's team, and the Rothschilds have been working with I-LP on a pump and dump scheme targeted at Fannie and Freddie. I have no evidence of this except the prices, but there can be no other explanation.
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Part of my "evidence" was the price of DJT. I looked at a graph of that recently and it spiked wildly to 50 before the last election, but then in the last couple days before election, it crashed to 30ish and has stayed there, more or less. My interpretation is that insiders hedged the election by pumping for a couple of weeks, finishing their sales a couple days early (mostly at 45-50), and then ceased pumping. 30 turned out the the "real" price.
I have no way to prove any of that except the prices. If insiders were the ones, though, it's interesting to me that that one stock peaked prior, while other securities perceived as Trump-related (TSLA, crypto, and of course FNMA) rose most after the election instead of before. With DJT being most directly of benefit to the Pres and his associates, at least its behavior fits the story, while the others appear to result from the enthusiasm of outsiders.
For a FNMA pump to benefit the Pres, he or his proxies have to first load up. Doing that and pumping it appear not to have happened during the election runup. Will they happen during this administration, I don't know.
The price action of DJT can easily be explained by the Illuminati and Lizard People (I-LP) conspiring to influence the election. That stock bears the President-elect's name so it was the important one to manipulate ahead of the election. The I-LP used their control of major brokerages to stop low priced sell orders from executing. Now that the election's over, they had to allow some volatility to maintain the appearance of free markets. Totally agree that Ackman, Trump's team, and the Rothschilds have been working with I-LP on a pump and dump scheme targeted at Fannie and Freddie. I have no evidence of this except the prices, but there can be no other explanation.
Well played, @LightStache
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Part of my "evidence" was the price of DJT. I looked at a graph of that recently and it spiked wildly to 50 before the last election, but then in the last couple days before election, it crashed to 30ish and has stayed there, more or less. My interpretation is that insiders hedged the election by pumping for a couple of weeks, finishing their sales a couple days early (mostly at 45-50), and then ceased pumping. 30 turned out the the "real" price.
I have no way to prove any of that except the prices. If insiders were the ones, though, it's interesting to me that that one stock peaked prior, while other securities perceived as Trump-related (TSLA, crypto, and of course FNMA) rose most after the election instead of before. With DJT being most directly of benefit to the Pres and his associates, at least its behavior fits the story, while the others appear to result from the enthusiasm of outsiders.
For a FNMA pump to benefit the Pres, he or his proxies have to first load up. Doing that and pumping it appear not to have happened during the election runup. Will they happen during this administration, I don't know.
The price action of DJT can easily be explained by the Illuminati and Lizard People (I-LP) conspiring to influence the election. That stock bears the President-elect's name so it was the important one to manipulate ahead of the election. The I-LP used their control of major brokerages to stop low priced sell orders from executing. Now that the election's over, they had to allow some volatility to maintain the appearance of free markets. Totally agree that Ackman, Trump's team, and the Rothschilds have been working with I-LP on a pump and dump scheme targeted at Fannie and Freddie. I have no evidence of this except the prices, but there can be no other explanation.
Well played, @LightStache
IDK, it's fair to ask why DJT rallied before the election, but others did not rally until after. A naive but logical explanation might be that the others had as much downside as upside riding on the election, whereas DJT had upside either way. However this does not pass the common sense test. In fact it seems more likely the reverse was true. The implication is that there was an arbitrage opportunity, which has since passed.
Another possibility is that some of these tickers had excess value only in a less-likely Republican sweep scenario, whereas DJT would rally even if Trump faced a divided Congress.
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At this point in the saga, FNMA and FMCC are sort of languishing and wearing off their post-election bumps. It seems they are being neglected for lack of attention, especially in comparison to cryptocurrency bets and companies where Don Jr. is getting a board seat or advisory role. I would fear that privatization could be on the back burner, as there are so many less politically perilous ways to graft the system than endangering the 30 year mortgage.
OTOH, either of these entities could announce tomorrow that Don Jr. is taking an advisory role, and the stocks could jump 50%.
A tax cut bill WILL be floated in the first half of 2025, and if these companies are not privatized as part of those negotiations, it will probably be a signal that it's time to run for the exits. It's the kind of political risk that won't be floated early in the negotiations, but will only be announced after backroom deals have secured majority support. So you'll have to wait until actual bills are filed to know what is happening, and even then there could be differences between the House and Senate versions.
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At this point in the saga, FNMA and FMCC are sort of languishing and wearing off their post-election bumps. It seems they are being neglected for lack of attention, especially in comparison to cryptocurrency bets and companies where Don Jr. is getting a board seat or advisory role. I would fear that privatization could be on the back burner, as there are so many less politically perilous ways to graft the system than endangering the 30 year mortgage.
OTOH, either of these entities could announce tomorrow that Don Jr. is taking an advisory role, and the stocks could jump 50%.
A tax cut bill WILL be floated in the first half of 2025, and if these companies are not privatized as part of those negotiations, it will probably be a signal that it's time to run for the exits. It's the kind of political risk that won't be floated early in the negotiations, but will only be announced after backroom deals have secured majority support. So you'll have to wait until actual bills are filed to know what is happening, and even then there could be differences between the House and Senate versions.
Interesting! I agree they are languishing from lack of attention, but my picture of the risks is quite different. I'm focused on comments from the mortgage industry that they want an explicit guarantee, so it's a question of whether their lobbyists will be powerful enough to stop a release using existing executive authority. I don't assume legislative action is required. I also have no awareness of Don Jrs. goings on and hope he steers well clear of Fannie and Freddie. No need to muddy the waters!
I expect a pop in January when the topic is broached in Bessent's confirmation hearings. Other than that I don't foresee any catalysts.
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At this point in the saga, FNMA and FMCC are sort of languishing................
..........I expect a pop in January when the topic is broached in Bessent's confirmation hearings. Other than that I don't foresee any catalysts.
Agreed on both. I'm expecting an Inauguration Day bump, which would be silly unless there's going to be a planned release that day, and I'd like to think there'll be a bump when the 2024 earnings are released about 2 weeks later.
However, earnings releases have not had sensible impacts on these companies in the past decade, so why start now? Fannie Mae Q3 income was $4B, and the stock price dropped really hard. Hilariously, shortly before that, Netflix posted a $2B quarter, and the price jumped significantly.
My attitude is that the longer this takes, the more shares I can buy. If it drops down to a $1.00 or less again, I still feel the same way.
These companies are only going 1 of 2 ways. Only 1 makes sense with them holding $100B in cash, and pulling in consistent multi-billion-dollar profits, but the fact that I was able to start buying so late is an indicator that nothing has to make any sense, so a $0.00 share price is possible, if not probable.
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FNMA up 36% today but that's still a little below its late Nov high. The increase came right after this statement/pump.
Bill Ackman, CEO of Pershing Square, stated in a post to X: “I am often asked for stock recommendations, but generally don’t share individual names unless I believe the risk versus the reward is extraordinarily compelling. As we look toward 2025, one investment in our portfolio stands out for large asymmetric upside versus downside so I thought I would share it. We have owned Fannie Mae (FNMA) and Freddie Mac (FMCC) common stock for more than a decade. Today, they trade at or around our average cost. As such, they have not been great investments to date. What makes them particularly interesting today versus any other time in history is that there is a credible path for their removal from conservatorship in the relative short term, that is, in the next two years. During Trump’s first term, Secretary Mnuchin took steps toward this outcome, but he ran out of time. I expect that in the second @realDonaldTrump administration, Trump and his team will get the job done… We estimate the value of each company at the time of their IPOs in 2026 at ~$34 per share. We assume their IPOs are priced at $31 per share reflecting a ~10% discount to their intrinsic values. We calculate a profit to the gov’t of ~$300 billion assuming full exercise of its warrants and a sell down of common stock in both companies over the five years following the IPOs. We believe the junior preferreds are also a good investment, but they do not offer nearly the same return because their upside is capped. Trump likes big deals and this would be the biggest deal in history. I am confident he will get it done. There remains a high degree of uncertainty about the ultimate outcome so you should limit your exposure to what you can afford to lose if you choose to invest.”
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The rally seems to have legs!
FMCC: $3.90
FNMA: $3.99
both up 15% this morning.
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The rally seems to have legs!
FMCC: $3.90
FNMA: $3.99
both up 15% this morning.
The FHFA issued a PR yesterday after close announcing an update to the preferred stock agreements. It directly addressed release from conservatorship, so I think that's the reason for the pop today.
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Possible there will be more rallies this week. Articles are now coming out talking about $25 share prices, plus the continued social media posts by Bill Ackman. I haven't sold anything, and don't know at what price I will.
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$5.00 might be a price we don't see again on these stocks.
10 days until inauguration, 20 days until 2024 earnings release, and common stock dividends may start being paid.
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Wow +20% today! These babies made me a paper millionaire yesterday. I almost threw in the towel before the election ... almost. I would have been $350,000 poorer. This is really wild!
ETA: If these go where I think they're going, I'll owe @Chris Pascale the biggest monster thank you for starting this thread.
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Wow +20% today! These babies made me a paper millionaire yesterday. I almost threw in the towel before the election ... almost. I would have been $350,000 poorer. This is really wild!
ETA: If these go where I think they're going, I'll owe @Chris Pascale the biggest monster thank you for starting this thread.
Really happy for you, and congrats! The end of conservatorship could still be years away, but to me that just means I get to keep buying in. Teaching 2 classes and tutoring this Spring, so when the checks start coming, I'll send them to Schwab, buy more than the $350 I sent in the Fall. When I upped it the extra $50 I had to consider that I could really just be throwing money away. Given that I was buying shares for about $1, those marginal differences are yielding materials gains.
It'll be a nice little twist if none of my articles about having a pension or keeping a POS car made the big difference, but the thread about gambling on a penny stock wrapped in a bundle of red tape turned a LightStache into an ImperialWalrus did.
At the price where conservatorship ends, I'll pull out some funds for a new van and (if it happens in time) my daughter's wedding, plus taxes, but for 2024 I saw something that showed Fannie Mae being more profitable than Visa. Over time, this looks like a triple digit stock, which means I can just teach part-time if I want, even if the kids want to go to medical, dental, law, etc. school.
But that could also be 20 years from now.
Like all things, we'll see.
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Wow +20% today! These babies made me a paper millionaire yesterday. I almost threw in the towel before the election ... almost. I would have been $350,000 poorer. This is really wild!
ETA: If these go where I think they're going, I'll owe @Chris Pascale the biggest monster thank you for starting this thread.
Really happy for you, and congrats! The end of conservatorship could still be years away, but to me that just means I get to keep buying in. Teaching 2 classes and tutoring this Spring, so when the checks start coming, I'll send them to Schwab, buy more than the $350 I sent in the Fall. When I upped it the extra $50 I had to consider that I could really just be throwing money away. Given that I was buying shares for about $1, those marginal differences are yielding materials gains.
It'll be a nice little twist if none of my articles about having a pension or keeping a POS car made the big difference, but the thread about gambling on a penny stock wrapped in a bundle of red tape turned a LightStache into an ImperialWalrus did.
At the price where conservatorship ends, I'll pull out some funds for a new van and (if it happens in time) my daughter's wedding, plus taxes, but for 2024 I saw something that showed Fannie Mae being more profitable than Visa. Over time, this looks like a triple digit stock, which means I can just teach part-time if I want, even if the kids want to go to medical, dental, law, etc. school.
But that could also be 20 years from now.
Like all things, we'll see.
Your patience is commendable and I hope it pays off in the long run.
I reallocated funds to buy in over seven months ending July '24. It's grown to 41% of my portfolio and now I'm cautiously trimming my position on the way up.
My guess is there's a 1/3 chance that the Trump admin won't be able to engineer an exit and the commons eventually plunge back to $1 - $2. As thrilling as the big up days are for me, I know a plummet from $20 to $2 would be too-big-to-stomach if I maintained a large allocation.
So I'm trying to balance upside potential with downside risk and keep my MAGI under the NIIT threshold. In my IRAs the exit path is a bit steeper.
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Wow +20% today! These babies made me a paper millionaire yesterday. I almost threw in the towel before the election ... almost. I would have been $350,000 poorer. This is really wild!
ETA: If these go where I think they're going, I'll owe @Chris Pascale the biggest monster thank you for starting this thread.
Really happy for you, and congrats! The end of conservatorship could still be years away, but to me that just means I get to keep buying in. Teaching 2 classes and tutoring this Spring, so when the checks start coming, I'll send them to Schwab, buy more than the $350 I sent in the Fall. When I upped it the extra $50 I had to consider that I could really just be throwing money away. Given that I was buying shares for about $1, those marginal differences are yielding materials gains.
It'll be a nice little twist if none of my articles about having a pension or keeping a POS car made the big difference, but the thread about gambling on a penny stock wrapped in a bundle of red tape turned a LightStache into an ImperialWalrus did.
At the price where conservatorship ends, I'll pull out some funds for a new van and (if it happens in time) my daughter's wedding, plus taxes, but for 2024 I saw something that showed Fannie Mae being more profitable than Visa. Over time, this looks like a triple digit stock, which means I can just teach part-time if I want, even if the kids want to go to medical, dental, law, etc. school.
But that could also be 20 years from now.
Like all things, we'll see.
Your patience is commendable and I hope it pays off in the long run.
I reallocated funds to buy in over seven months ending July '24. It's grown to 41% of my portfolio and now I'm cautiously trimming my position on the way up.
My guess is there's a 1/3 chance that the Trump admin won't be able to engineer an exit and the commons eventually plunge back to $1 - $2. As thrilling as the big up days are for me, I know a plummet from $20 to $2 would be too-big-to-stomach if I maintained a large allocation.
So I'm trying to balance upside potential with downside risk and keep my MAGI under the NIIT threshold. In my IRAs the exit path is a bit steeper.
You are doing the right thing. I'd be smart to take my capital out pretty much at any time, but it's still cheap to me.
Also, the only emotion I feel on this is that I'm right. I feel like I've never been so right on a stock, and that if I lose what I put in, I can bear it by just working another year or two, but if I miss out on millions when I knew I was right, then what the heck was all the obsessing and watching and talking about it for?
I can handle being wrong and losing. I don't know if I can handle being right and not winning.
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https://seekingalpha.com/news/4413227-flows-into-financials-sustaining-momentum-stocks-with-high-sa-quant-ratings
Freddie Mac ranks as a higher "Strong Buy" than Berkshire Hathaway, Wells Fargo, Chase Bank...........
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Wow +20% today! These babies made me a paper millionaire yesterday. I almost threw in the towel before the election ... almost. I would have been $350,000 poorer. This is really wild!
ETA: If these go where I think they're going, I'll owe @Chris Pascale the biggest monster thank you for starting this thread.
As of Friday they unmillionaired me hehe! The market giveth and the market taketh away.
I deviated from my plan and bought a lot more the last couple days!
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Wow +20% today! These babies made me a paper millionaire yesterday. I almost threw in the towel before the election ... almost. I would have been $350,000 poorer. This is really wild!
ETA: If these go where I think they're going, I'll owe @Chris Pascale the biggest monster thank you for starting this thread.
As of Friday they unmillionaired me hehe! The market giveth and the market taketh away.
I deviated from my plan and bought a lot more the last couple days!
I personally think it's a great price both ways. First, I'd have been thrilled with this price 6 months ago, and second, it's a cheap buy.
Best of luck with your re-load. I'll be continuing to buy as I can. My highest purchase has been $5.65.
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I've been waiting for someone to make a firm estimate about how much privatization of Fannie/Freddy would push up mortgage rates. Such estimates could affect the odds of privatization. I.e. if mortgages would go up 2-3%, it's probably not going to happen. If 0%, it definitely would happen to justify a tax cut or rebate check.
Now I found this quote (https://finance.yahoo.com/news/rates-are-going-to-go-up-the-challenge-in-privatizing-fannie-mae-and-freddie-mac-144831892.html):
Zandi, of Moody’s, estimates that if Fannie and Freddie go private with an implicit guarantee, mortgage rates could rise between 20 and 40 basis points. From current levels, that would mean rates back at or near 7%.
A release with no guarantee whatsoever could send rates 1 to 1.5 percentage points higher. Few experts view that scenario as probable given the destabilizing effects on the housing market.
There’s one scenario that could result in lower rates: The government could formally back the companies before they’re released, giving them an even more explicit level of support than the current system. But that backstop would require an act of Congress, which is politically unlikely.
Any release plan will take time to develop given the complexities and the money involved, said Mike Fratantoni, chief economist of the Mortgage Bankers Association, which has advocated for a conservatorship exit involving an explicit guarantee.
There is an extreme risk of setting off another housing crisis, and I think the Trump administration knows it. But they also want to sell these assets and convert them into tax cut justifications.
So my prediction is that the Trump administration tries to privatize ONLY ONE of the two at first - Fannie OR Freddy. And they'll do so with explicit government backing of some sort, so that the two GSE's are on an equal footing while one is public and the other is private.
The sale of the government's preferred stock - or the restructuring and re-floating of one of the companies - will generate billions to partially justify income tax cuts or even rebate checks to "stimulate the economy". The prospect of the other GSE being privatized and used as a justification for more rebate checks could be a campaign tool in 2028.
This take suggests that FNMA and FMCC are relatively risky. We cannot know which would be prioritized for privatization. We also cannot know whether the common stock holders will be left with anything after the companies are restructured for privatization. Unless Trump has an explicit plan to enrich Republican insiders who have piled into the stock, the recent gains are probably the bird in hand. Maybe investors should accept the win and keep their position sizes speculative.
I'm also not too keen on agency bonds from these or the government-sponsored farm banks. Markets could start chattering about the risks of an non-guaranteed privatization, and that alone could drive up yields.
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Studies estimating the impact of release on mortgage rates have been around for a long time.
The Harris campaign used this 2015 study (https://www.urban.org/sites/default/files/publication/75956/2000531-Delivering-on-the-Promise-of-Risk-Sharing.pdf) to claim that "Trump's" Project 2025 plan would increase the average mortgage cost by $1,200. Zandi authored that study.
Zandi is also on the board of MGIC, the largest provider of PMI in the country, which would benefit from an explicit guarantee. This is why he's typically aligned with the MBA, whose members would also benefit. Zandi also publishes on other economic matters and is quite partisan towards the left.
Since the switch from implicit to explicit guarantee did not move rates, it's not clear that the opposite action would have any effect. After conservatorship mortgage rates decreased because they follow 10-year treasury yields. Spreads did not change meaningfully.
Regardless of the science, the refrain "release will [likely] raise mortgage rates" is prominent enough that I have to agree it presents a real risk.
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Damn. Here's a great Wolf Street article explaining why Fannie/Freddy should remain in government conservatorship rather than returning to being guaranteed GSEs where the profits are 100% private and the risks are 99% public.
https://wolfstreet.com/2025/04/01/not-another-free-lunch-dont-let-fannie-and-freddie-turn-back-into-gses/#comment-631788 (https://wolfstreet.com/2025/04/01/not-another-free-lunch-dont-let-fannie-and-freddie-turn-back-into-gses/#comment-631788)
They also bring up a point I'd not heard before. Because Fannie/Freddy's MBS have an implicit government guarantee that is provided to them for absolutely free, they:
- Squeeze out private sector competition in this space, which cannot offer such a guarantee, and
- Increase the supply of government-guaranteed securities, thus putting upward pressure on Treasury yields, at a cost to taxpayers of hundreds of billions of dollars per year in extra interest.
The article goes on to calculate that, with conservative assumptions based on FDIC numbers, it would cost approximately 100% of Fannie/Freddy's profits if they had to pay the government a fair price for the government guarantee. Additionally, neither business model could compete in the private sector if there was no guarantee. Essentially, these companies extract exactly the value of a government guarantee.
I drew the following conclusion from this damning assessment: These post-GSE's are merely a subsidy for real estate and treasury investors. The profit the government collects as their owner is immediately lost due to higher Treasury yields. Privatization, even if done at a fair price (which is not much for an unsustainable business model) would simply enrich investors while leaving taxpayers on the hook for the next inevitable bailout.
That said, this government is not interested in doing the responsible thing. It's interested in preventing a housing crash, preventing the rise of mortgage rates to the market rates like we see for HELOCS (8-9% right now), and delivering a politically justifiable tax cut / rebate.
If the administration can collect a few hundred billion for the treasury to pay back out in stimulus checks, it will do it. If Trump has to write a blank check to the GSEs in the form of a pre-2007 implicit guarantee or a formal guarantee, that's fine because they'll probably implode again after the next election. Your average voter is a lot more concerned with keeping their property value propped up than in eliminating market-distorting subsidies, and our "tariff man" president is a big fan of market-distorting subsidies anyway.
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Thanks for sharing.
I am confused about how "all their profits" will be eaten up. I mean, they were profitable in 2006, 2005, etc. Would they not just operate in a profitable manner simply to survive? Costs would be cut when the employees solely doing conservatorship work come off the books, and the added $1200 cost to mortgages would be added to them.
Maybe they won't make more than Berkshire Hathaway (they did in 2024), but I'm sure they will run at a profit.
My main point is: I don't know that much, and am genuinely confused about why this is not a $100+ stock.
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Thanks for sharing.
I am confused about how "all their profits" will be eaten up. I mean, they were profitable in 2006, 2005, etc. Would they not just operate in a profitable manner simply to survive? Costs would be cut when the employees solely doing conservatorship work come off the books, and the added $1200 cost to mortgages would be added to them.
Maybe they won't make more than Berkshire Hathaway (they did in 2024), but I'm sure they will run at a profit.
My main point is: I don't know that much, and am genuinely confused about why this is not a $100+ stock.
The article was saying that Fannie/Freddy are only able to sell mortgage bonds at the low yields they currently sell for because there is an implicit government guarantee that the bonds cannot default. The US government made that guarantee real in 2008/2009 when they nationalized these companies and bailed out the MBS bondholders.
If Fannie/Freddy were cut off from this government guarantee, bond buyers would demand much higher yields to compensate them for the risk of loss. In such a world, Fannie/Freddy would be no better off than your local retail bank at earning the spread between mortgages and MBS. F/F's earnings come from taking a bunch of 6% mortgages and bundling them into MBS yielding 5.5%. The MBS is worth more than the mortgage because of the implicit government guarantee. In a future world, where these companies are cut loose, the MBS would be worth the same as the sum of their mortgages. Thus the whole value of Fannie/Freddy is in the ability to apply that implicit government guarantee and earn a profit from doing so. Taxpayers pay the price when a 2008-like bailout has to happen.
So the only way F/F stay in business as private sector entities with no government guarantee is if they buy such insurance on the open market. Given the size of the market, they'd quickly exhaust the reinsurance market, so that leaves the government. The government already sells depositor insurance to banks and if they did the same for F/F at a similar price, it would consume all the profits these companies make.
That makes logical sense, as the profits entirely consist of the value of the government guarantee. If they had to pay for the government guarantee - then no profits.
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Thanks for sharing.
I am confused about how "all their profits" will be eaten up. I mean, they were profitable in 2006, 2005, etc. Would they not just operate in a profitable manner simply to survive? Costs would be cut when the employees solely doing conservatorship work come off the books, and the added $1200 cost to mortgages would be added to them.
Maybe they won't make more than Berkshire Hathaway (they did in 2024), but I'm sure they will run at a profit.
My main point is: I don't know that much, and am genuinely confused about why this is not a $100+ stock.
The article was saying that Fannie/Freddy are only able to sell mortgage bonds at the low yields they currently sell for because there is an implicit government guarantee that the bonds cannot default. The US government made that guarantee real in 2008/2009 when they nationalized these companies and bailed out the MBS bondholders.
If Fannie/Freddy were cut off from this government guarantee, bond buyers would demand much higher yields to compensate them for the risk of loss. In such a world, Fannie/Freddy would be no better off than your local retail bank at earning the spread between mortgages and MBS. F/F's earnings come from taking a bunch of 6% mortgages and bundling them into MBS yielding 5.5%. The MBS is worth more than the mortgage because of the implicit government guarantee. In a future world, where these companies are cut loose, the MBS would be worth the same as the sum of their mortgages. Thus the whole value of Fannie/Freddy is in the ability to apply that implicit government guarantee and earn a profit from doing so. Taxpayers pay the price when a 2008-like bailout has to happen.
So the only way F/F stay in business as private sector entities with no government guarantee is if they buy such insurance on the open market. Given the size of the market, they'd quickly exhaust the reinsurance market, so that leaves the government. The government already sells depositor insurance to banks and if they did the same for F/F at a similar price, it would consume all the profits these companies make.
That makes logical sense, as the profits entirely consist of the value of the government guarantee. If they had to pay for the government guarantee - then no profits.
Thanks for taking the time to explain. Appreciate it.
Will be interesting to see what happens.
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Popcorn ready for tomorrow following Trump’s Truth post after markets closed for the day.
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Popcorn ready for tomorrow following Trump’s Truth post after markets closed for the day.
Premarket was more funner than the first few minutes of the regular market.
I started the day with 83,591 shares, so I'm up about $150K. That's wild, but the story is far from over. ¯\_(ツ)_/¯
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When it was sliding from its big open I was thinking, if it closes above $8.00 that's pretty good, and then it swung back up when there were no more $10.00, $9.99, $9,98 SELL triggers to hit.
A good day.
We'll see what's the come.
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For most of this month, $FNMA stock floated in the $6 to $7 range. Then Trump commented on May 21:
"Trump ‘giving very serious consideration’ to spinning off mortgage giants Fannie and Freddie"
https://edition.cnn.com/2025/05/21/business/trump-fannie-freddie-mortgage-privatization
And now the stock is around $11/share. It might be interesting to figure out what the IPO value of Fannie Mae could be, and how many years you would need to hold to reach that price, if Trump follows through.
"Mortgages Under Trump: What Happens if He Privatizes Fannie Mae and Freddie Mac?"
https://money.usnews.com/loans/mortgages/articles/mortgages-under-trump-what-happens-if-he-privatizes-fannie-mae-and-freddie-mac
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For most of this month, $FNMA stock floated in the $6 to $7 range. Then Trump commented on May 21:
"Trump ‘giving very serious consideration’ to spinning off mortgage giants Fannie and Freddie"
https://edition.cnn.com/2025/05/21/business/trump-fannie-freddie-mortgage-privatization
And now the stock is around $11/share. It might be interesting to figure out what the IPO value of Fannie Mae could be, and how many years you would need to hold to reach that price, if Trump follows through.
"Mortgages Under Trump: What Happens if He Privatizes Fannie Mae and Freddie Mac?"
https://money.usnews.com/loans/mortgages/articles/mortgages-under-trump-what-happens-if-he-privatizes-fannie-mae-and-freddie-mac
This January 2025 presentation (https://assets.pershingsquareholdings.com/2025/01/16112701/Fannie-Mae-Freddie-Mac-01-16-2025-Presentation.pdf) from Bill Ackman of Pershing Square suggests "IPO" prices of $32 in 2026 for Fannie and $34 in 2027 for Freddie.
I put IPO in quotes because it will technically be a follow-on public offering, not initial, but everyone has been calling it an IPO.
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For most of this month, $FNMA stock floated in the $6 to $7 range. Then Trump commented on May 21:
"Trump ‘giving very serious consideration’ to spinning off mortgage giants Fannie and Freddie"
https://edition.cnn.com/2025/05/21/business/trump-fannie-freddie-mortgage-privatization
And now the stock is around $11/share. It might be interesting to figure out what the IPO value of Fannie Mae could be, and how many years you would need to hold to reach that price, if Trump follows through.
"Mortgages Under Trump: What Happens if He Privatizes Fannie Mae and Freddie Mac?"
https://money.usnews.com/loans/mortgages/articles/mortgages-under-trump-what-happens-if-he-privatizes-fannie-mae-and-freddie-mac
This January 2025 presentation (https://assets.pershingsquareholdings.com/2025/01/16112701/Fannie-Mae-Freddie-Mac-01-16-2025-Presentation.pdf) from Bill Ackman of Pershing Square suggests "IPO" prices of $32 in 2026 for Fannie and $34 in 2027 for Freddie.
I put IPO in quotes because it will technically be a follow-on public offering, not initial, but everyone has been calling it an IPO.
I read a lot of that, skipping some parts in the second half. Very detailed, and convincing that both GSEs are ready to resume being public companies again. They've been retaining earnings in preparation for it. They could pay the U.S. government a "reinsurance" premium in case they run out of assets and need an infusion. They won't be allowed to enter riskier mortgages, which is why they got into trouble in the first place.
I believe markets are easily excitable, and have short memories. So I'm going to wait a few weeks to see if the market forgets about this stock. But then I might buy a very small allocation.
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Updates on possible direction of policy (https://finance.yahoo.com/news/trump-says-fannie-mae-keep-011316536.html):
“I am working on TAKING THESE AMAZING COMPANIES PUBLIC, but I want to be clear, the US Government will keep its implicit GUARANTEES, and I will stay strong in my position on overseeing them as President,” Trump wrote Tuesday night in a post on his Truth Social platform.
So it is evolving toward the government exiting its preferred share control over the companies, but still providing a guarantee over their mortgage-backed-securities. This direction would keep the status quo in terms of preserving the 15 and 30 year fixed rate mortgages, keeping those rates relatively low, and maintaining liquidity. It would simply divert the cash flows from the government to Fannie/Freddy's equity investors.
It remains to be seen whether those equity investors would be the same as the people who own FNMA and FMCC shares today. I can imagine the government liquidating its preferred shares in a dilutive IPO where new common shares are issued. I can imagine the government simply selling its preferred shares to the public and reverting back to the pre-GFC status quo. And I can imagine some kind of corrupt insider scheme that puts the shares in the pockets of administration-aligned billionaires, much like the way Russian assets were privatized by oligarchs in the 1990s.
The U.S. government would lose billions of dollars per year of revenue, and this would increase the deficit. Regular banks would lose the possibility of a competitive, fully-private-sector mortgage industry. Taxpayers would remain on the hook for bailing out the next housing crisis. But at least it will still be possible to buy a home with a 30 year fixed rate mortgage, and the housing crisis that would result from ending that seems to be off the table.
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Updates on possible direction of policy (https://finance.yahoo.com/news/trump-says-fannie-mae-keep-011316536.html):
“I am working on TAKING THESE AMAZING COMPANIES PUBLIC, but I want to be clear, the US Government will keep its implicit GUARANTEES, and I will stay strong in my position on overseeing them as President,” Trump wrote Tuesday night in a post on his Truth Social platform.
Dated May 28, FNMA stock rose to $11.76/sh on the news, but then fell back with the broader market after that. I view the market like that dog from the movie "Up!". I'm waiting for someone to say "squirrel!" and the market to forget about $FNMA so I can buy some.
The U.S. government would lose billions of dollars per year of revenue, and this would increase the deficit. Regular banks would lose the possibility of a competitive, fully-private-sector mortgage industry. Taxpayers would remain on the hook for bailing out the next housing crisis. But at least it will still be possible to buy a home with a 30 year fixed rate mortgage, and the housing crisis that would result from ending that seems to be off the table.
Is losing, not would lose. The government is losing billions in revenue, because FNMA has been retaining its revenue. I recall the presentation from Jan 2025 mentioning $5 billion needed to take FNMA public. I forget when Trump instructed FNMA to retain revenues, but I know it is currently doing just that. The government announced this takeover almost 17 years ago.
The earlier report claims that FNMA getting into subprime was the reason it had to be rescued. Borrowers with higher credit scores also caused losses, according to that report, but within the $20 billion buffer the company had reserved for it. It could have sustained prime mortgage losses. Because it got into subprime loans (like many institutions), it was taken down and needed a bailout. I suspect this risk won't go away - because the entire financial system was covered with subprime mortgage products.
If we get another real estate crisis, in theory reinsurance can prevent the need for government taking FNMA over again. FNMA makes regular payments to the U.S. government (or another large insurer), and if FNMA loans inflict enough losses, money is made available to keep it afloat (up to a specified limit). Will FNMA keep away from the next subprime loans? I doubt it. Major institutions couldn't, while Moody's and S&P rated the subprime CDOs as excellent. Something similar could happen.. but that seems unlikely for the near to medium term.
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If we get another real estate crisis, in theory reinsurance can prevent the need for government taking FNMA over again. FNMA makes regular payments to the U.S. government (or another large insurer), and if FNMA loans inflict enough losses, money is made available to keep it afloat (up to a specified limit). Will FNMA keep away from the next subprime loans? I doubt it. Major institutions couldn't, while Moody's and S&P rated the subprime CDOs as excellent. Something similar could happen.. but that seems unlikely for the near to medium term.
The article I posted on April 2 addresses the possibility of Fannie/Freddy paying for the riskiness of their own business operations:
https://wolfstreet.com/2025/04/01/not-another-free-lunch-dont-let-fannie-and-freddie-turn-back-into-gses (https://wolfstreet.com/2025/04/01/not-another-free-lunch-dont-let-fannie-and-freddie-turn-back-into-gses)
The author used the FDIC as a reinsurance model and scaled it to the mortgage market. They found the fair cost of the government's guarantee is approximately 100% of these companies' profits. I.e. their total profits merely represent the gift of free reinsurance from the government to the shareholders (currently the government and the shareholders are one and the same). If you can think of a reinsurance company big enough to underwrite $7 trillion in MBSs, it would be even more expensive because they'd need to price their reinsurance to earn a competitive profit margin and mitigate the risk of a bad sequence of returns.
So basically these entities live off of the taxpayer bearing most of their risk, or they can't survive at all. They are vehicles for a subsidy. Similarly, the long-duration 15 and 30 year mortgages prevalent in the U.S. only exist because the government insures the mortgage backed securities markets. Such mortgage products do not exist in other countries without government subsidies because the private sector cannot make such loans make sense.
I don't think simply avoiding subprime would work to make the GSEs safe. Even with prime mortgages, it is now routine for homebuyers to put down only 3-5%. What ever happened to the traditional 20%? IDK. But with that little skin in the game, even high-credit, financially savvy buyers are incentivized by a dynamic where if the market goes up they enjoy massive leverage and if the market goes down they lose very little.
This win big or lose small incentive structure alone would explain the massive rise in residential real estate speculation, but when we also factor in artificially low rates due to the government's not-so-implicit guarantee, we can see the bigger picture of how federal government influence has propped up housing prices.
An end to the mortgage subsidy would result in an end to the 15 and 30 year mortgages, much higher loan rates, and possibly a recalibration of home prices due to speculation not being as attractive. This would irritate a lot of home owning voters. Thus, a return to the pre-GFC privatized profits and socialized losses model was the only politically viable possibility for privatization.
But if the government is going to underwrite the risk of the GSEs, why not keep them as publically owned corporations forever? At least that way their "profits" pay the government/taxpayer for the risk the government/taxpayer is taking, and eventually replenish the public coffers for the periodic catastrophic losses. There are the optics, for conservatives, of privatizing things and breaking up Big Government, but this comes at the risk of being blamed for resetting the dominoes that led to the GFC. The left, meanwhile, doesn't seem to have a coherent direction on this issue.
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I have nothing to add. Just saying hi, and that I hope you guys have a great weekend.
With no more paychecks coming in from teaching until September, unless there's a price drop, I'm hanging out in HOLD territory at least until re-list.
At re-list (supposedly $30+) I'm thinking of selling some shares.
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I have nothing to add. Just saying hi, and that I hope you guys have a great weekend.
With no more paychecks coming in from teaching until September, unless there's a price drop, I'm hanging out in HOLD territory at least until re-list.
At re-list (supposedly $30+) I'm thinking of selling some shares.
Thank you so much for starting this thread! I started buying at 55 cents and kept going - it's crazy what this has done in the past year. It's easy to see much more upside but of course there is some chance it will collapse. It's been a fun ride so far!
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I have nothing to add. Just saying hi, and that I hope you guys have a great weekend.
With no more paychecks coming in from teaching until September, unless there's a price drop, I'm hanging out in HOLD territory at least until re-list.
At re-list (supposedly $30+) I'm thinking of selling some shares.
Thank you so much for starting this thread! I started buying at 55 cents and kept going - it's crazy what this has done in the past year. It's easy to see much more upside but of course there is some chance it will collapse. It's been a fun ride so far!
I leaned hard into this, so I have a sell schedule along the way up. So far I've realized $51K in gains and holding $736K with a cost basis of $150K. NGL though, most of those realized gains are from me going off script, buying dips and then "correcting" back to plan.
Last week after watching Bill Pulte's confidence-killing interviews and this youtube video (https://www.youtube.com/watch?v=zSIGmzHRpyM) I put in some additional sell orders for ~3%. They didn't execute and I corrected back to plan.
I entered into this investment figuring that HERA and the Fifth Amendment would rule, eventually forcing an end to conservatorship regardless of party control. But man watching this administration is cringe AF because they don't seem to be oriented to facts and recap/release is complicated. Hopefully there's enough expert engagement, and lack of political interest, that this doesn't fail like DOGE.
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The article I posted on April 2 addresses the possibility of Fannie/Freddy paying for the riskiness of their own business operations:
https://wolfstreet.com/2025/04/01/not-another-free-lunch-dont-let-fannie-and-freddie-turn-back-into-gses (https://wolfstreet.com/2025/04/01/not-another-free-lunch-dont-let-fannie-and-freddie-turn-back-into-gses)
The author used the FDIC as a reinsurance model and scaled it to the mortgage market. They found the fair cost of the government's guarantee is approximately 100% of these companies' profits. I.e. their total profits merely represent the gift of free reinsurance from the government to the shareholders (currently the government and the shareholders are one and the same). If you can think of a reinsurance company big enough to underwrite $7 trillion in MBSs, it would be even more expensive because they'd need to price their reinsurance to earn a competitive profit margin and mitigate the risk of a bad sequence of returns.
"Before joining AEI, Mr. Pinto was an executive vice president and chief credit officer for Fannie Mae until the late 1980s."
https://www.aei.org/profile/edward-j-pinto/
His experience is wildly appropriate to the subject at hand, since he was in corporate leadership at Fannie Mae. But I disagree with the theory that anyone competing with treasury bonds needs to pay the U.S. government for how much their competition costs the government. Do banks need to pay, because they issue CDs which take away demand from Treasury bonds? What about corporate bonds, which compete with U.S. treasuries? I haven't seen this claim used anywhere, and I don't think it makes sense.
I don't think simply avoiding subprime would work to make the GSEs safe. Even with prime mortgages, it is now routine for homebuyers to put down only 3-5%. What ever happened to the traditional 20%? IDK. But with that little skin in the game, even high-credit, financially savvy buyers are incentivized by a dynamic where if the market goes up they enjoy massive leverage and if the market goes down they lose very little.
Yes, Fannie Mae's 2024 report also claims 3% (adjustable rate) or 5% (fixed) down payments. The amounts are higher for investment properties and second homes, which I think limits how much people can take advantage of the low down payments. Deciding if subsidizing home ownership is good is above my pay grade... President Bill Clinton championed it, and I haven't seen arguments against it.
https://singlefamily.fanniemae.com/media/20786/display
An end to the mortgage subsidy would result in an end to the 15 and 30 year mortgages, much higher loan rates, and possibly a recalibration of home prices due to speculation not being as attractive. This would irritate a lot of home owning voters. Thus, a return to the pre-GFC privatized profits and socialized losses model was the only politically viable possibility for privatization.
That's a risk I haven't seen analyzed in detail. The article against it mentions costs, the article for it mentions investment returns.
The government would still stand behind Fannie Mae - it has to, with $7.7 trillion in assets. And Fannie Mae would pay for that guarantee.
Homeowners are very active voters, and if they hear about a change to mortgages in the U.S., I expect them to get very vocal, very quickly. That's a significant risk to this investment - the public reaction.
But if the government is going to underwrite the risk of the GSEs, why not keep them as publically owned corporations forever? At least that way their "profits" pay the government/taxpayer for the risk the government/taxpayer is taking, and eventually replenish the public coffers for the periodic catastrophic losses. There are the optics, for conservatives, of privatizing things and breaking up Big Government, but this comes at the risk of being blamed for resetting the dominoes that led to the GFC. The left, meanwhile, doesn't seem to have a coherent direction on this issue.
The article you mentioned earlier expects reinsurance of Fannie Mae's $7.7 trillion in assets would cost $4 to $24 billion/year, with the article estimating $9 billion/year. Fannie Mae's 2024 pre-tax profits were $36 billion, making the range of costs 11% to 67% of their revenue. The U.S. government would get that money, representing the risk of Fannie Mae holding $7.7 trillion in assets, and being backed by the government.
Leverage and fraud made the Great Financial Crisis (GFC) possible. Whenever subprime loans were aggregated, Moody's and S&P rated the credit risk as extremely low (AAA) - they weren't. These investments ran out of subprime loans to securitize, so they accepted anything - no income, no job, no verification. The fraud drove issuing of more subprime loans. Mix in leverage (CDOs and synthetic CDOs), and you have the GFC. Without leverage and fraud, it would have been a collapse of a small subprime mortgage market. But fraud expanded the subprime market ridiculously, and leverage made it into an economic collapse. Subprime loans, by themselves, didn't result in the GFC.
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I have nothing to add. Just saying hi, and that I hope you guys have a great weekend.
With no more paychecks coming in from teaching until September, unless there's a price drop, I'm hanging out in HOLD territory at least until re-list.
At re-list (supposedly $30+) I'm thinking of selling some shares.
Thank you so much for starting this thread! I started buying at 55 cents and kept going - it's crazy what this has done in the past year. It's easy to see much more upside but of course there is some chance it will collapse. It's been a fun ride so far!
That's incredible! I'm so happy it's working out.
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I have nothing to add. Just saying hi, and that I hope you guys have a great weekend.
With no more paychecks coming in from teaching until September, unless there's a price drop, I'm hanging out in HOLD territory at least until re-list.
At re-list (supposedly $30+) I'm thinking of selling some shares.
Thank you so much for starting this thread! I started buying at 55 cents and kept going - it's crazy what this has done in the past year. It's easy to see much more upside but of course there is some chance it will collapse. It's been a fun ride so far!
I leaned hard into this, so I have a sell schedule along the way up. So far I've realized $51K in gains and holding $736K with a cost basis of $150K. NGL though, most of those realized gains are from me going off script, buying dips and then "correcting" back to plan.
Last week after watching Bill Pulte's confidence-killing interviews and this youtube video (https://www.youtube.com/watch?v=zSIGmzHRpyM) I put in some additional sell orders for ~3%. They didn't execute and I corrected back to plan.
I entered into this investment figuring that HERA and the Fifth Amendment would rule, eventually forcing an end to conservatorship regardless of party control. But man watching this administration is cringe AF because they don't seem to be oriented to facts and recap/release is complicated. Hopefully there's enough expert engagement, and lack of political interest, that this doesn't fail like DOGE.
Wow! Thank you for sharing. It's been surprising how many people (here and elsewhere) bought based on me telling them about it.
When I wrote this blog post -
https://you.stonybrook.edu/crisisandcatharsis/2024/07/13/fannie-comes-to-town-and-may-soon-be-history/ -
a classmate of mine told me that he and his friends bought in. One guy is paying for his wedding with it! Not sure how big the wedding is, but those were his words when it hit $8.00 - that he had enough to pay for his wedding.
I'm not sure where this goes. $30-something is the conservatively estimated diluted value, but at relist you'll have the whole world able to buy it (Robin Hood users, etc.). There's also the possibility of bankers having purchased on their own Schwab and Fidelity accounts, who then have their employers buy a big stake, which will run the price up.
Not saying that would happen, but it's a possibility, and a justifiable purchase.
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Wow! Thank you for sharing. It's been surprising how many people (here and elsewhere) bought based on me telling them about it.
When I wrote this blog post -
https://you.stonybrook.edu/crisisandcatharsis/2024/07/13/fannie-comes-to-town-and-may-soon-be-history/ -
a classmate of mine told me that he and his friends bought in. One guy is paying for his wedding with it! Not sure how big the wedding is, but those were his words when it hit $8.00 - that he had enough to pay for his wedding.
I'm not sure where this goes. $30-something is the conservatively estimated diluted value, but at relist you'll have the whole world able to buy it (Robin Hood users, etc.). There's also the possibility of bankers having purchased on their own Schwab and Fidelity accounts, who then have their employers buy a big stake, which will run the price up.
Not saying that would happen, but it's a possibility, and a justifiable purchase.
It's not over 'till the fat lady sings. Just yesterday WSJ published this article (https://www.wsj.com/economy/housing/trump-mortgage-government-shares-fannie-freddie-2d990238?mod=Searchresults_pos3&page=1) where Laurie Goodman, of the Urban Institute, is quoted as saying "[...] keeping Fannie and Freddie in conservatorship is the most probable outcome."
If that happens the share prices are back down to $1 and new Fifth Amendment litigation will be the only hope. That would hurt.
If the average share prices first hit $15 I'll have recovered my initial investment in realized gains. In the meantime I'm just trying to overact to the swings and every bit of news.
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"Trump Team Signals It Wants to Keep Control of Fannie, Freddie to Boost Budget"
https://www.bloomberg.com/news/articles/2025-06-03/us-signals-interest-in-using-fannie-freddie-to-bolster-budget
Trump's team can send inconsistent messages, but if this is confirmed, the stock should plunge back to where it was before Trump's influence ($1.50 range).
There's also potential homeowner backlash at any change to mortgages - and that's a group that tends to vote. I'm not buying after all.
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"Trump Team Signals It Wants to Keep Control of Fannie, Freddie to Boost Budget"
https://www.bloomberg.com/news/articles/2025-06-03/us-signals-interest-in-using-fannie-freddie-to-bolster-budget
Trump's team can send inconsistent messages, but if this is confirmed, the stock should plunge back to where it was before Trump's influence ($1.50 range).
There's also potential homeowner backlash at any change to mortgages - and that's a group that tends to vote. I'm not buying after all.
48 hours ago, FNMA was trading at $10.59/share
24 hours ago, FNMA was trading at $10.16/share
now, FNMA is trading at $7.95/share
https://finance.yahoo.com/quote/FNMA/
I haven't seen confirmation of the Bloomberg article by another source.
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As always, I cannot say what's happening, and lay back on this gamble's inspiration: They make a lot of money, so should (should?) be worth what companies that make that much are worth.
In 2024 they made more money than Warren Buffett's Berkshire Hathaway, and no one would think he should be under conservatorship. On the contrary, he was who the government called in 2008.
At the moment, re-list seems like a good place to take back my capital, but we'll see.
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"Trump Team Signals It Wants to Keep Control of Fannie, Freddie to Boost Budget"
https://www.bloomberg.com/news/articles/2025-06-03/us-signals-interest-in-using-fannie-freddie-to-bolster-budget
Trump's team can send inconsistent messages, but if this is confirmed, the stock should plunge back to where it was before Trump's influence ($1.50 range).
There's also potential homeowner backlash at any change to mortgages - and that's a group that tends to vote. I'm not buying after all.
48 hours ago, FNMA was trading at $10.59/share
24 hours ago, FNMA was trading at $10.16/share
now, FNMA is trading at $7.95/share
https://finance.yahoo.com/quote/FNMA/
I haven't seen confirmation of the Bloomberg article by another source.
Yesterday's drawdown was unusual, but I don't think unprecedented on a percent basis. Down 20%, up 40%, down 15%, up 15%.
Posts by the President were unprecedented, though, and I suspect the Tue/Wed shakeout was a result of newbie retails having bought in on the recent press and then over-reacting to negative news.
Hopefully once the stocks up-list there will be more liquidity and therefore loss volatility.
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As always, I cannot say what's happening, and lay back on this gamble's inspiration: They make a lot of money, so should (should?) be worth what companies that make that much are worth.
In 2024 they made more money than Warren Buffett's Berkshire Hathaway, and no one would think he should be under conservatorship. On the contrary, he was who the government called in 2008.
At the moment, re-list seems like a good place to take back my capital, but we'll see.
Berkshire Hathaway didn't extend subprime loans, nor was it rescued by the government. Fannie Mae requires government guarantees, and the government has warrants on its stock. Comparing them is an odd choice. I've also read two sources that put Fannie Mae revenue in the $29 to $36 billion range, which is less than 1/10th of Berkshire's revenue.
"According to Berkshire Hathaway 's latest financial reports the company's current revenue (TTM ) is $415.77 Billion USD."
https://companiesmarketcap.com/berkshire-hathaway/revenue/
"Fannie Mae ...
Revenue US$29.048 billion (2023)"
https://en.wikipedia.org/wiki/Fannie_Mae
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"Trump Team Signals It Wants to Keep Control of Fannie, Freddie to Boost Budget"
https://www.bloomberg.com/news/articles/2025-06-03/us-signals-interest-in-using-fannie-freddie-to-bolster-budget
Trump's team can send inconsistent messages, but if this is confirmed, the stock should plunge back to where it was before Trump's influence ($1.50 range).
There's also potential homeowner backlash at any change to mortgages - and that's a group that tends to vote. I'm not buying after all.
48 hours ago, FNMA was trading at $10.59/share
24 hours ago, FNMA was trading at $10.16/share
now, FNMA is trading at $7.95/share
https://finance.yahoo.com/quote/FNMA/
I haven't seen confirmation of the Bloomberg article by another source.
Yesterday's drawdown was unusual, but I don't think unprecedented on a percent basis. Down 20%, up 40%, down 15%, up 15%.
Posts by the President were unprecedented, though, and I suspect the Tue/Wed shakeout was a result of newbie retails having bought in on the recent press and then over-reacting to negative news.
Hopefully once the stocks up-list there will be more liquidity and therefore loss volatility.
From 2009 to 2024, Fannie Mae stock never pushed above $5/share. Since Trump's inauguration, Fannie Mae stock has never been below $5/share. This isn't about volatility, but about Trump's decision on what happens to Fannie Mae. The stock dropped in anticipation of the Trump Administration confirming the views from Bloomberg's article. When the Administration remained silent, the stock started to recover.
To privatize Fannie Mae, according to this article by a CPA, requires the government waive/lose $100 billion in warrants. I don't follow what stops the government from exercising its warrants, and just keeping the stock, but this article claims they need to get approval from Congress to waive the warrants.
https://www.schroders.com/en/israel/professional/insights/the-big-beautiful-bang-or-fannie-mae-be-not/
If that take is correct, you can watch for Republicans proposing a bill in Congress to waive the Fannie Mae warrants. But they need to convince Democrats, who are likely to be suspicious of taking Fannie Mae private, and risking changes to the mortgage market. At that point, I would expect some homeowners to get involved, and make things more difficult. But if Democrats can't stop it, and homeowners are mollified, the stock could gain +200% from here.
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As always, I cannot say what's happening, and lay back on this gamble's inspiration: They make a lot of money, so should (should?) be worth what companies that make that much are worth.
In 2024 they made more money than Warren Buffett's Berkshire Hathaway, and no one would think he should be under conservatorship. On the contrary, he was who the government called in 2008.
At the moment, re-list seems like a good place to take back my capital, but we'll see.
Berkshire Hathaway didn't extend subprime loans, nor was it rescued by the government. Fannie Mae requires government guarantees, and the government has warrants on its stock. Comparing them is an odd choice. I've also read two sources that put Fannie Mae revenue in the $29 to $36 billion range, which is less than 1/10th of Berkshire's revenue.
"According to Berkshire Hathaway 's latest financial reports the company's current revenue (TTM ) is $415.77 Billion USD."
https://companiesmarketcap.com/berkshire-hathaway/revenue/
"Fannie Mae ...
Revenue US$29.048 billion (2023)"
https://en.wikipedia.org/wiki/Fannie_Mae
I'm just looking at profits.
The way I see it, there are 3 options: (1) Shut them down, (2) Take them off the market and let them operate like the FDIC or OCC, (3) End the conservatorship and relist the stocks on the NYSE.
Many companies have a bad year and their share price falls. Then they more-than-recover the next year. Some companies have a scandal, and the next quarter they post profits and people crap their pants over how the stock is on sale by like 10%. An example I'm thinking of is Lumber Liquidators. https://www.cpsc.gov/Newsroom/News-Releases/2016/Lumber-Liquidators-Laminate-Flooring
Fannie and Freddie are not showing a good quarter. They are showing a good decade.
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As always, I cannot say what's happening, and lay back on this gamble's inspiration: They make a lot of money, so should (should?) be worth what companies that make that much are worth.
In 2024 they made more money than Warren Buffett's Berkshire Hathaway, and no one would think he should be under conservatorship. On the contrary, he was who the government called in 2008.
At the moment, re-list seems like a good place to take back my capital, but we'll see.
Berkshire Hathaway didn't extend subprime loans, nor was it rescued by the government. Fannie Mae requires government guarantees, and the government has warrants on its stock. Comparing them is an odd choice. I've also read two sources that put Fannie Mae revenue in the $29 to $36 billion range, which is less than 1/10th of Berkshire's revenue.
"According to Berkshire Hathaway 's latest financial reports the company's current revenue (TTM ) is $415.77 Billion USD."
https://companiesmarketcap.com/berkshire-hathaway/revenue/
"Fannie Mae ...
Revenue US$29.048 billion (2023)"
https://en.wikipedia.org/wiki/Fannie_Mae
I'm just looking at profits.
The way I see it, there are 3 options: (1) Shut them down, (2) Take them off the market and let them operate like the FDIC or OCC, (3) End the conservatorship and relist the stocks on the NYSE.
Many companies have a bad year and their share price falls. Then they more-than-recover the next year. Some companies have a scandal, and the next quarter they post profits and people crap their pants over how the stock is on sale by like 10%. An example I'm thinking of is Lumber Liquidators. https://www.cpsc.gov/Newsroom/News-Releases/2016/Lumber-Liquidators-Laminate-Flooring
Fannie and Freddie are not showing a good quarter. They are showing a good decade.
Fannie Mae is not "showing a good decade". From Jan 2014 to Jan 2024 FNMA stock's cumulative return was -70%.
Before Trump won the election, FNMA was trading at $1.39/share on Nov 5 2024. The path to $9/share is entirely over the past 7 months. It has nothing to do with company performance or recovery - it is entirely because of Trump. Either he pushes the stock up near $30/share, or he abandons it and lets it sink back near $1 to $2/share.
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As always, I cannot say what's happening, and lay back on this gamble's inspiration: They make a lot of money, so should (should?) be worth what companies that make that much are worth.
In 2024 they made more money than Warren Buffett's Berkshire Hathaway, and no one would think he should be under conservatorship. On the contrary, he was who the government called in 2008.
At the moment, re-list seems like a good place to take back my capital, but we'll see.
Berkshire Hathaway didn't extend subprime loans, nor was it rescued by the government. Fannie Mae requires government guarantees, and the government has warrants on its stock. Comparing them is an odd choice. I've also read two sources that put Fannie Mae revenue in the $29 to $36 billion range, which is less than 1/10th of Berkshire's revenue.
"According to Berkshire Hathaway 's latest financial reports the company's current revenue (TTM ) is $415.77 Billion USD."
https://companiesmarketcap.com/berkshire-hathaway/revenue/
"Fannie Mae ...
Revenue US$29.048 billion (2023)"
https://en.wikipedia.org/wiki/Fannie_Mae
I'm just looking at profits.
The way I see it, there are 3 options: (1) Shut them down, (2) Take them off the market and let them operate like the FDIC or OCC, (3) End the conservatorship and relist the stocks on the NYSE.
Many companies have a bad year and their share price falls. Then they more-than-recover the next year. Some companies have a scandal, and the next quarter they post profits and people crap their pants over how the stock is on sale by like 10%. An example I'm thinking of is Lumber Liquidators. https://www.cpsc.gov/Newsroom/News-Releases/2016/Lumber-Liquidators-Laminate-Flooring
Fannie and Freddie are not showing a good quarter. They are showing a good decade.
Fannie Mae is not "showing a good decade". From Jan 2014 to Jan 2024 FNMA stock's cumulative return was -70%.
Before Trump won the election, FNMA was trading at $1.39/share on Nov 5 2024. The path to $9/share is entirely over the past 7 months. It has nothing to do with company performance or recovery - it is entirely because of Trump. Either he pushes the stock up near $30/share, or he abandons it and lets it sink back near $1 to $2/share.
From 2014 - present they are profitable. Profits are the metric I'm most interested in.
Yes, there was an irrational perception that Trump would do this, despite never talking about it in his 2024 campaign, and not having done anything from 2017-2021, but between a deadline approaching, and actual talk about it now, there seems to be the possibility that they will be released from conservatorship.