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Federal National Mortgage Association Message Board

  • hereinnh hereinnh Apr 6, 2013 12:24 AM Flag

    Saying Preferreds a better investment - nothing but hype.....

    .........If lack of assets were an issue then true commons "lack" of worth may be an issue but that is not the case here. With Fannie Mae making billions then that is not the case.Commons are simply third in line. Having Fannie giving all profits to the gov't and only being allowed to keep 3 billion on the books is the issue.

    ..........What's happening is the big money after promoting the "commons", the switch was made to promote the "preferred". They short the commons and make money. They bought the preferred low and now make money on the preferred gains. That is until everyone realizes that with the way things stand now the preferred aren't worth anything either. Commons and Preferreds are all in the same boat - dead in the water until Fannie and all shareholders are able to realize the profits.... when the everyone starts to realize this big money will simply short the preferreds and make money as the PPS drops on those as well. The one thing all shareholders got going for them is if FnF are going to be wound down then first the $117 Billion will be paid off which means Fannie will then be able to realize the profits and not just be giving all profits to the gov't.

    .......... Now I'm not saying Fannie will be would down because Fannie is woven into the fabric of our RE mortgage market and a "federal backstop" for the RE mortgage market is a must. However, should a new entity in fact be formed then Sallie Mae is the road map on how it will be done - that is the shares were transfered 1: 1 and the shareholders were first protected then rewarded. But to say the preferred shares are a better investment is nothing but hype with the way things stand now. Just hype.

    Sentiment: Hold

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