Can someone please explain the difference. Can anyone buy preferred? Why own one vs the other. Are there different kinds of preferred. Do all stocks have this? Why do people say the common has no value? If it has no value way is it still being traded? These are honest questions. I own 5000 shares of the common at $1.30 and I don't know if I should be terrified or optimistic.
....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. The 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 here.
..........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. I'm not saying Fannie is going to be wound down as it is woven into the fabric of our mortgage market and last week the NAHB said a "federal backstop" for the mortgage market is a must...but until profits are given back to Fannie Mae and all shareholders, of commons and preferreds, all the stocks are kinda on hold....
Well said that "Commons and Preferreds are all in the same boat "
What is critical for shareholders in both categories is to see the GSEs re-emerge after necessary reform or restructuring that is good and healthy for the mortgage finance system. Since banks, or AIG and GM can survive through crisis and restructuring, why not the GSEs? So long as the two GSEs are profitable and can maintain their profitability, there should be a solution that is good fot the two institutions as well as good for the recovery of thenation's economy and hence, happy for all..
.........And with $38 Billion in divideds being paid already and much much more after 2013's 1st quarter, and none of this money going to the $117 billion owed one might ask why will congress change anything. They got themselves a pretty darn nice "cash cow".
.......Hopefully the same big money discussed above after they have shorted both the commons and the preferreds and have made the most money possible out of the situation as it stands now - will send an army of lobbiests to DC to get it so so Fannie and the shareholders are able to realize the profits. But by then they'll have most of the shares bought on the cheap and will profit as both common's and preferred's PPS skyrocket. That's the big money plan as I see it.... and it makes sense - doesn't it.