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Lulupoopsalot (87.54)

I can't publish anything about this...But I can blog

Recs

4

May 28, 2013 – Comments (6) | RELATED TICKERS: FNMA , FMCC

I've been adding to my positions in FNMA and FMCC over the last couple weeks and this huge move has gone undiscussed by mainstream media.

Both Q1 2013 reports were AWESOME! This is a long term buy and hold for me in real life. I included my buy points in my individual stock pitches and replies if you'd like to see for yourself.

The problem with adding to my postions so frequently is that I can't publish any articles about these stocks within a 48 hour window. But I can blog about it. Lucky blog readers.

Now you all know my secret to a 200%+ gain over the last couple weeks and here's the hot tip....it's going to continue.

But the one catch....volatility. This is gambling to a degree because the ultra small market caps means they can be pushed around easily by big money. Don't put in more than you are comfortable losing. For some of you this might be only a hundred shares or so....and that's fine.

6 Comments – Post Your Own

#1) On May 28, 2013 at 1:57 PM, Mega (99.96) wrote:

"Both Q1 2013 reports were AWESOME!"

They were awesome for the US government which owns the senior preferred shares, not public shareholders. You don't have a claim to a dime of that income.

Here's a hot tip: it's not going to continue.

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#2) On May 28, 2013 at 4:34 PM, Mega (99.96) wrote:

Analysis of the 2012 Amendments to the Senior Preferred Stock Purchase Agreements http://fhfaoig.gov/Content/Files/WPR-2013-002_2.pdf

Key discussion

In the end, in 2012, Treasury settled on the “positive net worth” model, in which Treasury would simply take, as dividends, the entire positive net worth of each Enterprise each quarter. Treasury is phasing in this change by establishing a net worth “buffer” such that net worth above the level of the buffer will be paid to Treasury. The buffer was set at $3 billion for each Enterprise initially, to be incrementally reduced to zero over five years.

The PSPAs also prohibited the Enterprises, without the consent of Treasury, from making any changes to their capital structures, issuing capital stock, increasing their debt significantly, paying any dividends (other than those to Treasury), engaging in certain transactions with affiliates, or disposing of any assets unless they are for “fair market value” in “the ordinary course of business.”

Thus, Treasury has liquidation preferences ahead of other stockholders to receive $189.5 billion if the Enterprises are liquidated. This liquidation preference does not decrease by the amount of dividends paid.

Absent express consent from Treasury and FHFA, an Enterprise cannot redeem the senior preferred stock until the termination of Treasury’s funding commitment. Treasury’s funding commitment to an Enterprise will terminate if: (i) the Enterprise’s assets are completely liquidated; (ii) the Enterprise pays its liabilities and obligations (including MBS) in full; or (iii) the Enterprise reaches the funding cap.

The PSPAs originally required that each Enterprise reduce its mortgage assets by 10% per year down to $250 billion. The 2012 Amendments accelerate the reduction to 15% per year.

The 2012 Amendments make it impossible for the Enterprises to build up any capital because their net worths, except for the temporary buffer amount, will be zero after they make each quarterly dividend payment to Treasury. Treasury’s press release announcing the amendments stated that with this change, the Enterprises “will not be allowed to retain profits, rebuild capital, and return to the market in their prior form.”

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#3) On May 29, 2013 at 3:55 AM, jiltin (28.65) wrote:

I have been watching it since it crossed $1, but did not take a risk as it may be good gambling and my IRA blocked this trading (penny stocks).

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#4) On May 29, 2013 at 12:52 PM, ikkyu2 (99.15) wrote:

Thanks, Megashort.  A good explanation of a company's capital structure is always in order, especially for us fans of Peter Lynch who wish we, too, could get in on 1980's FNMA :)

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#5) On May 30, 2013 at 9:21 AM, ElCid16 (96.43) wrote:

http://blogs.reuters.com/felix-salmon/2013/05/29/the-frannie-gamble/

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#6) On May 30, 2013 at 5:14 PM, rmwaskewicz (< 20) wrote:

Do you guys think there is more roller coaster rides coming soon for this stock, or do you think it was just being manipulated by trigger happy day traders? Intrinsic value flat liner...

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