Tuesday, February 11, 2014

WISE UP!! IF the money sent is seen as payback by courts, commons are wealthy!!!!!!!

WISE UP!! IF the money sent is seen as payback by courts, commons are wealthy!!!!!!!!

In any liquidation, F&F would have cash on hand if they quit paying the dividend to the treasury. lets look at Fannie: treasury is about 117 billion, if courts say this is paid back, by winning for preferred, then even in conservatorship there would no longer be a 10% dividend since the liquidation preference on the senior would be 0, the 10% div would be 0. Ok so we got everything zeroed out, now the money fannie makes would be paid to themselves and start to build. the FHFA could maybe not pay a dividend to preferred, but I would think they will have to from court, but the money builds either way. to the tune of 30 billion a year. now lets say they liquidate Fannie, pay the debts? they have none!! treasury wiped all debt with its shares and 117 billion borrowed. so then we divide the cash up, guess what commons get paid. huge. lets say half the money goes to preferred share. thats 15 bil left for common and with 1 bil common out, $15 a share per year they remain in conservatorship. THERE is no WAY not to pay out the cash to commons. even if govt cashed in warrants, then there would be a takings of 80% of the money from the commons by dilution. I suspect when senior shares are dissolved so will the warrants be dissolved and they are part of the agreement. And when treasury is no longer part of the picture the warrants die when treasury removes their support to the gse's.

Either way In the worst case, liquidation, I'm looking at $15 a share by the end of 2014. commons make as much sense as preferred. IF not more.

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