Today, I’m joining Einhorn and other hedge funds in Fannie Mae speculation.
music selection: “Garbage” — Blaze ya Dead Homie
weigh-in: 213.4 +2.0 – Too much pizza!
Fannie Mae (Federal National Mortgage Association) is the subject of a great deal of controversy. After the bailout, the agency was still struggling to pay its preferred dividend to the government. Just before the agency returned to profitability, the government changed the rules of the deal to a sweep of all profits. The government is now reaping a massive distribution while shareholders are completely shut out. There are numerous lawsuits underway challenging this scenario. This article at WSJ explains it well.
FNMA is now profiting a couple billion dollars every quarter. It has paid over 10 billion in dividend payments to the government in the prior four quarters. If these dividends had been paid to investors instead, the imputed yield would be a little over 95%! If the lawsuits are successful, the stock could easily gain 1000%.
This one isn’t for the rent money or anything you might want to return to cash in the next three years. But for my money, it is a safe speculation that could pay off big. I am committing 5,000 to stock.
Devour your prey raptors!