FNM and FRE bailout bullish or bearish

Here are my calculations:

http://www.elitetrader.com/vb/showthread.php?s=&postid=2056808#post2056808

so an approximate "value" for FRE of 39 cents (250 / 647) and a "value" for FNM of 23 cents (250 / 1,070).

I agree - that it's disgusting that the Treasury is still leaving some value for common shareholders.


Quote from Trader KGB:

I thought the general expectation was for the common shares to be wiped out. This sounds like a bailout for the common. So what if they "bear losses ahead of the new preferred", the companies are fully backed by the Treasury now. What a joke..

Any ideas where the common will open up tomorrow?
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Quote from Trader KGB:

I thought the general expectation was for the common shares to be wiped out. This sounds like a bailout for the common. So what if they "bear losses ahead of the new preferred", the companies are fully backed by the Treasury now. What a joke..

Any ideas where the common will open up tomorrow?
More...

it depends....

if secondary mortgage market rebounds so will the common.

if the secondary mrtgage mkt fades on the back of continually weaker housing THEN the common/preferred are diluted to zero by Treasury preferred issuance.


I think we see ALOT of volatility in the short term until the long term picture clears.
 
Quote from staffpro:

if this will make us treasury yields shoot up won't that also make the dollar go up?
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Yields go up because money is less interested in paying a premium for these, so i can hardly expect this will be supportive of this. It all boils down to faith in the ability for this not to sink us, which I think may wain. This should be a major historic event in the fixed income markets. I can hardly wait to see what happens to bond futures.
 
Quote from scriabinop23:

Yields go up because money is less interested in paying a premium for these, so i can hardly expect this will be supportive of this. It all boils down to faith in the ability for this not to sink us, which I think may wain. This should be a major historic event in the fixed income markets. I can hardly wait to see what happens to bond futures.
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the real action should be in the USD overnight.
 
Im so fucking confused! So treasury will buy $200 billion in 0% preferred for both companies yet the common shareholders still remain. WTF? How the hell can anyone value this company?
 
The Kin:

From WSJ:

The Treasury said its senior preferred stock purchase agreement includes and upfront $1 billion issuance of senior preferred stock with a 10% coupon from each GSE, quarterly dividend payments, warrants representing an ownership stake of 79.9% in each firm going forward, and a quarterly fee starting in 2010.

***

My thoughts:

This values the GSEs at a market cap of $1.25 billion (1 billion / 0.799) each, made up of
1 billion Treasury senior preferred + 250 million pre-existing equity.

647 million shares oustanding for FRE and 1.07 billion shares oustanding for FNM

so an approximate "value" for FRE of 39 cents (250 / 647) and a "value" for FNM of 23 cents (250 / 1,070).


Quote from The Kin:

Im so fucking confused! So treasury will buy $200 billion in 0% preferred for both companies yet the common shareholders still remain. WTF? How the hell can anyone value this company?
More...
 
i think it would be un-american to not celebrate the collapse of a fraudulently managed gse monolith bubble machine with a nice greasy rally. further reason to pop the chamagne cork is the subsequent bail out with taxpayer dollars. rally the dollar, rally equities, sell commodities. if bac and C go tits I see dow at 27,000 by dec 4th, 2008.
 
no seriously won't this make treasury YIELDS shoot through the roof making the dollar rally SHORT TERM, inducing a rate HIKE AND THEN WE PLUNGE.

just plunging straight away seems too obvious almost like the Hurricane Gustav trade lmao
 
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