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What's a Fannie Worth?

Bruce Krasting's picture




 

 

How about Fannie's stock of late? The low-high for May saw a 660% swing. There were several days of +200Mn shares crossing hands. The stock fell off a cliff at $5.40 and 36-hours later it was back down to $1.75. Some guys made a killing, others lost their shirts. I think 99% of what happened to FNMA was due momentum chasers and day traders.

Clearly the market is having a difficult time trying to figure out what Fannie is worth these days. The news services are also struggling. The normal sources have some big discrepancies. Bloomberg measures the market cap of FNMA at $12.9Bn (5.8Mn shares outstanding):

 

bloomber

 

 

Yahoo Finance agrees with Bloomberg:

 

yahoo

 

CNBC and Reuters have a different number for the market cap. They think that FNMA is only worth about $2.6Bn, about 1/4 of what Bloomberg is saying:

 

cnbc

reuters

Google has yet a different number. It thinks FNMA is worth about $3.8Bn, based on 1.71Bn shares outstanding:

 

google

In the March 2013 10-Q Fannie confirmed that the number of shares outstanding is 1.158Bn.

fannie10q

 

So the market cap of FNMA (as of the close) is about $2.5BN. Bloomberg, Yahoo and Google have bad data. No wonder traders are so confused.

 

The deep thinkers in D.C. are also confused about the government's investment in the mortgage industry. Senator Bob Corker (R-Tn) thinks that Fannie and Freddie should be shut down and a brand new government owned mortgage entity should take over. Corker has a fancy new name for his mortgage lender, Federal Mortgage Insurance Corp.

The problem with Corker's plan is that the US already has a federally owned mortgage insurer. FHA (separate from Fan and Fred) has been booking new mortgages like crazy the last four years. FHA is under-capitalized, and will probably need a bailout in the not too distant future. Yesterday the FHA leaked an internal review that stressed tested the FHA business plan. That "plan" looks like it could be another disaster for taxpayers:

 

 

wsj

 

I think Corker is nuts to consider a new government owned mortgage lender. The government will screw it up just like they have with Fannie, Freddie and FHA. How many times do these guys have to get hit over the head before they realize that mortgage lending is risky stuff?

 

I don't know what will happen with Fannie and Freddie. If you believe in the FHFA (the administrator for F/F) then you would have to conclude that F/F have no value at all. The flip side is that if left alone, F/F would be able to pay back all of the money borrowed from the Treasury PLUS a very big return to the taxpayers. This "miracle" could be accomplished in less than 36-months.

GM/Chrysler, AIG and all of the TARP banks have done pretty much what F/F are capable of. They went into the crapper in 2009, the Feds bailed them out and after a few years all the money was paid back with a gain. Given that as a precedent, then a good case could be made to let F/F go down the same road.

If F/F were allowed to payback the taxpayers, and then emerge as new private sector companies, the Preferred stock of the Agencies would be money good, and the common stock would be worth many multiples of the current price.

Most investment opportunities have three possible outcomes. (1) A significant gain, (2) a complete loss , and (3) something in the middle. That's not the case with F/F. There is no "middle". Either the the common/Pref could be a huge home run, or it is going to zero. No wonder the market is having a difficult time trying to figure out how to value the equity.

 

15206258-graffiti-question-mark-with-confused-direction-arrows-painted-and-sprayed-with-an-aerosol-can-textur

 

 

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Wed, 06/05/2013 - 16:57 | 3627584 Lonewar
Lonewar's picture

Whats Fannie worth, as I have said before, it depends on if the BIG money can get that 3rd Amendment to the Conservatorship Agreement changed or nullified...

If they can, its worth $50 to $60 per share for the Common and $48 per share to the $50 Par Preferreds and a HUGE Dividend stream

If they cant, its worth about $2 per share to the Common and Par for the Preferreds

Fannie should be range bound again next week (Between $1.50ish and $2.00 ish) and the week following should start heading up again to pass the $5.44 mark it set last week. (Assuming that Japan doesnt explode, if it does, I have NO clue what will happen to the marked). This week and next is all about consolidation. The next peak I see is ~$10 per share for the commons, and once there, the stock should drop back to about $6 per share for another two weeks of consolidation.

What is abolutely infuriating to me is the fucking slavery of that 3rd Amendment. Cant act in your own best interest, and ALL profits are considered Dividends so you can never be free...

Wed, 06/05/2013 - 14:30 | 3627074 MrBoompi
MrBoompi's picture

What is any share of stock worth?  LMAO  What does that matter?  Since the price of stock now seems to be, in most cases, totally divorced from company performance, I guess the price is whatever somebody is willing to pay for it.  Also, if the big players can make a lot of money on a stock by shorting it, the price will miraculously go down.  Vice versa if they're long.  And insider knowledge is still the key to success.

Wed, 06/05/2013 - 13:39 | 3626884 Bruce Krasting
Bruce Krasting's picture

 

Bloomberg has a story out today on Fan and Fred - This is the intro:

 

Fannie Mae and Freddie Mac shares
surged to five-year highs last week, giving them a combined
market value of $48 billion

 

I think that Bloomberg has this wrong by a mile. I did write them, never heard from Bloomie.  

bk 

http://www.bloomberg.com/news/2013-06-05/fannie-shares-seen-as-worthless...

Wed, 06/05/2013 - 14:00 | 3626958 Panafrican Funk...
Panafrican Funktron Robot's picture

Corker isn't nuts; he's a perfectly sane financier puppet.  Just remember, if it doesn't make rational sense, there is probably a more nefarious purpose behind it.  

Wed, 06/05/2013 - 13:01 | 3626716 crzyhun
crzyhun's picture

Worth of FNMA, Freddie, FHA  = three pieces of used TP!

Wed, 06/05/2013 - 12:53 | 3626676 rlouis
rlouis's picture

While pointing a finger at the small-time momo & day-traders, don't forget the HFT computers - high diving into the shallow pool of NYSE capital is dangerous/stupid/etc.  It seems Ivan Boesky's "greed is good speech" to the graduating UC Berekely business students might have been a storm driven high water mark, it has been a lot of flotsam ever since.

Wed, 06/05/2013 - 12:49 | 3626646 tradewithdave
tradewithdave's picture

You can't put a price tag on friendship.  Just as J. Christopher Flowers and/or Jon Corzine what a friendship is worth.  Money can't buy love... even with FHA underwriting, but it can buy "equitable treatment."  Go long Longstockings!  

http://tradewithdave.com/?p=16860

http://tradewithdave.com/?p=16882

Wed, 06/05/2013 - 12:48 | 3626641 Variance Doc
Variance Doc's picture

"due...[to] day traders."  LOL.  Those muppits got crushed and scrapped a long time ago, Bruce.

What happend?  Why don't you visit with the boys at Nanex.

Day traders...Hahahahahahahaha...

Wed, 06/05/2013 - 12:18 | 3626533 PiltdownMan
PiltdownMan's picture

Fannie is worth NADA. Likely they will be shut down along with Fredo Mac.

http://www.ad-co.com/about_news_and_events

Wed, 06/05/2013 - 12:13 | 3626516 ebworthen
ebworthen's picture

FNMA is worthless, other than a cash cow for the executives and people that work there.

Wed, 06/05/2013 - 11:50 | 3626452 DaveyJones
DaveyJones's picture

What's a fannie worth? Like all things, depends on whether it's kicked, tucked or left to expand 

Wed, 06/05/2013 - 11:34 | 3626411 NoTTD
NoTTD's picture

Depends on your personal preferences.   I've seen some worth alot more than others; however, generally speaking, the worst I've had were not that much worse than the best I've had.  It's all good.

Wed, 06/05/2013 - 11:26 | 3626384 Downtoolong
Downtoolong's picture

Nobody knows what anything is worth these days until the Fed tells them.

"Help us Obe Won Bernanke, you're our only hope."

 

Wed, 06/05/2013 - 11:19 | 3626350 thismarketisrigged
thismarketisrigged's picture

ZERO!!!!

Wed, 06/05/2013 - 11:09 | 3626321 csmith
csmith's picture

I was hoping for a piece differentiating the common and the preferred. Some (Berkowitz included) are making huge bets on the preferred while dissing the common.

Wed, 06/05/2013 - 11:14 | 3626334 Chupacabra-322
Chupacabra-322's picture

Fanny isn't worth the sweat off my balls.

Wed, 06/05/2013 - 11:52 | 3626462 DaveyJones
DaveyJones's picture

that's prison talk that is

Wed, 06/05/2013 - 10:43 | 3626228 moneybots
moneybots's picture

Absent financial fraud, isn't Fannie worth a big fat ZERO?

The financial fraud has NEVER ended.  It is all a game of pretend.

Wed, 06/05/2013 - 11:08 | 3626315 NotApplicable
NotApplicable's picture

Absent financial fraud, there's not even a remaining market.

Wed, 06/05/2013 - 13:27 | 3626831 SAT 800
SAT 800's picture

Absent financial fraud, there's not even a remaining USA." fixed it for ya.

Wed, 06/05/2013 - 10:38 | 3626213 Joe Davola
Joe Davola's picture

They're not really business entities, their purpose is social engineering and political payback slush funds.

Wed, 06/05/2013 - 10:44 | 3626223 Rainman
Rainman's picture

" Washington can't fathom there could be value and the investment community seems convinced there is "

http://www.bloomberg.com/news/2013-06-05/fannie-shares-seen-as-worthless-surging-in-disconnect.html

 

Wed, 06/05/2013 - 10:29 | 3626188 Hongcha
Hongcha's picture

Maybe try this blackjack table, lotta players; or are they shills?

Wed, 06/05/2013 - 10:28 | 3626184 mofreedom
mofreedom's picture

i love medium sized butts.

Wed, 06/05/2013 - 19:22 | 3627997 DriveByLurker
DriveByLurker's picture

  

 

Mofreedom, I partied with Sir Mix-A-Lot.  I knew Sir Mix-A-Lot.  Sir Mix-A-Lot was a friend of mine.  Mofreedom - you're no Sir Mix-A-Lot.

Wed, 06/05/2013 - 10:27 | 3626175 Rainman
Rainman's picture

Excellent report.....I just love the smell of kleptocratic fascism first thing in the morning.

Wed, 06/05/2013 - 10:27 | 3626174 otto skorzeny
otto skorzeny's picture

$115B- fuck it- print it.

Wed, 06/05/2013 - 10:46 | 3626241 Pinto Currency
Pinto Currency's picture

 

What's a Fannie worth?  That depends.

There are three meanings to the word fannie.

One is Fannie Mae, one is a N.Amer. slang for back side, and one is the UK slang for um, er, well nevermind.

Wed, 06/05/2013 - 11:13 | 3626332 BigJim
BigJim's picture

 GM/Chrysler, AIG and all of the TARP banks have done pretty much what F/F are capable of. They went into the crapper in 2009, the Feds bailed them out and after a few years all the money was paid back with a gain. 

Yes, Bruce, paid back with QE and the spreads Primary Dealers 'earn' selling USTs back to the Fed with money they borrow at artificially low rates... from the Fed.

Such a deal! 

Wed, 06/05/2013 - 11:19 | 3626348 Bananamerican
Bananamerican's picture

"er, well, nevermind..."

Damnit....

"Fannie" = Vagina, named after early 18th century English erotic novel 'Fanny Hill'. Later became slang for the posterior in the USA...

Wed, 06/05/2013 - 11:42 | 3626435 Pinto Currency
Pinto Currency's picture

 

BA,

You've just caused numerous crimson blushes and fainting spells of the demure debs who read ZH.

Wed, 06/05/2013 - 11:07 | 3626313 NotApplicable
NotApplicable's picture

It appears a Fannie is worth exactly one ZIRP.

Wed, 06/05/2013 - 12:51 | 3626653 boogerbently
boogerbently's picture

Value drop on "taper" talk.

Wed, 06/05/2013 - 11:06 | 3626312 Ying-Yang
Ying-Yang's picture

Bruce you said - GM/Chrysler, AIG and all of the TARP banks have done pretty much what F/F are capable of. They went into the crapper in 2009, the Feds bailed them out and after a few years all the money was paid back with a gain.

How about this............

Most people don't realize how much GM actually took from taxpayers, and how little it's given back. If I told you GM has repaid only $6.7 billion out of the $49.5 billion in loans it was given, would you be surprised? If I told you the expected loss to the U.S. Treasury of roughly $12 billion isn't even a fraction of the real cost, would you believe me? If not, you might be in for a nasty surprise.

http://www.fool.com/investing/general/2013/05/19/how-much-gm-truly-stole...

Wed, 06/05/2013 - 11:10 | 3626323 Ying-Yang
Ying-Yang's picture

A little bit more...

Consider that the only true loan GM received from the U.S. government was for $6.7 billion at 7% interest, which it has since repaid. The majority of the nearly $50 billion was in stock purchases by the U.S. Treasury at a price that GM didn't lose money when recently rebuying shares.

Also consider that GM was "gifted" tax losses from the "Old GM" corporation in amounts of $45 billion. What that really means is the "New GM" can write off current profits up to that amount and not pay taxes on it. That's a complete joke, in my opinion.

Think of it like this: GM took our tax dollars to save its company, and then after turning 13 quarters of profit, it still isn't paying a single income-tax dollar. Are you kidding me? News flash: My recent taxes cost me and my wallet a bundle, and I didn't turn billions in profit.

Too often, people assume that since GM received nearly $50 billion in taxpayer funding, and when people hear that GM has fully repaid its obligations, we assume that means it repaid the said $50 billion. That couldn't be further from the truth. GM has merely paid its initial pure loan of $6.7 billion with interest, and rebought some of its own shares from the Treasury -- often at a cheaper price. Most of us taxpayers don't even realize Ford paid an effective tax rate of 26% in 2012, compared with 0% for GM -- a complete joke to Ford, which didn't take any of our taxpayer dollars.

Wed, 06/05/2013 - 13:00 | 3626712 disabledvet
disabledvet's picture

spot on. love it. "all the while ramping up Tesla." CRAZY! close down Pontiac? ASSHOLES. Close down Saturn? REALLY? these clown could care LESS about jobs and the economy. the bailouts were just political "vengeance weapons" against enemies real and perceived. and now a massive chunk of the industrial heartland of the USA is a flaming wreck! thank God for foreign investment! shall we throw in "lose the war" for good measure? unreal. and not a PEEP out of Congress of the White House. NOTHING. General Petraeus to private equity? General McChrystal after going full on Rolling Stone now "admitting" that it's all about National Service??!!! Hmmmm. "That leaves Senator John McCain and DisableVet as the only two people who believe in public defending Western Civilization and those who will defend her." AND THIS IS JUST RHETORIC! Ronald Reagan is laughing his balls off. "political hacks one and all" he'd say. "Only i said we could win against the Soviet Union. And not only was i right but i happened to live to see it happen." that's how history is made folks.

Wed, 06/05/2013 - 12:17 | 3626529 ebworthen
ebworthen's picture

And thus the U.S. slang for G.M. of "Government Motors".

Wed, 06/05/2013 - 11:10 | 3626318 Manthong
Manthong's picture

What's a Fannie Worth?

Well, if’s she’s on crack and hanging near the alley, probably as little as 10 or 20 bucks.

What did someone say about there being no coincidences?

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