Menko

+1 I'm incredibly grateful that cherzeca accepted my nudging to join COB&F so we could all benefit from his insight. Merkhet has been an incredibly valuable member of this thread for as long as I can remember. +1 Fully agree. Thank you.

Yes, this is indeed a situation where I see an investment that is complex. And the reason why I share the quote is because I want to share an additional perspective. The ideological element I view as part of the situation. I see the housing sector, the US and the world economy involved. Fannie Mae and Freddie Mac are immensely important in my view. The biggest companies in the world, combined and seen as one, with a very important role. Looking at the different elements, I see the three mentioned elements (see post above) combined leading to an unavoidable outcome. Taken together, I see a logical whole and logical steps. And as an investor, I chose to invest, exactly because of that. As an example to stress the importance and the strange situation we are in currently: coming out of the housing crisis, what is I think the first thing we want to do with Fannie Mae and Freddy Mac, the largest companies in the world? We want to make them rock solid. We want to build their equity. No dividends, for years to come. With AIG, that was achieved in my view. With European banks generally, that was not achieved in my view. With Fannie Mae and Freddie Mac, I think all stakeholders really want to achieve that: rock solid institutions.

A lottery ticket would not sound as a share/security to invest in at any price?, though I admit it fully depends on the preference of the investor. To add an additional perspective: The cases of Fannie Mae and Freddy Mac are quite complex for us, yet we believe the following three questions summarize them. Taken together, we see the outcome described below as unavoidable: - Can the conservator FHFA of Fannie Mae and Freddie Mac, change contracts as executed through the August 2012 Third Amendment, effectively sweeping 100% of the profits of both companies towards the government, forever, leaving all other shareholders with nothing despite the fact that they hold title to their shares? Our answer is a firm NO. This would mean the contracts that were signed in 2008 remain in place in the interest of all shareholders and stakeholders. - Is there a better alternative for Fannie Mae and Freddie Mac and can they be replaced? Our answer is a firm NO. This would mean a solution must be found to keep Fannie and Freddie alive and kicking, in the interest of the United States and the world. - Are these companies solidly profitable and is it highly likely their position and business models will enable them to continue to earn solid profits in the US financial as well as global financial system? Our answer is a firm YES. - Therefore, we are happy shareholders in the common and the preferred shares. We are ready to wait many years if needed, but we think the United States will move faster, as the companies are vital for the health of the country.

I think it's helpful. Yes please continue to do so! I think this thread is outstanding thanks to Merkhet and others.