FNMA (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) preferreds are on a roll for now. FNMAS is now up from a low of $5.42 on April 7th to $6.97 at Friday’s close, +4.5% today on big volume of 4.5 million shares vs. average volume of 1.6 million shares. It still has a long way to go to get back to its recent peak of nearly $11.00 back in February. FNMAT soared 6.77% Friday on huge volume of 8 million shares today, nearly 40 times its average daily volume.
Why have FNMA and Freddie Mac preferreds performing so well lately and why was volume up so much? I am hearing chatter that someone knows something which is why there was big volume and blocks in FNMAS and FNMAT Friday. Details might be in Treasury Secretary Mnuchin’s tax plan announcement next week due to DTAs. Mnuchin said Fannie and Freddie overhaul is a ‘very important’ goal, read about it here in Bloomberg BusinessWeek.
Could Bruce Berkowitz, John Paulson, or Carl Icahn have convinced Bill Ackman he should also have a large position in Fannie preferreds in addition to Fannie and Freddie common stock? Several of these investors have an inside track within the Trump administration which should help our chances of seeing an end to the net worth sweep.
Actually all Mnuchin needs to do is mention the word Fannie or Freddie in an interview or speech and it could cause a buying panic in their shares. This might be a slight exaggeration but I believe Fannie and Freddie investors watch Mnuchin’s words as carefully as fixed income investors used to watch the words of Alan ‘Maestro’ Greenspan as he was orchestrating interest rate policy when he was Chairman of the Federal Reserve.
Dick Bove of Rafferty Capital also highlighted that Celeste Brown has left her position as Treasurer of Morgan Stanley to become Deputy CFO at Fannie Mae. Commenting on why a rising star at Morgan Stanley would leave to join a company on the verge of being eliminated, he said: “My belief is that she would not do this unless she were given assurances that there was a bright future for her at Fannie Mae. Ms. Brown is special. She is unlikely to sidetrack her career to become a government employee dead set in the middle of “the swamp.”
FNMA and Freddie common shares are also back in an uptrend but not as large an uptrend as their preferred shares for now.
I own Fairholme Fund and indirectly own Fannie Mae and Freddie Mac preferred shares, which have a large position in Fairholme Fund.
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