Fannie and Freddie are selling for 25% or 35% of what they are worth. The upside is three- or four-fold once the mortgage crisis unfolds. These stocks in the $20s don’t make any sense, even in a bear case where they have to raise lots of capital. Even if Freddie has to issue $5 billion in equity at $20 a share, massively diluting the existing shareholder base, you still come up with earnings power of almost $4 a share….In a best-case situation, assuming nobody else gets back into this market and they are the only game in town, you can get $9-$10 of earnings power for a stock that is in the $20s. You don’t ever see that kind of risk/reward trade-off.  Maybe so, but how much are their assets really worth? FNM’s net tangible is 41 bil, with a market cap of 38 billion. 839 billion of those assets versus 799 bil of liability.  liabilities are real. So roughly 20 to 1 leverage! So if asset on the book is actualy worth 5% less than stated, that would mean a complete wipeout of net tangible book value.  I ask,  is that a possbility?

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