Michael Burry Warns Fannie Mae and Freddie Mac Could Become ‘Worthless’ as Trump-Era Gains Collapse Under Fresh Pressure

“The Big Short” investor Michael Burry warned that technical chart patterns for Federal National Mortgage Association (OTC:FNMA) and Federal Home Loan Mortgage Corp. (OTC:FMCC) predict “worthless stock” following recent price declines that erased gains made since Donald Trump’s election.

In a post on X, Burry disclosed making recent moves in both over-the-counter mortgage giant equities as market breadth narrows.

Technical Breakdown and ‘Meme Juice’

Burry noted that both stocks recently completed a “giant head-and-shoulders-and-elbows top” pattern, signaling a severe technical breakdown. According to Burry, the equities are shedding previous speculative gains, writing that the stocks “are coming close to expelling that poison from their bodies” after taking on “meme juice.” “What that chart predicts, technically, is worthless stock,” he said.

He added that “all that is left is the dominant hand to forcibly shove the shares off into the nether” as broader market attention remains concentrated in the AI trade.

Government Preferred Stock and 90% Dilution Risk

Beyond technical indicators, Burry pointed to fundamental risks tied to the government’s senior preferred stock (SPS) liquidation preference, which continues to grow each quarter.

Citing market price action and sell-side research from KBW, he stated Wall Street’s base case is shifting toward the U.S. Treasury converting its senior preferred stock into common equity.

Under that scenario, existing common shareholders face severe equity loss, with Burry writing that “common shareholders are diluted at least 90%.”

Policy Inaction Halts Value Creation

Addressing potential operational catalysts, Burry argued that unlocking underlying value in Fannie Mae and Freddie Mac requires ending government conservatorship or drastically reducing the senior preferred liquidation preference.

Commenting on policy progress, Burry stated that Fannie Mae and Freddie Mac “need Thor’s Hammer to unleash the value,” but added that “Thor’s looking too fat and lazy to wield it.”

How Have These Stocks Performed?

The OTC stock FNMA was down 31.64% over the last month, 62.35% year-to-date, and 66.75% over the year. Similarly, FMCC was down 29.90% in a month, 63.71% YTD and 68.84% over the year.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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