Fannie Freddie Seesaw Ride Far From Over

NEW YORK ( TheStreet) -- Fannie Mae ( FNMA) and Freddie Mac ( FMCC) are down 68% from their May 29 high of $5.44, and much as I have to admit that I enjoyed seeing them plunge over the past two days, I have little doubt they will turn higher at some point.

While Fannie and Freddie common shares may ultimately prove worthless, their fate will remain very much an open question for months, if not years, and given the volatility they have shown in recent weeks, there is little reason to expect it won't continue.

While savvy professional investors, including Mickael Kao of Akanthos Capital Management and John Hempton of Bronte Capital, shook their heads in disbelief at the recent rally of the common shares while the preferred shares was still trading at a fraction of face value, that doesn't mean the common shares are worthless.

Indeed, the latest big-name investor to get involved in Fannie and Freddie preferred shares, Fairholme Funds President Bruce Berkowitz, told CNBC that, though he hasn't bought the common, he notes that those shares have "optionality."

I'm not entirely sure what he meant by that and Berkowitz didn't immediately return a call I placed to him on Friday. Still, it sure doesn't sound like he thinks they're completely worthless. Not yet anyway. And clearly they aren't. If shareholders get their rights restored to them -- and one has to believe they have a legitimate shot at this happening -- they could easily be worth quite a lot.

But will they be worth something? And, if so, how much? Much of that determination will be left to Congress, the Obama Administration, and very possibly, the Courts.

In other words, it will likely take a really long time before a final decision is made. In the meantime, enjoy the spectacle and, if you like, place a small wager on the final outcome. Just make sure you're ready to lose it all.

-- Written by Dan Freed in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.