Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 2674933 times)

HalfMeasure

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10020 on: June 21, 2018, 10:59:51 AM »
So who are the most important Government stakeholders in everyone's opinion, in terms of a decision on GSE reform? FHFA, OMB, Treasury, anyone else?


cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10021 on: June 21, 2018, 10:59:56 AM »
fnmas up 10%
fnma up 2%

both on heavy volume.  any thoughts on disparity?

my thought is that the "reduce footprint" reference is scaring common.  has anyone seen what WH means by this term?  if it is just reduce FnF's loan portfolio and become a guarantor only, well hell this has already been largely done (about one trillion dollar reduction already since FC)

Common value depends more on pro-forma business model and the "out years" - i.e. if the reform materially changes the economics of the business model the equity value could shrink. The preferred however are a prior claim - it's hard to see a scenario where the prefs don't get par or very close to it as long as the conservatorship ends.

agreed, though until one sees how FnF exit conservatorship and builds up capital, it is hard for me to see how common does not do well given current price of  $1.50 and treasury long it as well

DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10022 on: June 21, 2018, 11:06:59 AM »
I was very tempted by the common if there are only 2 guarantors, but more than that will mean a race to the bottom on fees and it will only be a matter of time before the big banks capitalise a guarantor and charge rock bottom fees.

I hate the idea of multiple guarantors. They're not necessary and risk won't be priced correctly. Imo the best route is 2 guarantors competing on price and heavily regulated to make sure there's no collusion.  Sad!
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Luke 5:32

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cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10024 on: June 21, 2018, 11:32:44 AM »
I was very tempted by the common if there are only 2 guarantors, but more than that will mean a race to the bottom on fees and it will only be a matter of time before the big banks capitalise a guarantor and charge rock bottom fees.

I hate the idea of multiple guarantors. They're not necessary and risk won't be priced correctly. Imo the best route is 2 guarantors competing on price and heavily regulated to make sure there's no collusion.  Sad!

as a policy matter, ending the duopoly makes sense.  as an investor in FnF you would love for the duopoly to continue.

but as a PRACTICAL matter I think the risk is way overblown.

first if fhfa is going to require >3% capital for FnF, it will require same for new entrants.  which company is going to have a comparative advantage in raising new capital?

FnF will remain full fledged business operations in all 50 states (no reference to breakup or transitioning FnF themselves into multiple guarantors) that has shown it is executing on all cylinders lately. bypass investing in FnF for some new startup?...even a startup that is backed by TBTF banks? and a startup which is not owned 80% by treasury which presumably wants to make as much money as possible on this privatization process?

if as an investor I am going to invest in one guarantor (and why would I invest in more than one), which would look better to me?
« Last Edit: June 21, 2018, 11:36:34 AM by cherzeca »

beaufort

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10025 on: June 21, 2018, 11:42:54 AM »
I would be worried about instant recap as a common holder.  I don't know if that is possible, but that would be the worry re dilution.

Businesses in comfortable oligopolies can do very well.  Canadian banks come to mind.   

DocSnowball

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10026 on: June 21, 2018, 11:47:31 AM »
I was very tempted by the common if there are only 2 guarantors, but more than that will mean a race to the bottom on fees and it will only be a matter of time before the big banks capitalise a guarantor and charge rock bottom fees.

I hate the idea of multiple guarantors. They're not necessary and risk won't be priced correctly. Imo the best route is 2 guarantors competing on price and heavily regulated to make sure there's no collusion.  Sad!

as a policy matter, ending the duopoly makes sense.  as an investor in FnF you would love for the duopoly to continue.

but as a PRACTICAL matter I think the risk is way overblown.

first if fhfa is going to require >3% capital for FnF, it will require same for new entrants.  which company is going to have a comparative advantage in raising new capital?

FnF will remain full fledged business operations in all 50 states (no reference to breakup or transitioning FnF themselves into multiple guarantors) that has shown it is executing on all cylinders lately. bypass investing in FnF for some new startup?...even a startup that is backed by TBTF banks? and a startup which is not owned 80% by treasury which presumably wants to make as much money as possible on this privatization process?

if as an investor I am going to invest in one guarantor (and why would I invest in more than one), which would look better to me?

What about a competitor acting more like a platform company using primarily CRT like transactions? That would need a lot less capital if risk based?

DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10027 on: June 21, 2018, 11:53:23 AM »
I was very tempted by the common if there are only 2 guarantors, but more than that will mean a race to the bottom on fees and it will only be a matter of time before the big banks capitalise a guarantor and charge rock bottom fees.

I hate the idea of multiple guarantors. They're not necessary and risk won't be priced correctly. Imo the best route is 2 guarantors competing on price and heavily regulated to make sure there's no collusion.  Sad!

as a policy matter, ending the duopoly makes sense.  as an investor in FnF you would love for the duopoly to continue.

but as a PRACTICAL matter I think the risk is way overblown.

first if fhfa is going to require >3% capital for FnF, it will require same for new entrants.  which company is going to have a comparative advantage in raising new capital?

FnF will remain full fledged business operations in all 50 states (no reference to breakup or transitioning FnF themselves into multiple guarantors) that has shown it is executing on all cylinders lately. bypass investing in FnF for some new startup?...even a startup that is backed by TBTF banks? and a startup which is not owned 80% by treasury which presumably wants to make as much money as possible on this privatization process?

if as an investor I am going to invest in one guarantor (and why would I invest in more than one), which would look better to me?

We don't know the full details yet in terms of new guarantors, but I think it was Watt (could be bob) that advocated for hindering Fannie and Freddie with higher fees so new guarantors can enter the space with lower fees.

It was Watt that advocated for all guarantors to have a national footprint to avoid concentration risk.
That means many smaller Fannie and Freddies to me which is duplication that will increase overall costs to Fannie and Freddie as their market share goes down.

Don't get me started with the explicit guarantee....

Feels like this has been captured by wall street and won't be best for America.

Hopefully small lenders insistence on 2 guarantors max so they don't have to integrate with more companies will swing things back the other way. That and also the argument that they should be merged and fully nationalised could swing the pendulum back to only 2 gses.

For now I'm focusing on the preferred again.
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Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10028 on: June 21, 2018, 11:55:45 AM »
District Court has declared CFPB unconstitutional.  Up next, FHFA?

Edited to add this link: http://www.nysd.uscourts.gov/cases/show.php?db=special&id=634
« Last Edit: June 21, 2018, 12:17:20 PM by Luke 5:32 »

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #10029 on: June 21, 2018, 11:58:07 AM »
*REPORT CALLS FOR U.S. ENTITY TO OVERSEE FULLY PRIVATE GSES 13:10:16
*GSE PRIVATIZATION WOULD ENABLE COMPETITORS, WHITE HOUSE SAYS 13:10:18
*REPORT URGES EXPLICIT MBS GUARANTEE FOR GSES AND COMPETITORS 13:10:20
*WHITE HOUSE REORGANIZATION PLAN WOULD REMOVE GSES' U.S. CHARTER

13:10:22 *FANNIE-FREDDIE FULL PRIVATIZATION URGED IN WHITE HOUSE REPORT 13:10:24 FMCC,FNMA
Removing charters, shrinking size, full privatization and conversion to monoline insurers reminds me of the original Jim Millstein's plan.