Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 2804914 times)

TwoCitiesCapital

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11180 on: January 10, 2019, 03:15:18 PM »
Unbelievable.  I honestly think investor fatigue is a big part of the slow market realization.  Nobody wants to look at this again

The reactions here are nuts. You'd think the preferred weren't 40+% off their recent lows based on the commentary here. Markets have responded. It's going up, but there's just been so many head-fakes in the past that it's a bit more cautious. 


SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11181 on: January 10, 2019, 03:47:53 PM »
Unbelievable.  I honestly think investor fatigue is a big part of the slow market realization.  Nobody wants to look at this again

The reactions here are nuts. You'd think the preferred weren't 40+% off their recent lows based on the commentary here. Markets have responded. It's going up, but there's just been so many head-fakes in the past that it's a bit more cautious.

Prefs trading at 32% of par right now is nuts.

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11182 on: January 10, 2019, 05:14:34 PM »
“There’s a clear mission that’s outlined by the Treasury and the White House, what they want to accomplish,” Otting said in an interview this morning inside the building that houses both the OCC and FHFA.

“We have to look at the capital and liquidity requirements of the GSEs,” he said. “But by all accounts … I think the GSEs can be commended for the way they have repositioned their business models and the way they are serving the market.”

He said he was still getting his bearings in his new role, but added: “Our goal is to be able to complete the release of the GSEs but at the same time make sure that it supports the U.S. housing market.”

Seems like yuge news to me. The administration has a clear plan and they trust Otting and Calabria to implement it. They also think that the GSEs are mostly okay as-is, and want the companies released by the end of 2020.

I doubt Calabria is too allergic to the administration's plans, otherwise I don't think he would have taken the job. I still think Calabria's past views are important because there are any number of yes-men Trump could have picked instead. He doesn't like the NWS, the companies need to be recapped before they can be released, and a recap can't happen while the NWS is in place. Thus the NWS's days are numbered.

Still, what's the downside thesis for the prefs from here? I'm really struggling. Seniors remain in place even after the NWS is gone? Government tries to force through an unfavorable conversion?

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11183 on: January 10, 2019, 06:07:14 PM »
“There’s a clear mission that’s outlined by the Treasury and the White House, what they want to accomplish,” Otting said in an interview this morning inside the building that houses both the OCC and FHFA.

“We have to look at the capital and liquidity requirements of the GSEs,” he said. “But by all accounts … I think the GSEs can be commended for the way they have repositioned their business models and the way they are serving the market.”

He said he was still getting his bearings in his new role, but added: “Our goal is to be able to complete the release of the GSEs but at the same time make sure that it supports the U.S. housing market.”

Seems like yuge news to me. The administration has a clear plan and they trust Otting and Calabria to implement it. They also think that the GSEs are mostly okay as-is, and want the companies released by the end of 2020.

I doubt Calabria is too allergic to the administration's plans, otherwise I don't think he would have taken the job. I still think Calabria's past views are important because there are any number of yes-men Trump could have picked instead. He doesn't like the NWS, the companies need to be recapped before they can be released, and a recap can't happen while the NWS is in place. Thus the NWS's days are numbered.

Still, what's the downside thesis for the prefs from here? I'm really struggling. Seniors remain in place even after the NWS is gone? Government tries to force through an unfavorable conversion?

the common stock value (40% of its two year high) is still depressed on a relative basis as compared to junior pref (currently at 80% of two year high), and the junior pref is still only at par/3 .  so there remains still great uncertainty and fear. 

this is less an investment than a "black mirror" episode.
« Last Edit: January 11, 2019, 07:26:02 AM by cherzeca »

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11184 on: January 10, 2019, 06:55:44 PM »
An announcement that the NWS has been stopped seems imminent.

https://twitter.com/JoshRosner/status/1083440288415260672
@JoshRosner
OTTING in Politico Pro: "Our goal is to be able to complete the release of the GSEs but at the same time make sure that it supports the U.S. housing market."


https://twitter.com/Fanniegate101/status/1083441893340573696
@Fanniegate101
Joseph Otting has made his first on the record comments about ending $FNMA & $FMCC conservatorships & releasing them. The end of this charade is getting closer by the day. Capital is the next logical step by amending the 'net worth sweep' #FannieGate


Hopefully really imminent. That piece from October said new people were going to act fast. Lets see it!
They can immediately suspend dividends and go for full earnings retention. But they cannot kill the NWS completely and do away with the Srs. That may have to be part of a complete overhaul, warrants, Srs. and perhaps conversion of Jrs.

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11185 on: January 10, 2019, 07:57:06 PM »
An announcement that the NWS has been stopped seems imminent.

https://twitter.com/JoshRosner/status/1083440288415260672
@JoshRosner
OTTING in Politico Pro: "Our goal is to be able to complete the release of the GSEs but at the same time make sure that it supports the U.S. housing market."


https://twitter.com/Fanniegate101/status/1083441893340573696
@Fanniegate101
Joseph Otting has made his first on the record comments about ending $FNMA & $FMCC conservatorships & releasing them. The end of this charade is getting closer by the day. Capital is the next logical step by amending the 'net worth sweep' #FannieGate


Hopefully really imminent. That piece from October said new people were going to act fast. Lets see it!
They can immediately suspend dividends and go for full earnings retention. But they cannot kill the NWS completely and do away with the Srs. That may have to be part of a complete overhaul, warrants, Srs. and perhaps conversion of Jrs.

I agree the first part, stopping dividend distributions, is a likely first step in isolation, and I found the timing of the recent Milken report, advocating for that as well, may indicate that it will come sooner than one might think.  Milken's sources are likely not too shabby.  once that step is taken, then you will see Milken and others saying fine (of course that is not fine with them) but now lets do the heavy congressional work (competition and fed guarantee).  given the current congressional impasse and govt shutdown, good luck with that.  judging from the Otting interview, working with congress didn't seem to be at the top of his list.

SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11186 on: January 10, 2019, 08:56:37 PM »
Does anyone have a creative downside scenario which is consistent with all of these data points we now have?   Genuinely have none aside from Trump impeachment etc.  Anything else would contradict something one these guys said (when they simply could have stayed silent...)

Eye4Valu

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11187 on: January 10, 2019, 09:54:00 PM »
Not even sure a Trump impeachment and conviction represents true downside, as Calabria was Pence's economist.

DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11188 on: January 11, 2019, 12:20:02 AM »
Otting will be acting director for at most 6 months? Assuming calabria is confirmed.
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allnatural

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11189 on: January 11, 2019, 04:35:05 AM »
Tail-risk downside we must all be aware of even if low probability:

1) Market and housing market take a serious u-turn / recession. If capital markets dry up, there would be no appetite for this IPO. All the more reason they need to act while the window of opportunity is still there.
2) Trump wakes up on wrong side of the bed and fires Mnuchin- short term this would be hairy and im not sure they can replace him quick enough to act ahead of election cycle and with someone who shares his views.

The bull thesis remains stronger than ever today across the board when you evaluate the players in charge, their commentary to date, the recent court developments (dc circuit and fifth circuit + court of federal claims T'ed up finally). As Howard always says. TINA + WARRANTS. Get it done