Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3143829 times)

DRValue

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11180 on: January 11, 2019, 07:23:59 AM »
I'm buying more today. Probably 50/50 common and preferred. Recap mechanics and how much, if any, competition are the only uncertainty now.
Not Investment Advice. Do Your Own Research.


SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11181 on: January 11, 2019, 07:28:32 AM »
I've always hated the term privately owned given ambiguity.  Why not publicly owned?  Shareholder owned? 

You wouldn't call Berkshire a publicly owned company in common parlance. 

orthopa

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11182 on: January 11, 2019, 08:05:17 AM »
I've always hated the term privately owned given ambiguity.  Why not publicly owned?  Shareholder owned? 

You wouldn't call Berkshire a publicly owned company in common parlance.

I guess relative to the the gov? Ie private capital in FNMA and not govt sponsored capital.

DocSnowball

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11183 on: January 11, 2019, 08:25:06 AM »
Otting's statement is the third, after OMB document and Craig Phillips comments back in the fall. With the highlights already mentioned in this thread - the common themes among Treasury, WH and FHFA players are starting to emerge - and the new language "return to private ownership" by Phillips and "release" by Otting is notable. Status quo seems very unlikely now, and restructuring in some form is coming. I'm still risk averse to the commons because receivership and release in the form of New Cos is still not off the table.

@allnatural

I re-viewed the Craig Phillips video on twitter after reading your comments to avoid bias from all the interpretations - "The administration advocates ending the conservatorship of Fannie Mae and Freddie Mac and returning them to private ownership. Their charters should be removed from statute and their operations should be overseen by the primary regulator who has the authority to approve additional guarantors to introduce competition into the secondary mortgage market"

This would count as progress not activity - 1) it is very consistent with the OMB document, 2) with the additional words "returning them to private ownership".
https://www.performance.gov/GovReform/Reform-and-Reorg-Plan-Final.pdf
Excerpts from Page 75-76

"WHAT WERE PROPOSING AND WHY ITS THE RIGHT THING TO DO
Under the current system, Fannie Mae and Freddie Mac, two privately-owned GSEs, buy and guarantee mortgages from lenders and sell them to investors as MBS. Although they are private companies, they are congressionally chartered, a unique status that has been viewed as conveying an implicit Federal backstop that has in turn lowered their cost of capital relative to similarly-sized institutions. In 2008, Fannie Mae and Freddie Mac were taken into conservatorship and received (and continue to receive) an explicit but limited backing from the Treasury under a Preferred Stock Purchase Agreement (PSPA), which gives access to capital funding that covers any loss the enterprises may incur. In their Federal charters and by action of their primary regulator, the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac have goals of providing a certain amount of financing to low- and moderate-income borrowers. However, these a ffordable housing activities are not clearly accounted for on the Federal balance sheet.
In addition to the GSEs, other Federal programs provide mortgage support, contributing to a large Federal footprint in the housing market. The Department of Housing and Urban Development (HUD) Federal Housing Administration (FHA) provides mortgage insurance intended to aid borrowers traditionally underserved by the conventional mortgage market, including lower-wealth households, minorities, and first-time homebuyers. The Departments of Veterans A ffairs (VA) and Agriculture (USDA) also administer mortgage insurance programs targeted to veterans and lower-income rural households, respectively. The loans guaranteed by FHA, VA, and USDA are in turn packaged into MBS that are guaranteed by Ginnie Mae, a Federal entity operated by HUD. Together, loans backed by the GSEs and Ginnie Mae comprised about 70 percent of mortgages originated in 2017.
All these entities, taken as a whole, form a complex and overlapping network of cross-subsidization, without clear accountability as to who is paying for, and who is receiving, housing subsidies. Although the Federal role in the housing market has helped to facilitate the availability of the 30-year fixed-rate mortgage, the current system has structural flaws that have also created distortions in home pricing that may actually hinder the goal of homeownership. This reorganization proposal, which includes broad policy and legislative reforms beyond restructuring Federal agencies and programs, would:
Increase competition. The proposal would remove the Federal charter from statute and fully privatize the GSEs. A Federal entity with secondary mortgage market experience would be charged with regulatory oversight of the fully privatized GSEs, have the authority to approve guarantors, and develop a regulatory environment that is conducive to developing competition amongst new private guarantors and the incumbent GSEs, ensuring they would all be adequately capitalized and competing on a level playing field. If the GSEs lost some of the benefits that have led them to dominate the market, this would enable other private companies to begin competing in this space. The regulator would also ensure fair access to the secondary market for all market participants, including community financial institutions and small lenders...."

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11184 on: January 11, 2019, 09:12:03 AM »
Does anyone have a creative downside scenario which is consistent with all of these data points we now have?

The major downside I see for prefs:
(1) If I accidentally enter a market sell order instead of limit.
(2) The capital gains tax is going to be painful.
 :)
Invest for retirement?  Sure.  But investing in eternity is infinitely more important.  Don't get it twisted.  "...but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal."  Matthew 6:20

undervalued

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11185 on: January 11, 2019, 09:48:41 AM »
Does anyone have a creative downside scenario which is consistent with all of these data points we now have?

The major downside I see for prefs:
(1) If I accidentally enter a market sell order instead of limit.
(2) The capital gains tax is going to be painful.
 :)

How many % of your asset do you put into this?
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11186 on: January 11, 2019, 09:52:57 AM »
Does anyone have a creative downside scenario which is consistent with all of these data points we now have?

The major downside I see for prefs:
(1) If I accidentally enter a market sell order instead of limit.
(2) The capital gains tax is going to be painful.
 :)

How many % of your asset do you put into this?

I don't want to offer a specific percentage, but I will say the preferred shares collectively are by far my largest investment.  Of course, this shouldn't sway anybody one way or another because I am a random guy on a message board.
Invest for retirement?  Sure.  But investing in eternity is infinitely more important.  Don't get it twisted.  "...but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal."  Matthew 6:20

allnatural

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11187 on: January 11, 2019, 09:57:55 AM »
But if we can't trust random guys on a message board on the internet, who can we trust?

Quote
I don't want to offer a specific percentage, but I will say the preferred shares collectively are by far my largest investment.  Of course, this shouldn't sway anybody one way or another because I am a random guy on a message board.

undervalued

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11188 on: January 11, 2019, 10:04:27 AM »
But if we can't trust random guys on a message board on the internet, who can we trust?

Quote
I don't want to offer a specific percentage, but I will say the preferred shares collectively are by far my largest investment.  Of course, this shouldn't sway anybody one way or another because I am a random guy on a message board.

Maybe our president?
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #11189 on: January 11, 2019, 10:19:30 AM »
there is a lot that could go wrong.

you would think that, with MI now adopting a stop to NWS divs (albeit only as a step to motivate congress to act) and bright seeing the light and leaving gnma, those who have a good opportunity to know a lot more about admin plans than we do are  not pleased with what they are seeing.  that's good, but this admin (and truly any admin) is not likely to move quickly.  for example, we don't know whether admin thinks that doing things under otting and before Calabria is confirmed is a good idea

even if things go "right" and admin reform is really rolled out that seeks to release GSEs from conservatorship, it may take a whole lot longer than one would hope.

my next signpost is the collins en banc oral arg 1/23. 
« Last Edit: January 11, 2019, 10:31:41 AM by cherzeca »