FNMA and FMCC preferreds. In search of the elusive 10 bagger.

[DRValue]

https://www.marketwatch.com/story/fhfa-acting-director-discussing-plan-to-take-fannie-and-freddie-out-of-conservatorship-2019-01-18?mod=mw_share_twitter

"The acting director of the Federal Housing Finance Agency has told the agency’s employees that the regulator will announce a plan within weeks to take the government-sponsored enterprises out of conservatorship."

Later...

"A spokesperson for the agency confirmed there was discussion about ending Fannie and Freddie conservatorship but denied there was any talk of timing or details."

Wow.  This is huge.

My only concern right now is with Calabria's position.  He seems to want to completely open things up for private industry and wind down the GSE's.  Is it possible we are being fooled by this announcement?

Calabria will be an implementer not a policy shaper imo.

[no_free_lunch]

This is what I am talking about.  I hope this isn't what they are discussing.  I guess even in this scenario they still might have to make the prefs whole but I think you would rely on the courts for that outcome.

Two proposals we reviewed would terminate the enterprises and completely privatize the housing finance industry, with no federal guarantee on MBS. Under these proposals, the enterprises’ charters would be revoked and the enterprises would be wound down over a multiyear transition period during which their guarantee fees would increase and their loan limits decrease until they no longer guaranteed new mortgages. One proposal would keep the common securitization platform and make it available to all market participants, but it would operate as a nongovernmental entity and would be prohibited from guaranteeing MBS.

https://www.gao.gov/assets/700/696516.pdf

[cherzeca]

this is speculation, but I think what otting has up his sleeve is none of the 14 proposals that gao report summarizes.  the gao report appears to be a sort of rear guard maneuver. otting will say this is what we are doing at fhfa, and we don't need congress.  if you want to do something else, call your congressperson and reference whatever proposal in the gao report you prefer. 

edit:  about the only thing this gao report affirmatively states is that no proposal covers the entire housing finance system (including fha, hud etc).  Mnuchin has said for over a year that congressional reform should take a comprehensive approach, covering not just GSEs but all housing finance.  so I find this GAO report akin to a "white paper", and you know what happens to white papers...

[rros]

Chris could be right.

GAO is unrelated to the WH.

"The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for Congress. Often called the "congressional watchdog," GAO examines how taxpayer dollars are spent and provides Congress and federal agencies with objective, reliable information to help the government save money and work more efficiently.

[Luke 5:32]

Those looking to initiate a position or add, don't sleep on some of the lower dividend prefs.  FMCCL, for example, still trading at 30% of par.  Although I might just be talking my book. 

[DRValue]

https://www.nytimes.com/2019/01/18/us/politics/mnuchin-private-flight-michael-milken.html#click=https://t.co/TYuX7jdk6K

Hmmmmmm...

[Fat Pitch]

2019 is shaping up to be one heck of a year. Rolled the gains from crypto to jr prefs and common. I don't think the treasury will want to write another check to these entities and will instead want to receive a check for infrastructure spending and 2020 campaigning....

Good luck all 

[Midas79]

2019 is shaping up to be one heck of a year. Rolled the gains from crypto to jr prefs and common. I don't think the treasury will want to write another check to these entities and will instead want to receive a check for infrastructure spending and 2020 campaigning....

Good luck all 

If you don't mind me asking, what's your preferred vs common allocation? And what made you decide on it?

[cherzeca]

@midas

interesting to see yesterday the common go up about double as a percentage than prefs. there are two possible "events" on the horizon that would be favorable:  a win in collins and a recap plan from admin.  both of these events should also result in more appreciation for common as a % than for pref.  so if you are bullish, you probably should have some common.  and if you are cautious given all past setbacks, then you probably should have more pref than common.

[ValueMaven]

Still very interesting that the main-stream media has not really picked this up ... Sure, one half-page bloomberg article, and a marketwatch piece yesterday afternoon ... wait till this hits WSJ and other major sources. 

The Moelis plan will be playing out in front of us ...