Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3323721 times)

TwoCitiesCapital

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13140 on: July 19, 2019, 05:57:32 PM »
I think the TA should be flashing buy now  ;)

Once again, I'm terrible at reducing the position before the big drop, but was diligent in buying more shares at 31%-32% of par today

Seems like progress is delayed, but it keeps moving the right direction. We're now talking a timeline for recapitalization and release and have officials on record supporting the concept. A far cry from where we were at in 2013 when I started this position.
« Last Edit: July 19, 2019, 06:05:17 PM by TwoCitiesCapital »


muscleman

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13141 on: July 19, 2019, 05:58:03 PM »
the plan is on Mnuchin's desk and it's waiting for mnuchin to have the time to give it a final blessing.  that's all folks!

I don't have high hopes for that. A few of you guys were upset that I was focusing on tweets, whack job Maloni's rumors etc. and you said you would only want to listen to Calabria, Mnuchin etc.
So let's talk about these folks.
Calabria changed his tone from IPO Q1 2020 to hopeful sometime 2020 on June 13th or so. Kudoos to one of our members finding that detail out.
Calabria filed in Collins and changed his position and stated FHFA is consistutional. OK. People here got upset, but a possible twist is that he needs to keep his job if Trump is not re-elected in 2020. But what does that imply? That implies that the current recap and release plan is not going to go as quickly as originally expected.
Then the 2024 talk this week.

I think those give some hints on what the current treasury plan looks like.

In terms of Collins, I am a complete legal fool, so just read my post for fun.

Assuming government has connections to the judges and already know what they are writing, and assuming Calabria wants to get GSE out of conservatorship. I think the second assumption is very high confidence, while the first assumption is lower confidence.
1. Plantiff will win. In this case, Calabria should not have to file the claim that he now believes FHFA is constitutional. He can just relax for another few months, and after the ruling, void NWS, and release Fannie and Freddie.
2. Plantiff will lose. In this case, Calabria is thinking, since the judges are giving them a lose, it is better to also file the claim to make sure FHFA is consistutional, so he can still keep the job until 2024. In that case, he bought more time to achieve his goal.

Therefore my guess here is that Collins is a loss for plaintiffs. It seems reasonable if we can assume that the government has connections to the judges and already know what they are writing. If my assumption is wrong, then the above logic is invalid.

Question for Chris, how likely do you think that the government already knows what the outcome of Collins will be? Could someone in treasury be talking to the judges, underscoring the importance of housing reform, and demanding that they know in advance what the result will be? I don't see how the treasury plan can be complete without knowing Collins outcome first, do you?
« Last Edit: July 19, 2019, 06:09:16 PM by muscleman »
I am muslceman. I have more muscle than brain!

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13142 on: July 19, 2019, 06:33:46 PM »
"Question for Chris, how likely do you think that the government already knows what the outcome of Collins will be? Could someone in treasury be talking to the judges, underscoring the importance of housing reform, and demanding that they know in advance what the result will be? I don't see how the treasury plan can be complete without knowing Collins outcome first, do you?

I have posted on this.  I think it possible that the parties have inquired as to timing of the release of a decision.  what if anything they were told is impossible to say. a P win in collins just means that a SCOTUS decision will occur in 2020 if the parties dont settle.  the decision could be stayed pending appeal and the NWS could go on, but it looks a lot better for a re-IPO to have at least one circuit court rule against NWS.  I dont think the delay is attributable to collins though.  mnuchin wont be able to sign off until the debt/budget deal is done...unless another crisis emerges
« Last Edit: July 19, 2019, 06:40:43 PM by cherzeca »

hardincap

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13143 on: July 19, 2019, 08:16:21 PM »
at the risk of stating the obvious, cancelling the NWS and senior prefs is much more important than timing of the exit. calabria/mnuchin may have disappointed on timing, but  so far they (or at least calabria) have been very very consistent on letting the entities rebuild capital. as soon as that starts, prefs should recover to 60-75% par. there are too many variables to be confident about 90%+ par recovery in the short term, imo. but thats okay, 60-75% par is still great in my book, especially considering my cost basis is <15% par. and thats what MOS is all about. sometimes you gotta tune out the noise and keep it simple.

« Last Edit: July 19, 2019, 08:20:44 PM by hardincap »

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13144 on: July 19, 2019, 08:36:53 PM »
at the risk of stating the obvious, cancelling the NWS and senior prefs is much more important than timing of the exit. calabria/mnuchin may have disappointed on timing, but  so far they (or at least calabria) have been very very consistent on letting the entities rebuild capital. as soon as that starts, prefs should recover to 60-75% par. there are too many variables to be confident about 90%+ par recovery in the short term, imo. but thats okay, 60-75% par is still great in my book, especially considering my cost basis is <15% par. and thats what MOS is all about. sometimes you gotta tune out the noise and keep it simple.

1. what's MOS?
2.  I think if the recap process actually gets underway in the next 3 months, ie NWS stopped and negotiations begin on cancelling the sr. prefs (and for giggles some kind of victory in collins), I think the jps pricing will advance beyond what might otherwise be considered fair value...so yes I would go with your 60-75% range, maybe even higher.  this may set up for future disappointment of course, but once the admin starts doing rather than talking, I think you are going to see plenty of LIFOs come back and heat the space up
« Last Edit: July 19, 2019, 09:50:06 PM by cherzeca »

hardincap

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13145 on: July 19, 2019, 08:50:02 PM »
margin of safety.

barring actions by treasury toward IPO in the near future, the prefs are a clear sell to me at 60-75% par. i strongly believe that while one can make decent money on these types of special situations, the real big money is made by investing in businesses that have excellent economics and long runway, and then sitting on your ass and watching it compound. the opportunity cost of holding out for the last 5, 10% of par is too high, unless as i stated there are clear actions taken toward IPO/conversion
« Last Edit: July 19, 2019, 08:53:53 PM by hardincap »

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13146 on: July 19, 2019, 09:28:06 PM »
"the real big money is made by investing in businesses that have excellent economics and long runway, and then sitting on your ass and watching it compound."

sounds like the GSEs once recapped.

I haven't thought through things GSE that far ahead, for obvious reasons given the gyrations of events, but I would love to be able to have my jps convert into common at a favorable rate and then hold that common for a long time...

hardincap

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13147 on: July 19, 2019, 09:40:41 PM »
the business is way too complicated for me to understand well, and then theres the politics. so too hard pile for me. ill keep a little for fun though. more if buffett buys in (doubt it).

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13148 on: July 19, 2019, 09:48:02 PM »
politics affects a lot of businesses.  Pharma, FANGs etc. understanding that politicians like
 to make noise, prices can be buffeted.  one way of looking at the GSEs is that if they can get recapped, what better proof that all of that congressional/tbtf lobbying hatred is much ado about very little. 

investorG

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #13149 on: July 20, 2019, 04:12:45 AM »
it appears they -- at a minimum -- created some wiggle room to punt on an initial capital raise until after the election either out of necessity (limited demand based on last 2 months feedback) or preference (avoid a complex issue). 

many things can occur going forward good or bad but there will be plenty of current holders who in the mean time aren't going to stick around to find out.

good luck, everyone.
We could see a trading bottom today.

there's no urgency to buy and plenty of people urgently want out.
It looks like it was the bottom, as per this weekly close. Which topped the 34 weekly ma. Likely, we will regain the 5 monthly ma for the Jrs. FNMAS sits at $11.27 and FMCKJ at $ 11.16 and continue the bullish run started on October last year. Hopefully, nobody has sold their shares.

Recent comments by Gasparino on Calabria (thank you, Luke) may indicate the administration is still on the side of shareholders trying to put together the fact that c-ship is hard to terminate (or cannot) while shareholders must be made right. I can totally see the FHFA trying to achieve some kind of co-existence between Treasury (taxpayers) and us, with Treasury agreeing on sharing profits. This looks like a "second attempt". A new twist to throw us a bone.

it may be premature for confidence that this week was the bottom as actual events / quotes carry more weight than speculative tweets.