Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3572483 times)

blackcoffee

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9760 on: May 01, 2018, 01:13:06 PM »
   The government is financially incented to exercise the warrants - but that assumes that is their primary incentive.

What other incentive do you see away from the warrants FOR the gov't that would out do $100B?

Personal incentives.  These guys want to get re-elected. Handing over the secondary mortgage market to the large banks -> fundraising from the large banks for the next election cycle.

oh so systemic corruption due to extremely weak campaign finance laws. Got it.

I've written this before but I'll repeat it.  Indignation is not an investment thesis.

Truth hurts right?

I was simply pointing out a reality of the situation which should tell people to run away from investing at all in the twins.

Which is something I wish I'd done prior to February of last year but here we are waiting for the next explosion.

Clearly the political class has been coerced into doing the bidding of their largest contributors, pointing that out doesn't make it any less true and does not constitute an investment thesis but somehow you got there on my behalf.

Impressive. 


SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9761 on: May 01, 2018, 02:42:51 PM »
Absent actual evidence in the real world to the contrary, this is wishful thinking.  The fact that Mnuchin hasn't/isn't acting administratively is consistent with the fact that this plan could be aligned to his agenda, rather than administratively implementing Moelis.

Evidence in the real world of what? I don't follow.

Given that Mnuchin cannot unilaterally implement two of the core parts of the Milken proposal, how do you expect that to be a plausible downside scenario? I don't see how the Milken plan could be amended into something Treasury can do by itself. It begins with amending the charters, something only Congress can do.

It can't be.  Hence why I'm worried that he's waiting for another Congress & a new FHFA director to stand behind him.  If he wanted to go the route of Moelis, he can do that today.  Doesn't need a new congress.  Doesn't need a new FHFA director.   

With respect to your legal argument, all of the legal arguments to date have passed every basic common sense test (and seemingly the opinion of some attorneys), yet we've been absolutely blindsided by the judicial branch opining that it does not have the authority to review.   How does that argument not also apply to the liquidation preference in the event of receivership?  You're acting like its a probable event that we win a liquidation preference suit and I just don't see how you're optimistic on the legal front at this point. 

To be clear-  I remain cautiously optimistic and am playing devils advocate.   

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9762 on: May 01, 2018, 06:16:51 PM »
Absent actual evidence in the real world to the contrary, this is wishful thinking.  The fact that Mnuchin hasn't/isn't acting administratively is consistent with the fact that this plan could be aligned to his agenda, rather than administratively implementing Moelis.

Evidence in the real world of what? I don't follow.

Given that Mnuchin cannot unilaterally implement two of the core parts of the Milken proposal, how do you expect that to be a plausible downside scenario? I don't see how the Milken plan could be amended into something Treasury can do by itself. It begins with amending the charters, something only Congress can do.

It can't be.  Hence why I'm worried that he's waiting for another Congress & a new FHFA director to stand behind him.  If he wanted to go the route of Moelis, he can do that today.  Doesn't need a new congress.  Doesn't need a new FHFA director.   

With respect to your legal argument, all of the legal arguments to date have passed every basic common sense test (and seemingly the opinion of some attorneys), yet we've been absolutely blindsided by the judicial branch opining that it does not have the authority to review.   How does that argument not also apply to the liquidation preference in the event of receivership?  You're acting like its a probable event that we win a liquidation preference suit and I just don't see how you're optimistic on the legal front at this point. 

To be clear-  I remain cautiously optimistic and am playing devils advocate.
Common sense is that doing anything administratively now, including Moelis, will only create controversy/animosity and open the door for other administrations to restart the fight. Mnuchin, whether we like it or not, is correct in looking for an accord from Congress. An agreement (turned into law) that will settle the matter forever, never to hear again from the GSEs. What remains to be seen is what his agenda is. And if any future Congress will buy it. We will have to wait until after the elections. Or, if you believe in miracles, perhaps Mnuchin shows his hand a little before that.

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9763 on: May 02, 2018, 05:38:11 AM »
Absent actual evidence in the real world to the contrary, this is wishful thinking.  The fact that Mnuchin hasn't/isn't acting administratively is consistent with the fact that this plan could be aligned to his agenda, rather than administratively implementing Moelis.

Evidence in the real world of what? I don't follow.

Given that Mnuchin cannot unilaterally implement two of the core parts of the Milken proposal, how do you expect that to be a plausible downside scenario? I don't see how the Milken plan could be amended into something Treasury can do by itself. It begins with amending the charters, something only Congress can do.

It can't be.  Hence why I'm worried that he's waiting for another Congress & a new FHFA director to stand behind him.  If he wanted to go the route of Moelis, he can do that today.  Doesn't need a new congress.  Doesn't need a new FHFA director.   

With respect to your legal argument, all of the legal arguments to date have passed every basic common sense test (and seemingly the opinion of some attorneys), yet we've been absolutely blindsided by the judicial branch opining that it does not have the authority to review.   How does that argument not also apply to the liquidation preference in the event of receivership?  You're acting like its a probable event that we win a liquidation preference suit and I just don't see how you're optimistic on the legal front at this point. 

To be clear-  I remain cautiously optimistic and am playing devils advocate.

It only takes one win, and we're not close to the point of all outstanding cases being dead right now. I just meant that receivership opens a whole new can of worms for the government because it breaches contracts (wrt liquidation preference) with all current junior pref holders, giving them all standing to sue. Right now only those who have continuously held since before the NWS have standing.

This is where I differ from the Seeking Alpha crowd that shouts "the government can't exercise the warrants because it will be a taking!" in that the liquidation preference rights have been explicitly recognized by the court, and FHFA/Treasury are trying to argue that they aren't ripe yet. Receivership certainly would ripen those claims along with creating a bunch of new ones. To be sure there is still plenty of downside: the cases would take years to resolve and might only result in a return of cost basis, perhaps with interest.

On a side note, this might be why we have seen only one major case (Washington Federal) challenge the conservatorship itself: the set of people/companies who have held shares since before the conservatorship and are willing to spend the time and money to drag it out in court is likely vanishingly small by now.

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9764 on: May 02, 2018, 07:54:49 AM »
Treasury is Treasury.
I am starting to feel nothing has really changed since the Obama days. While Mnuchin himself may not care or be thrilled to see the Jr. preferreds crashing since his appearance on TV I suspect someone in his team feels "mission accomplished". The only difference between now and Obama's Treasury is that they aren't coming out guns blazing against us. Just a softer approach. But equally negative.

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9765 on: May 02, 2018, 10:58:11 AM »
...Berkowitz, Paulson should lobby to get this done and let public see what went on for 10 years (c) Watt needs to leave.
Emily, lobby the government to go against the government? Maybe we have all been myopic all the way.
I have a better plan for you. Why not get Mnuchin in front of someone who can call his bullcrap? Like asking him about the Treasury he heads stealing from private shareholders? It doesn't have to pretty or sexy Bartiromo style.
« Last Edit: May 02, 2018, 11:01:59 AM by rros »

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9766 on: May 03, 2018, 05:37:08 AM »
"Berkowitz’s fund continued trimming its holdings in preferred shares of Freddie Mac and Fannie Mae. During the quarter, the fund sold 7,886,338 shares of Freddie Mac 8.375% fixed-to-floating preferred shares (FMCKJ.PFD) and 7,678,501 of Fannie Mae Series S preferred shares (FNMAS.PFD). The two trades chopped 9.78% of the portfolio in the aggregate."

https://www.gurufocus.com/news/675474/bruce-berkowitzs-fairholme-fund-buys-vistra-energy-in-1st-quarter
There is a big short on St. Joe that is out there where Fairlhome is the largest shareholder. His, is a very illiquid position and by recent SEC rules Fairholme is being forced to sell. Maybe he is in dire need of raising cash. Briefly, his downsizing may have nothing to do with the merit of the FF investment.

emily

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9767 on: May 03, 2018, 03:30:15 PM »
What’s next?

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9768 on: May 03, 2018, 04:20:31 PM »
We all sell and send a 'wishing you well' card to Mnuchin.

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9769 on: May 04, 2018, 05:26:01 AM »
Seventh Circuit released its opinion affirming the District Court's ruling dismissing the Roberts Plaintiffs' lawsuit (attached)
Take 4 minutes and listen to it. "Stars" by Skillet: https://www.youtube.com/watch?v=TbLJyjfyACM