Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 2674934 times)

John Hjorth

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9980 on: June 14, 2018, 08:47:12 AM »
Pretty amazing to now read 10,000+ posts in this topic.

You read them all?

Almost. CoBF is my most valuable "paper" every day.
« Last Edit: June 14, 2018, 08:49:59 AM by John Hjorth »
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SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9981 on: June 14, 2018, 09:12:29 AM »
Pretty amazing to now read 10,000+ posts in this topic.

You read them all?

Almost. CoBF is my most valuable "paper" every day.

What are your thoughts?  Personally, I think the preferred should be trading in the mid teens.  Even a 66% upside to par ($15 for a $25 par) seems absurd given the current constraints involved.  Seems a combination of ignored, hated, misunderstood, and frankly most of the buyers have already bought multiple dips over the years leaving more sellers (due to timing, liquidations) than buyers.   This is exactly the type of investment I look for as a contrarian investor looking for systemic edges. 

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9982 on: June 14, 2018, 10:13:20 AM »
This is exactly the type of investment I look for as a contrarian investor looking for systemic edges.

+1

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9983 on: June 14, 2018, 11:43:05 AM »
What are your thoughts?  Personally, I think the preferred should be trading in the mid teens.  Even a 66% upside to par ($15 for a $25 par) seems absurd given the current constraints involved.  Seems a combination of ignored, hated, misunderstood, and frankly most of the buyers have already bought multiple dips over the years leaving more sellers (due to timing, liquidations) than buyers.   This is exactly the type of investment I look for as a contrarian investor looking for systemic edges.

If people really understood what was going on and the $25s had a 60%-of-par valuation, this investment wouldn't be nearly so contrarian. Right?

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9984 on: June 14, 2018, 01:35:36 PM »
Rosner's paper on FHFA Capital Requirements... https://www.scribd.com/document/381737512/GF-Co-FHFA-s-Proposed-Capital-Rule

PDF attached...

Tim Howard's comments on Rosner's paper...
https://howardonmortgagefinance.com/2018/05/03/a-view-on-affordable-housing/comment-page-1/#comment-6828

I’m a little puzzled by this note from Josh. I generally agree with his overall assessment of the FHFA capital proposal—which he calls “a good start,” and “not being so onerous as to reduce the economic viability of their mandated mission to ensure liquidity to the primary mortgage market”—but he then spends the bulk of his piece objecting to the fact that “FHFA will not implement the capital requirements while the GSEs are in Conservatorship and will, instead, wait for Congress or the Administration to affirmatively act on GSE reform,” arguing that “Such a position is in direct opposition to the requirements of the HERA law and, again, ignores that Congress has acted and given it direction in the HERA law.”

All of that is true. The problem is that Treasury and FHFA interpret HERA differently from how Josh does, and so far the Treasury/FHFA interpretation has prevailed in every court case decided to date. Fannie and Freddie cannot be recapitalized as long as the net worth sweep remains in force or until the conservatorship has ended, and FHFA cannot end either the sweep or the conservatorship without Treasury’s approval. For those reasons, I’ll take the half a loaf FHFA has given us: beginning a substantive dialogue about the right way to capitalize the companies post-conservatorship, if, whenever and however—i.e. legislatively or administratively—that happens.

As I noted shortly after the FHFA capital proposal came out, I’m going to take my time going through and analyzing it before I write my comment letter (which I’ve got a couple of months to do). But I do have a preliminary reaction to it: it is extremely, and I would say unnecessarily, conservative. I’m going to withhold judgment as to whether the average 3.24 percent “estimated risk-based capital requirements as of September 31, 2017” for Fannie and Freddie shown in Table 1 of the summary document would make the companies “unviable” (I suspect not), but I will make arguments for how and why that number could be reduced without materially increasing taxpayer risk, and at the same time significantly lowering the cost and increasing the availability of mortgages to the large majority of homeowners Fannie and Freddie were chartered to serve.

I recognize, of course, that there is a political dimension to the recapitalization of Fannie and Freddie, and that there will be some threshold capital percentage below which it will be very difficult to go, irrespective of the merits of the arguments for doing so. Building on the “Rule of Law Guy’s” observation, the range of dollar capital numbers for Fannie and Freddie as of September 2017 given in the FHFA summary table—from $154.1 billion without a deferred tax asset reserve to $180.9 billion with one—is virtually identical to the $155 to $180 capital range in the Moelis recapitalization plan released just over a year ago. I doubt this is coincidental, and it suggests we now are seeing some serious “fleshing out” of a pathway to administrative reform of the companies, if only for informational purposes. And it’s interesting that given the fundamentally high credit quality of the mortgages Fannie and Freddie finance, the only way to get to a 2.75 to 3.25 percent average capital number is to add a host of conservative buffers, a few of which are redundant. Hopefully some of those can be worked down as the discussion moves forward.

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9985 on: June 15, 2018, 01:10:14 PM »
Seems to me that David Stevens is acting a bit desperate...

Ten days ago...
David Stevens feels left out in the cold...

https://www.insidemortgagefinance.com/imfnews/1_1371/daily/MBA-Wants-more-transparency-on-gse-activities-1000046308-1.html?ET=imfpubs:e10982:73599a:&st=email&s=imfnews

Four days ago...
It appears David Stevens is no fan of Trump!  I doubt he'd be publicly bashing POTUS at this juncture if he thought he was going to get his way with the GSE's.

Similar to Corker bashing Trump awhile back when he realized his desires weren't going to materialize.

https://www.housingwire.com/blogs/1-rewired/post/43640-monday-morning-cup-of-coffee-ben-carson-backtracks-on-plan-to-raise-rents-for-poor

Today...
https://www.insidemortgagefinance.com/imfnews/1_1379/daily/treasury-wants-to-reduce-fannie-freddie-footprint-1000046445-1.html?ET=imfpubs:e11034:73599a:&st=email&s=imfnews
In a new opinion piece, Mortgage Bankers Association CEO and President Dave Stevens takes aim at the speculators who bought shares in Fannie and Freddie and the tactics they’ve taken to get the two released into the wild again (commonly known as “recap and release”). In a new blog posting, Stevens says since the moment the GSEs were put into conservatorship “a debate has raged over their future. The debate is complex, highly charged and at times, frankly nasty.” Then the soon-to-be retired trade group CEO notes: “Part of the reason for the tone of the debate is that various groups representing the interests of shareholders of the two companies have chosen to wage a bare-knuckles campaign to get the two companies re-privatized. If they were re-privatized, the increase in value of these stocks, currently trading below $2 per share, could produce a massive profit to their investors. Thus, a hodge-podge of players acting on behalf of shareholders has put significant capital behind a coordinated effort to increase the odds of their re-privatization, including contributing to sympathetic non-profits and other stakeholders who could be persuaded to share their views, hiring PR firms to plant beneficial op-eds and other stories in the press, and creating organizations intended to give the impression of grass roots support.” Wait. Planting stories in the press? Donating money to nonprofits? Sounds like a page out of the Fannie-Freddie lobbying book, pre-conservatorship…

beaufort

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9986 on: June 15, 2018, 08:48:59 PM »
If anybody has a subscription to American Banker, please post the story from today.

rros

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9987 on: June 15, 2018, 09:46:32 PM »
If anybody has a subscription to American Banker, please post the story from today.
Check your messages.

muscleman

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9988 on: June 16, 2018, 07:24:07 AM »
If anybody has a subscription to American Banker, please post the story from today.
Check your messages.

Could you send me one as well pls