Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3155750 times)

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12720 on: June 12, 2019, 09:53:11 AM »
fhfa recs for congressional action is not a line item in the table of contents.  anyone find it?

The report reads as if everything but the introduction was just copied and pasted, with appropriate adjustments, from the Watt-era reports. As Calabria mentions, June 15 is the statutory deadline, so I wouldn't read too much into the contents. Other than the introduction I think it's just a TPS report.

there is a 3 page intro letter which talks about competition and refining capital setting process to avoid undesirable workarounds...not sure what that's about

Perhaps it's just a platform for Calabria to say what he wants to, not that he needs it.

For the rest of the report, I just ask myself "is this something Watt's FHFA would have produced?" The intro is clearly a no, but the parts I skimmed through, especially the Maintain/Reduce/Build conservatorship section is yes. I think Calabria lacked the time, and Otting the inclination (and also time, perhaps), to make wholesale changes to the report's structure and contents.

The report also mentions the upcoming CECL standards and how they might push FnF's net worth under zero. The last estimate I saw was $12.5B.  I don't think this would become an issue until the end of Q2 2020 though, because the writedown would happen on 1/1/2020 (during Q1 2020) and its effect on net worth wouldn't be reported until the Q1 10-Q is released in May 2020. This could be a deadline for the capital raise to avoid ugly bailout accusations in the middle of campaign and election season.


cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12721 on: June 12, 2019, 11:14:07 AM »
I admit that I am subject to confirmation bias with the best of them, but I am getting real comfortable with what I see as the two main asks of congress from calabria/mnuchin:  competition and mbs backstop govt guaranty

any govt guaranty should help GSEs in short term, especially with capital raise.  I am sure that is what institutional investors have been asking for, and it will only help GSEs in short term.

in longer term, the govt guaranty may help other financial institutions enter the secondary mortgage finance market.  I sure wouldn't want to compete against a $5T duopoly without help.  but longer term is post capital raise, and while the specter of competition is a negative, I think it is far overshadowed by the capital raise benefit of an mbs guaranty in favor of GSE mbs

there has been a lot of antagonism against GSEs over past 7 years, and so it is natural that one is suspicious of calabria/mnuchin motives in asking for congressional action.  I am warming up to it

Jcmeg35

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12722 on: June 12, 2019, 12:29:19 PM »
Another article from WSJ. Not much added here...it is interesting though that he cites common shares and not preferred as indicating "the end of NWS being priced in", IMO just highlights the lack of knowledge on the GSEs.

https://www.wsj.com/articles/sound-and-fury-over-fannie-mae-and-freddie-mac-11560359890

Ahab

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12723 on: June 12, 2019, 01:17:43 PM »
2/3 of the subject matter experts on the GSEs are probably surreptitiously writing to one another on this very message board. I've given up on the mainstream financial media understanding GSE reform because most journalists have either not put in the work to understanding the history of Fannie/Freddie and the nuances of the reform debate, or they understand perfectly well what's likely to happen and have been told to gum up the works.
Holdings: FNMAS/J/N, FMCKO, BAC, JPM, GOOG, GM (calls), FELP, Tesla (is a zero)
Twitter: AhabValue

SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12724 on: June 13, 2019, 05:09:01 AM »
It's interesting to me that the administration has been signaling release of a completed plan for the month of June 2019.  The timing aligns closely to the en banc decision and that seemingly hasn't impacted their timeline for releasing the plan.

I see three options as a result:
a) They aren't actually releasing it in June 2019 - or they are waiting until en banc comes out.
b) The plan is so high-level that is compatible with a positive and negative (for shareholders) en banc outcome.
c) The plan notes that Tsy has been repaid and the sr pref must be eliminated, consistent with a positive en banc outcome.

SnarkyPuppy

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cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12726 on: June 13, 2019, 09:56:09 AM »
It's interesting to me that the administration has been signaling release of a completed plan for the month of June 2019.  The timing aligns closely to the en banc decision and that seemingly hasn't impacted their timeline for releasing the plan.

I see three options as a result:
a) They aren't actually releasing it in June 2019 - or they are waiting until en banc comes out.
b) The plan is so high-level that is compatible with a positive and negative (for shareholders) en banc outcome.
c) The plan notes that Tsy has been repaid and the sr pref must be eliminated, consistent with a positive en banc outcome.

Calabria has stated that the recap plan will take care of those pesky lawsuits...so my guess is C

EDIT:  though I dont think the treasury plan will necessarily go into such detail
« Last Edit: June 13, 2019, 11:18:06 AM by cherzeca »

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12727 on: June 13, 2019, 12:48:55 PM »
Prepared Remarks of Dr. Mark A. Calabria, Director of FHFA, at 2019 Ginnie Mae Summit (today 3:30-4:00pm)

https://www.fhfa.gov/mobile/Pages/public-affairs-detail.aspx?PageName=Prepared-Remarks-of-Dr-Mark-A-Calabria-Director-of-FHFA-at-2019-Ginnie-Mae-Summit.aspx

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

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12728 on: June 13, 2019, 12:55:57 PM »
Prepared Remarks of Dr. Mark A. Calabria, Director of FHFA, at 2019 Ginnie Mae Summit (today 3:30-4:00pm)

https://www.fhfa.gov/mobile/Pages/public-affairs-detail.aspx?PageName=Prepared-Remarks-of-Dr-Mark-A-Calabria-Director-of-FHFA-at-2019-Ginnie-Mae-Summit.aspx

Doesn't sound like Net Worth Sweep is going to be stopped in 2019...
We will continue to engage with Treasury to develop a responsible plan to end the conservatorships with a clear road map and mile markers and to adjust the Treasury share agreements accordingly.

And by sometime next year, my hope and expectation is that we will be on the path where Fannie and Freddie can start to build capital.
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

Jcmeg35

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #12729 on: June 13, 2019, 12:56:37 PM »
Prepared Remarks of Dr. Mark A. Calabria, Director of FHFA, at 2019 Ginnie Mae Summit (today 3:30-4:00pm)

https://www.fhfa.gov/mobile/Pages/public-affairs-detail.aspx?PageName=Prepared-Remarks-of-Dr-Mark-A-Calabria-Director-of-FHFA-at-2019-Ginnie-Mae-Summit.aspx

Thanks Luke.

"And by sometime next year, my hope and expectation is that we will be on the path where Fannie and Freddie can start to build capital."

This caught my eye, in an unpleasant way. Hopefully, I am not reading too much into it, but starting to build capital next year (I have to think this means retained earnings not just capital raising) is a longer an more opaque timeline than what he has previously said. Not very reassuring.

Edit: @luke Looks like you had the same reaction.
« Last Edit: June 13, 2019, 12:58:28 PM by Jcmeg35 »