Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 4529721 times)

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #16030 on: October 15, 2020, 11:33:01 AM »
Interesting Boyle Capital Q3 update: https://www.boylecapital.com/news-and-insights/2020-q3-commentary . As some of you may now they are big on Jr prds, and have increased their exposition this Q. Nothing new on the table, but love the way they connect the dots on this saga. Expecting a PSPA amendment/consent decree late november/early december (between elections and SCOTUS hearing).

https://twitter.com/ACGAnalytics/status/1309135699900276740

https://files.acg-analytics.com/wl/?id=shIIixOKejR2zEc8DlZsZiDRgmhHAutt

80%+ chance PSPA by inauguration day (if Trump loses)*

95% chance of SCOTUS unwinding NWS (obviously, if no settlement prior to their decision)

This equates to a 1% chance that neither happen: (1 - 0.95) x (1 - 0.20) = 0.01.  Or, in other words, a 99% chance we either (A) win SCOTUS or (B) PSPA by inauguration.

*Note: the 80% PSPA chance was from a few months ago during a call ACG opened to public, but they confirmed this week when I asked that % still valid.

In other words, my take-away, pricing of junior prefs represent a severe discount in the market that doesn't represent what is actually happening behind the scenes.
The Atheist Delusion, watch here: https://www.youtube.com/watch?v=ChWiZ3iXWwM


Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #16031 on: October 15, 2020, 12:29:36 PM »
https://twitter.com/ACGAnalytics/status/1316820910914129923
At this week's @MITgcfp Future of Housing Finance conference, @MarkCalabria
 stated that @FHFA will release mile markers that indicate when capital is enough and sufficient, and said that "we as an agency need to be ready." Sounds like a consent decree to us! #GSEs
The Atheist Delusion, watch here: https://www.youtube.com/watch?v=ChWiZ3iXWwM

SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #16032 on: October 15, 2020, 12:51:28 PM »
My biggest concern is that if Trump loses the election, the current administration being as partisan as it is, recognizes that a supreme court loss will likely be decided during the next administration.

Therefore, as a F* you, Mnuchin can refuse to sign any PSPA amendment and let the next administration deal with the mess.  Why is this not a risk?

A loss in the courts is really a reflection of the policies in 2012 during Biden's previous stint & mnuchin/calabria can say they did what they could to build capital.   

Of course from a probability perspective, this scenario AND a supreme court loss would both have to  occur for us to lose $. 
« Last Edit: October 15, 2020, 12:55:55 PM by SnarkyPuppy »

onyx1

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #16033 on: October 15, 2020, 01:03:19 PM »
Interesting Boyle Capital Q3 update: https://www.boylecapital.com/news-and-insights/2020-q3-commentary . As some of you may now they are big on Jr prds, and have increased their exposition this Q. Nothing new on the table, but love the way they connect the dots on this saga. Expecting a PSPA amendment/consent decree late november/early december (between elections and SCOTUS hearing).

https://twitter.com/ACGAnalytics/status/1309135699900276740

https://files.acg-analytics.com/wl/?id=shIIixOKejR2zEc8DlZsZiDRgmhHAutt

80%+ chance PSPA by inauguration day (if Trump loses)*

95% chance of SCOTUS unwinding NWS (obviously, if no settlement prior to their decision)

This equates to a 1% chance that neither happen: (1 - 0.95) x (1 - 0.20) = 0.01.  Or, in other words, a 99% chance we either (A) win SCOTUS or (B) PSPA by inauguration.

*Note: the 80% PSPA chance was from a few months ago during a call ACG opened to public, but they confirmed this week when I asked that % still valid.

In other words, my take-away, pricing of junior prefs represent a severe discount in the market that doesn't represent what is actually happening behind the scenes.


Speaking of chances, I've laid out the possible near-term scenarios from today and assigned conservative probabilities to each node to arrive at a "low-ish" estimate of a JPS win.  Spoiler: It's 80%.   I have no doubt others will see different probability distribution and for that reason, I welcome any feedback (especially from those with more insight & expertise).  FWIW I've owned JPS since 2011, and recently added significantly more around current levels.  See attached.

SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #16034 on: October 15, 2020, 01:06:08 PM »
Interesting Boyle Capital Q3 update: https://www.boylecapital.com/news-and-insights/2020-q3-commentary . As some of you may now they are big on Jr prds, and have increased their exposition this Q. Nothing new on the table, but love the way they connect the dots on this saga. Expecting a PSPA amendment/consent decree late november/early december (between elections and SCOTUS hearing).

https://twitter.com/ACGAnalytics/status/1309135699900276740

https://files.acg-analytics.com/wl/?id=shIIixOKejR2zEc8DlZsZiDRgmhHAutt

80%+ chance PSPA by inauguration day (if Trump loses)*

95% chance of SCOTUS unwinding NWS (obviously, if no settlement prior to their decision)

This equates to a 1% chance that neither happen: (1 - 0.95) x (1 - 0.20) = 0.01.  Or, in other words, a 99% chance we either (A) win SCOTUS or (B) PSPA by inauguration.

*Note: the 80% PSPA chance was from a few months ago during a call ACG opened to public, but they confirmed this week when I asked that % still valid.

In other words, my take-away, pricing of junior prefs represent a severe discount in the market that doesn't represent what is actually happening behind the scenes.


Speaking of chances, I've laid out the possible near-term scenarios from today and assigned conservative probabilities to each node to arrive at a "low-ish" estimate of a JPS win.  Spoiler: It's 80%.   I have no doubt others will see different probability distribution and for that reason, I welcome any feedback (especially from those with more insight & expertise).  FWIW I've owned JPS since 2011, and recently added significantly more around current levels.  See attached.

You have 80% odds of an amendment which requires Mnuchin's approval.  Why is it only 20% odds that Mnuchin says F* you and leaves the mess to the next administration if Trump loses?

onyx1

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #16035 on: October 15, 2020, 01:23:24 PM »
Interesting Boyle Capital Q3 update: https://www.boylecapital.com/news-and-insights/2020-q3-commentary . As some of you may now they are big on Jr prds, and have increased their exposition this Q. Nothing new on the table, but love the way they connect the dots on this saga. Expecting a PSPA amendment/consent decree late november/early december (between elections and SCOTUS hearing).

https://twitter.com/ACGAnalytics/status/1309135699900276740

https://files.acg-analytics.com/wl/?id=shIIixOKejR2zEc8DlZsZiDRgmhHAutt

80%+ chance PSPA by inauguration day (if Trump loses)*

95% chance of SCOTUS unwinding NWS (obviously, if no settlement prior to their decision)

This equates to a 1% chance that neither happen: (1 - 0.95) x (1 - 0.20) = 0.01.  Or, in other words, a 99% chance we either (A) win SCOTUS or (B) PSPA by inauguration.

*Note: the 80% PSPA chance was from a few months ago during a call ACG opened to public, but they confirmed this week when I asked that % still valid.

In other words, my take-away, pricing of junior prefs represent a severe discount in the market that doesn't represent what is actually happening behind the scenes.


Speaking of chances, I've laid out the possible near-term scenarios from today and assigned conservative probabilities to each node to arrive at a "low-ish" estimate of a JPS win.  Spoiler: It's 80%.   I have no doubt others will see different probability distribution and for that reason, I welcome any feedback (especially from those with more insight & expertise).  FWIW I've owned JPS since 2011, and recently added significantly more around current levels.  See attached.

You have 80% odds of an amendment which requires Mnuchin's approval.  Why is it only 20% odds that Mnuchin says F* you and leaves the mess to the next administration if Trump loses?


If partisanship is the primary motivation, and I don't believe it is, then leaving the NWS in place would be giving a Biden Administration exactly what they and many democrats (like Warner and Sherman) desire: nationalized GSEs they can control and continue to milk. 

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #16036 on: October 15, 2020, 01:42:32 PM »
@onyx

I think you have done a good job, analytically and risk assessing.  this has always been an "event investment", and I always believed that the ultimate event would be a litigation win.  now that ultimate litigation win opportunity has been teed up (and I never thought that it would get to scotus, but as the court of last resort so much the better), the events of an amendment/consent decree will come to fruition imo simply because govt won't want to see the litigation result (you can add to that the desire not to hand this situation to #crookedjoe).  govt actors are always slow and unreliable...but now their focus has been concentrated.
« Last Edit: October 15, 2020, 01:52:16 PM by cherzeca »

orthopa

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #16037 on: October 15, 2020, 03:22:42 PM »
Interesting Boyle Capital Q3 update: https://www.boylecapital.com/news-and-insights/2020-q3-commentary . As some of you may now they are big on Jr prds, and have increased their exposition this Q. Nothing new on the table, but love the way they connect the dots on this saga. Expecting a PSPA amendment/consent decree late november/early december (between elections and SCOTUS hearing).

https://twitter.com/ACGAnalytics/status/1309135699900276740

https://files.acg-analytics.com/wl/?id=shIIixOKejR2zEc8DlZsZiDRgmhHAutt

80%+ chance PSPA by inauguration day (if Trump loses)*

95% chance of SCOTUS unwinding NWS (obviously, if no settlement prior to their decision)

This equates to a 1% chance that neither happen: (1 - 0.95) x (1 - 0.20) = 0.01.  Or, in other words, a 99% chance we either (A) win SCOTUS or (B) PSPA by inauguration.

*Note: the 80% PSPA chance was from a few months ago during a call ACG opened to public, but they confirmed this week when I asked that % still valid.

In other words, my take-away, pricing of junior prefs represent a severe discount in the market that doesn't represent what is actually happening behind the scenes.


Speaking of chances, I've laid out the possible near-term scenarios from today and assigned conservative probabilities to each node to arrive at a "low-ish" estimate of a JPS win.  Spoiler: It's 80%.   I have no doubt others will see different probability distribution and for that reason, I welcome any feedback (especially from those with more insight & expertise).  FWIW I've owned JPS since 2011, and recently added significantly more around current levels.  See attached.

You have 80% odds of an amendment which requires Mnuchin's approval.  Why is it only 20% odds that Mnuchin says F* you and leaves the mess to the next administration if Trump loses?

Certainly a possibility I have thought of but a low one I believe for a couple of reasons.

1. Granted it was only words but reforming the GSEs were a priority for this administration spoken by Mnuchin himself.
2. A loss in any fashion during a Biden admin is blamed on Mnuchin/Calabria as right now they have their name all over this and Calabria still in office till removed. So either they leave their mark on their terms or a courts terms.
3. Even if only at 50/50 odds something as large as overturning the NWS and being held responsible for such carries no glory. Why even step in that arena when you can stop that possibility in totality with a pen stroke?
4. Last PSPA amendment agreement contemplated another amendment.
5. Again I have mentioned this before but I think many people that Mnuchin would interact with outside of public servant duty would benefit much more from a 4th PSPA then not. This will be seen as enriching the hedge funds but lets call it for what it is.
6. There is substantial cover at this point in regard to Tsy investment and risks of SCOTUS.

As much as sticking it to Biden may seem palatable this would stink of Mnuchin forever. How can it not?

A interesting point that Phillips brought up during the recent MIT webinar was in regard to treasury's investment return. Not only have the GSEs returned the original commitment +10% but treasury also has the warrants which will be worth 10s of billion of dollars making this one of the govs best investments  if not best ever. That should quiet Mark Warner and his buddy down real quick.
« Last Edit: October 15, 2020, 03:32:27 PM by orthopa »

orthopa

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #16038 on: October 15, 2020, 03:35:22 PM »
https://twitter.com/ACGAnalytics/status/1316820910914129923
At this week's @MITgcfp Future of Housing Finance conference, @MarkCalabria
 stated that @FHFA will release mile markers that indicate when capital is enough and sufficient, and said that "we as an agency need to be ready." Sounds like a consent decree to us! #GSEs

Not sure I quite get the quoted part of this tweet. Ready for what? If released under consent decree the terms would have been determined already.

I wonder if the mile markers will be released with or as part of the capital rule?

Jcmeg35

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #16039 on: October 15, 2020, 03:41:53 PM »
https://twitter.com/ACGAnalytics/status/1316820910914129923
At this week's @MITgcfp Future of Housing Finance conference, @MarkCalabria
 stated that @FHFA will release mile markers that indicate when capital is enough and sufficient, and said that "we as an agency need to be ready." Sounds like a consent decree to us! #GSEs

Not sure I quite get the quoted part of this tweet. Ready for what? If released under consent decree the terms would have been determined already.

I wonder if the mile markers will be released with or as part of the capital rule?

I watched the discussion, and if memory serves me, the "need to be ready" was around the change to capacity as regulator. He discussed quite a bit building up this capacity within the agency - having own analytic capability compared to relying on GSE's, hiring economist, etc.