Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3705566 times)

blackcoffee

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9750 on: May 01, 2018, 09:39:19 AM »
   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?


SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9751 on: May 01, 2018, 10:33:37 AM »
   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.   

blackcoffee

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9752 on: May 01, 2018, 11:05:17 AM »
   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.

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9753 on: May 01, 2018, 11:33:09 AM »
With all of that said - the most likely downside scenario is this model:
http://assets1b.milkeninstitute.org/assets/Publication/Viewpoint/PDF/Toward-a-New-Secondary-Mortgage-Market.pdf

I wouldn't be stunned if that's where things end.   Seems consistent with everything we've heard so far across multiple key players. Maybe we would receive some relative compensation in lieu of ownership of the new private mutuals.  Maybe we wouldn't.

This paper involves two things that Mnuchin and Watt (or Watt's successor) cannot do without Congress:
  • amend the charters
  • pass the companies through receivership

So if Mnuchin is going to do any purely administrative action, he won't be able to come close to what the Milken Institute wants.

Even then, a pass through receivership will prompt a whole wave of lawsuits from junior pref holders, unless said holders are made whole anyway (which involves deeming the seniors repaid). The longer FnF build capital and/or make NWS payments (i.e. the further past the 10% moment FnF get), the stronger the case gets for the junior holders.

DocSnowball

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9754 on: May 01, 2018, 11:36:34 AM »
https://www.bloomberg.com/news/videos/2018-05-01/fannie-mae-ceo-says-conservatorship-wasn-t-long-term-solution-video

Wondering again after watching this from Fannie CEO - isnít Fannie Mae turning into a platform company, connecting buyers and sellers of secondary insurance?

undervalued

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9755 on: May 01, 2018, 11:54:36 AM »
With all of that said - the most likely downside scenario is this model:
http://assets1b.milkeninstitute.org/assets/Publication/Viewpoint/PDF/Toward-a-New-Secondary-Mortgage-Market.pdf

I wouldn't be stunned if that's where things end.   Seems consistent with everything we've heard so far across multiple key players. Maybe we would receive some relative compensation in lieu of ownership of the new private mutuals.  Maybe we wouldn't.

This paper involves two things that Mnuchin and Watt (or Watt's successor) cannot do without Congress:
  • amend the charters
  • pass the companies through receivership

So if Mnuchin is going to do any purely administrative action, he won't be able to come close to what the Milken Institute wants.

Even then, a pass through receivership will prompt a whole wave of lawsuits from junior pref holders, unless said holders are made whole anyway (which involves deeming the seniors repaid). The longer FnF build capital and/or make NWS payments (i.e. the further past the 10% moment FnF get), the stronger the case gets for the junior holders.

Quote
Even then, a pass through receivership will prompt a whole wave of lawsuits from junior pref holders, unless said holders are made whole anyway (which involves deeming the seniors repaid). The longer FnF build capital and/or make NWS payments (i.e. the further past the 10% moment FnF get), the stronger the case gets for the junior holders.

Looks like the judges already agreed that FnF is owned by the government now through the conservatorship. Will new lawsuits change anything or just a waste of money? I think the downside is without any win in the court, the government legally owns FnF and can do whatever they want w/o paying current/previous shareholders.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9756 on: May 01, 2018, 12:06:20 PM »
With all of that said - the most likely downside scenario is this model:
http://assets1b.milkeninstitute.org/assets/Publication/Viewpoint/PDF/Toward-a-New-Secondary-Mortgage-Market.pdf

I wouldn't be stunned if that's where things end.   Seems consistent with everything we've heard so far across multiple key players. Maybe we would receive some relative compensation in lieu of ownership of the new private mutuals.  Maybe we wouldn't.

This paper involves two things that Mnuchin and Watt (or Watt's successor) cannot do without Congress:
  • amend the charters
  • pass the companies through receivership

So if Mnuchin is going to do any purely administrative action, he won't be able to come close to what the Milken Institute wants.

Even then, a pass through receivership will prompt a whole wave of lawsuits from junior pref holders, unless said holders are made whole anyway (which involves deeming the seniors repaid). The longer FnF build capital and/or make NWS payments (i.e. the further past the 10% moment FnF get), the stronger the case gets for the junior holders.

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.

SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9757 on: May 01, 2018, 12:07:01 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.   

Midas79

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9758 on: May 01, 2018, 12:38:05 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.

blackcoffee

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #9759 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.