Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 5122304 times)

SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #15940 on: September 24, 2020, 01:00:38 PM »
Sometimes the simple explanation is the best explanation. 

At this point in the history of these companies, who the hell else would be buying these shares? 

-You either have purchased or passed on the story by now. 
-There are no natural incremental buyers who care. 
-Combine this with Mike Green's thesis on passive flows taking from discretionary managers & the fact that these trade OTC and are excluded from ETFs/indexes.
-Add in perceived legal risk / election risk / timing risk / political risk.

The discount seems understandable if you aren't one of the few psychopaths who have followed this for years.   


Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #15941 on: September 24, 2020, 05:31:50 PM »
The discount seems understandable if you aren't one of the few psychopaths who have followed this for years.

LOL, I agree.  I made a similar point to somebody earlier today.  I understand why they trade where they do, but those prices don't represent the actual risk/reward in the trade.  Big difference.
"Way maker, miracle worker, promise keeper..."  God is a promise keeper. You can rest in the hope and assurance that He is true to His word.  But it is also a warning that He will keep His promises to those that choose a life of unrepentant sin. https://www.youtube.com/watch?v=XCpbeVFgs4E

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #15942 on: September 24, 2020, 05:54:12 PM »
The discount seems understandable if you aren't one of the few psychopaths who have followed this for years.

LOL, I agree.  I made a similar point to somebody earlier today.  I understand why they trade where they do, but those prices don't represent the actual risk/reward in the trade.  Big difference.

GSEs are in a lot of "too hard" piles.  that creates opportunity/risk

orthopa

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #15943 on: September 25, 2020, 05:04:41 AM »
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.

Open question for the floor. Why isnt there a 100% chance the PSPA isnt done by inauguration day? If Trump is out, Mnuchin is out and Im not so sure I want a Biden appointed Treasury Secretary or underling negotiating with Calabria. Secondly if Trump loses what do either Calabria as an independent regular or lame duck Mnuchin have to lose negotiating the PSPA in the weeks after the election.

I cant think of a more common sense assumption regarding the PSPA if Trump loses and why that chance isnt 100%. Unless they want to dump the chance of a SC loss on a new administration.

Luke 5:32

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #15944 on: September 25, 2020, 07:38:42 AM »

Open question for the floor. Why isnt there a 100% chance the PSPA isnt done by inauguration day?

I have reason to believe she is actually much more confident than her publicly stated 80% chance, but I'm not at liberty to discuss details of that belief here in this forum.
"Way maker, miracle worker, promise keeper..."  God is a promise keeper. You can rest in the hope and assurance that He is true to His word.  But it is also a warning that He will keep His promises to those that choose a life of unrepentant sin. https://www.youtube.com/watch?v=XCpbeVFgs4E

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #15945 on: September 25, 2020, 08:13:21 AM »
here's how I think about it.  right now, govt's litigation strategy is 180 degrees opposite of its policy position.  continuing to litigate makes no sense if you want to implement policy of recapping GSEs. now, adopting that strategy took a lot of fortitude because many in congress oppose, but the administration held firm, and those opposing in congress have largely moved on to other sound bite opportunities.  but why continue to litigate if it is at odds with policy, now that congress is off the GSEs?

so the reason must be govt wants some form of political cover, together with the Goldman Sachs theory that you don't act until you have to, because different and better options may arise. Mnuchin was born and bred at Goldman.

now, what happens if Biden wins? my guess is that the wait for political cover will be over...in essence, letting Biden appoint Ds to DOJ/FHFA and have Parrott back holding the housing reins is political cover enough for Mnuchin/Calabria to act before inauguration to prevent this.  this is DC actor speculation, which ACG should know better than I do, but that is how this scenario makes sense to me.
« Last Edit: September 25, 2020, 11:19:04 AM by cherzeca »

orthopa

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #15946 on: September 25, 2020, 11:03:16 AM »
From the IMF rag apparently FSOC voted unanmously to support FHFAs reproposed capital framework. How can FSOC approve it if it isnt finalized (or is it and we are just in a waiting game as assumed).

Apparently FSOC thinks the capital rules are not strict enough. Not sure how much of a blessing this was but glad there was no opposition.

SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #15947 on: September 25, 2020, 11:14:30 AM »
Are there any controls in place within the US government that restrict the incumbent from implementing laws subsequent to an election but before removal at inauguration that could potentially impact any contracts signed between UST and FHFA? 

Said another way, in the event Biden wins - are there any arguments to be made that PSPA amendments made during a "lame duck" period can be revoked?

cherzeca

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #15948 on: September 25, 2020, 11:21:39 AM »
Are there any controls in place within the US government that restrict the incumbent from implementing laws subsequent to an election but before removal at inauguration that could potentially impact any contracts signed between UST and FHFA? 

Said another way, in the event Biden wins - are there any arguments to be made that PSPA amendments made during a "lame duck" period can be revoked?

same story as filing RBG's seat.  if you have the power to do it, then you have the power to do it even if with hindsight that power wasn't for too much longer

orthopa

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #15949 on: September 25, 2020, 03:56:50 PM »
Based on the prepared statements of Calabria and FSOCs recomendations it doesnt appear the proposal capital levels are going to budge much if at all. Not a whole lot of tea reading other then Calabria saying the rule will be finalized in the coming months.


https://www.fhfa.gov/Media/PublicAffairs/Pages/Prepared-Remarks-of-Dr-Mark-A-Calabria-Director-of-FHFA-at-FSOC-Principals-Meeting-9-25-2020.aspx

https://home.treasury.gov/system/files/261/Financial-Stability-Oversight-Councils-Statement-on-Secondary-Mortgage-Market-Activities.pdf