Author Topic: FNMA and FMCC preferreds. In search of the elusive 10 bagger.  (Read 3654270 times)

SnarkyPuppy

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14260 on: November 16, 2019, 09:36:06 AM »
Just had some thoughts - curious to hear if there's something missing in the below logic-

Is it not beneficial to us for them to hold off on modifying the SPSA for as long as possible?   The future SPSA amendment (if done in one shot) will likely eliminate the outstanding liquidation preference ending the net worth sweep, but it will also introduce a periodic commitment fee for the existing explicit backstop.   

Said another way, $x of earnings today go to building capital. Once the commitment fee is introduced for some amount $y, incremental capital build will be = $x minus $y, effectively slowing down the speed of building capital.

Of course, the liquidation preference today is being increases 1 for 1 with $x, but if I understand correctly we've actually surpassed the "10% moment", so there is room for further increases in liquidation preference while remaining above the "10% moment".   In fact, if you have the exact math behind how the administration is calculating the 10% moment, you can probably back into the timing of the SPSA amendment we're all looking forward to. 


allnatural

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14261 on: November 16, 2019, 12:47:12 PM »
A simple workaround is to simply announce what the commitment fee would be, but not activate it until all conditions of exiting conservatorship are met so no fee is required in interim. Also rosners point is you can't direct the GSEs to come up with a capital restoration plan without knowing the status of spspa so this needs to be addressed sooner rather than later.

emily

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14262 on: November 16, 2019, 01:15:14 PM »
Are both GSE’s buying their own shares: defeasance to minimize dilution and increase warrants value for the government?

emily

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Re: FNMA and FMCC preferreds. In search of the elusive 10 bagger.
« Reply #14263 on: November 16, 2019, 01:20:59 PM »
“They are waiting for courts. Perfect cover. Why should it not be? It hasn’t been fair.  Justice is blind but corrupts influenced it , no more chance, matter of time and that is why Mark keeps saying it is not time bound as cannot predict when courts will render a just verdict and not just a political one”