hardincap

Goes the other way as well - one interprets the tone in a manner conforming to his biases

That's my sense as well. So then the question is, to follow millets line of thinking, what is the remedy? is incompatibility with conservatorship enough to order it to be vacated, or is there some other superficial remedy that goes against the plaintiffs? I suspect there are nuances here that I don't fully understand as a non lawyer. Also, have to look back at the transcript but I got the impression that Olson could have been more clear when she asked him that question

It seems a low bar for the judges to agree that the nws prevents fnma from becoming sound and solvent (g tipped his hand on this one). But does it necessarily follow from a statutory standpoint that they're in liquidation, and hence in receivership? i think millett was struggling with this and I'm not clear on it either

said this earlier but to me a critical moment was when millett kept pushing for a standard to apply and olson, after some waddling around the issue, finally declares "you can never get into a sound and solvent situation if every nickel of profit you make is given to someone else." g says thats clearly true, and millett then shifts to, well could they have lawfully morphed into receivership and just not given notice? olson pretty clearly articulates in his closing remarks that this is essentially what the govnt has tried to do: run a shell game by declaring conservatorship but acting as a receiver

http://gselinks.com/Archive/Court_Filings.html

a rational businessman would. govtal officials? agreed. there would be real personal cost to the rational businessman in not settling, but theres almost zero personal cost to the gov official. a settlement sounds nice, but i dont see it Unless part of the settlement is that the 11,000 docs in question will remain under wraps. That would allow those personally involved to remain secret. all those guys have left already. theyre no longer in the position to influence the settlement decision

a rational businessman would. govtal officials? agreed. there would be real personal cost to the rational businessman in not settling, but theres almost zero personal cost to the gov official. a settlement sounds nice, but i dont see it

i took away that Millett was getting at this with her hypotheticals. specifically her probing olson on "what test should we apply" to know if conservator went beyond its powers. this is where Olson retorts "you can never get to a sound and solvent condition if you every nickel of profits is given to someone else", to which g says "that is clearly true"

Consolidation or no consolidation, a favorable decision by perry appeals re: 4617f should be huge for those cases, no?

i could be reading too much into it, but it seems ginsburg tipped his hand in that exchange: "if you get an opportunity to fully explore [their motivations]"... then after establishing that motivations matter, g closes with "I dont know why we should go further than that."

I'm still working through the audio but these are fantastic notes. Ty!

Arent we getting ahead of ourselves here? The govnt may have taken one on the chin but this still seems far from over

I think the dilution argument is somewhat moot because as cherzeca mentioned before, that will come later, after any positive legal ruling. So from a purely price speculation perspective, commons, if history is any guide, should do better (maybe alot better) immediately following a positive legal ruling. as i write this, commons are up 21% vs 1% preferreds

commons do seem to consume the lion's share of "animal spirits" (no doubt due to its liquidity). from a purely technical, price action perspective it does seem commons are a better bet over preferreds, but value investors tend to not put much weight to technical analysis (indeed even be skeptical of it). it may end up disadvantaging value investors in this particular instance, but in the long run, i think they benefit from underweighting TA

http://www.hoover.org/research/fannie-and-freddie-fiasco

+1. Some of those quotes...wow

;D

Yea, and we're in agreement on that part. We're really talking past each other in terms of lexicon. When I say NWS is upheld, I mean substantively upheld and therefore, implicitly, the injunction was not upheld. And sorry to nitpick, but I wouldn't say that FHFA was exempted from its fiduciary duty to uphold because of 4617(f), but rather that there is no mechanism to enforce FHFA to exercise its fiduciary duty. I know it looks the same output wise to the layman, but input wise it is very, very different. It's not as if FHFA doesn't have a fiduciary duty anymore -- it still does! -- but if it decides not to enforce it, there's no way for someone else to force them to do it. even if the nws is upheld substantively and nws stock is ruled technically permissible under dcgl, corporate management would still be prevented from attempting such a scheme because it would violate their fiduciary duty to common shareholders, correct? yes, i hesitated to use the word "exempted", but they basically are in effect (according to lamberth)

@merkhet nws was upheld procedurally by lamberth and im speaking to the scenario that we lose other cases on similar grounds. then the hypothetical of well any company can issue preferreds with nws terms is not really correct because they have fiduciary duty to uphold, whereas fhfa (according to lamberth's ruling) was exempted via 4617f

Yes, I sort of agree on rhetoric -- but I think the point is that if the holding ends up being that preferred shareholders can bilaterally, with the agreement of management, decide that they will transform their preferred shares into new common shares that are above the rest of the capital structure, that's going to be bad for the stability of companies in general. Theoretically, the very next day, I would go out and start picking up preferred shares and contacting management to carve up companies 50-50. (Change my preferred dividends to a full sweep, and I will vote to increase your pay by a ton!) A few unscrupulous management teams will probably go for it! except its not exactly like that, bc there would be no anti injunction provision that shields management from legal challenges on grounds that they neglected their fiduciary duty to common shareholders

@chris all valid points and i think you're probably right re: commons having higher upside at least in the short term after nws invalidation ruling. also if you compare the charts for fnma and fnmas from 1/1/13 to lamberth decision, commons climbed much higher - for a while it was holding double the returns of preferreds. and yeah, its too bad theres no ignore button on here

FNMAS went up as high as mid $12 pre-lamberth. I think it goes higher than $15-20 range if nws invalidated

"immeasurable loss to the rule of law" these kinds of statements irk me a bit because its largely just rhetoric and should have no bearing on the investment decision. will the government actually start trampling over shareholders left and right if they win these lawsuits? of course not. it sets a bad precedent for sure, and yes it justifies indignation and outrage, but cmon, we're all just trying to make a buck here

there are degrees of intelligence in speculation. some longs like sullivan seem to be running with this settlement communication thing (he tweeted a berk quote and replaced the word communication with negotiations), and i think thats just silly. isnt it expected for two parties in a three year legal war to have at least some communication over possible settlement? actually entering negotiations is entirely different. re: speculating on the legal aspect, i think everyone is to a degree, but theres substantial rational and factual basis for that

my point was he put 16% of his assets in what I believe to be a binary bet. he claims it isn't binary, and his position size suggests he isn't fibbing about that, but that creates a riddle as to how he sees the light at the end of the tunnel if litigation fails. settlement is obviously not the answer, post litigation losses.