Sunrider
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Posts posted by Sunrider
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Take a look at the working age population graphs for the US and Italy.
US: https://fred.stlouisfed.org/series/LFWA64TTUSM647S
Italy: https://fred.stlouisfed.org/series/LFWA64TTITQ647S
Italy GDP is lower than 2007. Debt to GDP as high as ever, even with negative rates.
Their quarterly GDP growth rate figures: 0.1, -0.1, -0.1, 0.1, 0.1, 0.1, 0.1. They have the highest amount of sovereign debt issued in Europe. Eurocrats must have told them to fake their GDP growth rate reports.
Will Italy die rather than leave the Euro? They want to be part of the Euro so badly that they are willing to kill themselves rather than leave? If they do leave the Euro, financial markets will crash.
I take it from your statement that you don‘t live in Europe. Also, you seem to imply that it is the Euro which is responsible for Italy‘s malaise. That’s debatable.
In the words of Robin Williams “I made you short?” :)
Clearly it doesn’t help to be in fiscal system which doesn’t allow you to devalue when your productivity sucks, and yoking countries together this way is the original mistake of the Eurozone - but there is more to Europe than the Euro, and that’s what Italy (and many Brits, actually, are after). What you’re seeing in this chart has more to do with outward migration as low growth means whoever can go and work elsewhere does. Where do they go? To other parts of Europe, mostly ... which was the idea of the ‘free movement of labour’ principle enshrined in the EU common market. The problem is that Italy’s productivity in many sectors is comparatively low, they have a lot of red tape, etc., etc.
All of these things wouldn’t magically disappear if they left the Euro (which also means they’d have to leave the common market and start negotiating bilateral trade agreements). Of course, they could then devalue, but that doesn’t fix the structural issues.
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Freddie Mac retains McKinsey & Company to consult on capital management
4 month engagement so plan/suggestion should be done by April. Not sure when this hits the market but seem like a majority of our fate price wise will be known then.
Oh boy, nearly the last company one might want to pick for this sort of work ... unless of course it's just to stamp the name on pre-determined output ...
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Pinging Sanjeev ....?
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Supported.
Sanjeev - is that an easy adjustment?
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Uh - what's not clear to me is why we (and anyone really) is debating whether the earth is warming? That is just basic physics:
1. You have a system which receives heat at a fairly constant rate (= our planet, from the sun, and no controversy about that input rate being constant enough).
2. That heat has to go somewhere by the laws of thermodynamics, which I think are not open to politics. It can either go into heating 'stuff', or it can be re-radiated off the object into cold, dark space (most of that by being reflected before it heats things).
That's pretty much it.
Since we don't (as yet) have any influence over how much energy arrives on earth, we only need to concern ourselves with how much is radiated back out vs. retained. Again, here it seems clear (=proven?), or at least not open to debate that nothing which we have come up with and/or put into the atmosphere actually increases the rate at which energy is reflected back into space. (Yes, airplane contrails and clouds formed around ship exhaust plumes reflect light, but all models on this show that this is a minor effect compared to the increased heat retention potential of 'greenhouse' gases.)
CO2 (and other di- or tri- atomic molecules) are really great at absorbing heat - no scientific debate about this.
Ergo, if you put more CO2 into the atmosphere, there is more opportunity for it to heat up and retain the heat (vs. radiating it back out), thus the system overall gains in heat.
It's really just 'input to retention vs. loss' math. We are messing with the loss bit by giving radiation (light spectrum) more things to hit and heat up along its path. You can simulate this at any high school with a lamp, a glass box, a thermometer and some suitable gas.
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All that said - the question on whether it's good or bad seems to be hard for people to wrap their head around because there is so much variability. Much of the heat the planet has gained through increased CO2 levels appears to have been stored away in the oceans, and some people just think 'we'll if we can grow crops in northern Manitoba for another 2 months of the year, what's so bad about that?'.
That's a localised view and ignores the complexity of the system as a whole. Tweak one bit and things can change in very unexpected places. If the planet heats, we know that, on average, ice will melt and oceans expand (because pretty much all materials expand as they warm);so oceans rise; if oceans rise, expensive Miami condos have an issue, and hurricanes gain in force because of higher average temperatures, so that means more damage; if ice melts, the salinity balance of the oceans changes, which messes with the flow of water from the arctic to the equator and back up again - that heat re-distribution drives much of the northern hemisphere climate, if it stops, much of the northern hemisphere may well turn colder, not warmer, as most people expect. Etc.
Are you happy to just prod it a bit and see what happens?
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Check out the GSE thread on the prefs under general.
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What big players are there trying to unload? paulson doesn't have a big stake but he has worked with moelis on their plan so can't imagine him dumping. Berkowitz position has been public and been steady only in preferred. Ackman owns 10% of the commons so basically he can't unload without massive price declines and in his latest report indicates he's still confident in the position. The volume in the preferred are so low even an average joe could be a single day player. Lets be honest, nobody running a billion dollar portfolio is doing anything with their fannie and freddie shares till there's REAL news. They don't make decisions on day to day noise.
. The "big players" have been in it since the beginning and show no signs of getting out without a resolution.the woman from ACG in the real vision video was reasonably well-versed in the GSEs' investment merits
I think the ACG video could be a pump and dump scheme to support some big players to continue to unload.
I do agree with everything she said though, but I've been consistent wrong on my FA.........
I don't care who exactly it is. I trust my chart reading skills and it tells me big players are unloading.
And for those waiting for the September treasury plan, I have to ask you this: Do you think there is still some opportunity for information arbitrary? Isn't it already well known that Treasury will have a plan released in early September, and it is supposed to be good?
There is nothing in the charts to suggest "big players" are unloading. The volume the last couple of months outside of a couple of days would not let a big player out without crashing the price even in the most liquid FNMAS. That statement is twaddle.
Again this is not a FA or chart "trade". The keys are Treasury plan, FHFA capital standards, 4th Amendment/NWS then recap. Each along the way may bump % of par value but final value will likely be realized in the days following the recap plan release.
Didnt we already go over this?....and what big player would be unloading right before the fireworks go off? That's ridiculous IMO. For better or worse if you have made the decision to invest in this why would you get out right before the most anticipated 3-6 months in this whole saga?
I look at 200 charts a day, so that’s how I get a feel of how things may play out.
I agree with what you said “what bigger players would be selling right before a immediate huge catalyst”? That’s true, but the charts show they are selling. So could it be possible that they are smarter than us and they now expect something not as bullish as you and me are expecting?
Big players don’t use a market order to get out with one click of a mouse. If you don’t understand how big players get in and out of a position, you may call TD AM’s institutional desk and ask them how to trade large quantities. I didn’t know anything like this until I called them for fun one day and then started to understand why sometimes charts show certain patterns.
That's interesting - can you elaborate? What do they do and how does that turn up in a chart? I would've thought that if the volume isn't there, then there's not much they can, unless it's off market transactions (but then they would not be in your charts? And why would someone take the other side in size off market if the big players know something?)
Thank you!
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its pretty simple: mm has the temperament of a trader and most of us have the temperament of a fundamental analysis investor. temperament loads evidence one way or another and shapes ones worldview. what primarily filters through to mm (chart signals, etc) barely even registers with most of us. (i wasn't as cool as midas when perry appeal came down but my wife didnt notice anything was wrong and we continued on with our vacation as if nothing had happened... though i may have lost my appetite).
i internalized before graduating college that debate between two parties with opposite temperaments results in nothing more than people getting frustrated and talking past each other. its not impossible, but it takes humility, patience, and self awareness, qualities we've been lacking in these posts
... haven't said anything here for a while... for my part, I appreciated your contributions, whether I believe TA or not, whether I can use your insights or not, I'd rather have them - it works for you so there must be some value in it, whether I can derive it or, I'd rather have it here. So please keep on with it.
I agree. Well said. I guess this is why I should stop talking about TA.
Still..... Just for fundamental investors, I still think it is important to be open minded, and constantly look for ways to improve the process, and be disciplined. When I was a fundamental investor from 2009 to 2018, I was doing lazy and lousy work, eager to put my cash to work, and once I buy a stock, I would rationalize it as hard as I could to hold on to the position, because, hey, selling at a loss means "lack of conviction", which is not supposed to happen for great investors. Eventually, I took big losses on certain names.
I already realized the problem with TA so I stopped talking about it, but I wanted to share with you my own pain and hope it helps with some of you.
I don't see how my comment on "If you don't learn, you get slapped by Mr. market" upset people. I got slapped several times by Mr. market by taking big losses on some names in those 9 years, and vowed to not to let it happen again.
Maybe it was because Midas kept thinking I was referring to him when I was not.
Getting back to the GSEs..... I think the probability is high that the treasury plan is a disappointment, which propped Calabria to file in Collins for FHFA constitutionality position to buy himself time. Collins ruling itself is not something I could speak of though.
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I second what Read the footnotes stated. My impression is that Metro’s management lacked the ability ( to exactly understand the rules governing banking in the UK) and were not necessarily dishonest, but I could be wrong.
I haven’t followed this story too closely however.
Good point. I too am ignorant on the specifics. I didn't mean to impugn Metro Bank management, but to respond to Cubsfan's comments and assessments as I understood them.
Falling victim to a charlatan is the worst case scenario that we all are trying to avoid, but there are many lessor risks in evaluating manager skill and honesty.
Well you can and should impugn them - getting risk weightings on mortgages wrong is kinda difficult unless you’re either (i) incompetent or (ii) trying to do it deliberately. Calculating RWA is one of the most basic things in banking ...
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Chris - I agree with your views & that understanding politics is informative in relation to predicting how this may play out.
I'm simply tired of seeing one or the other side of the political divide (for it is now really a divide) accuse the other of stonewalling, abdicating their duty, being evil, etc. When you consider yourself righteous and the other side evil, it's not hard to see why nothing productive gets done.
Sadly, it doesn't matter which side it comes from, it's just the kettle calling the pot black. I'm not American and for me the US used to be the beacon of liberty, so it is very disappointing to see what a bunch of small-minded, squabbling, barely competent, ill-informed, and often ignorant people get to positions of power. The current president's lack of ethics are just the visible symptom of a deeper malaise affecting what used to be the leading country of the free world. (To be clear, I don't care much what side of the aisle he comes from, nor do I think does he, I judge him by what he says and does.)
That's where I'm coming from --- and thus I felt compelled to call out this instance of somewhat hypocritical (whether intended or not) political hogwash (not your analysis, but the statement of 'Democrats are X' ... it's the same as 'Republicans are Y').
Cheers.
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if you watched testimony you would come to conclusion that at least some D senators would vote for calabria. turns out politics is a stronger impulse in senate than governance
There is no longer any rational thinking by the Democrats today. The only thing they do is to angrily object anything. I dare say if Trump declares himself as self-identified woman, and therefore the first female president in the US, the democrats will not celebrate, but instead yelling angrily. (Even though they should celebrate, as that seems to be inline with their value.)
Let's leave D/R politics out of here ... your statement would just as well apply to R during Obama - in fact they are on record saying "We will sabotage and object to anything this president wants to do." It's sad that this sort of 'politics' seems to be the norm now (and as per your statement the D are now doing the same as the R back then). Representatives are elected to do work - which typically means compromising to find workable, albeit imperfect, solutions.
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Thank you.
You have done an incredible job here we have all benefitted from your effort whether the stock moves higher or not.
Hands down Christian deserves the MVP award for Most Valuable Poster. His work on MBIA was incredible as well. I have a law degree and still learn a ton reading his posts. Thank you!! Once this saga ends, I hope you find another potential investment to keep the intelligent posts coming!
Seconded.
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@IG. not surprised at all. this is a special situation, event name. most hedges etc who are in this will want as wide an exit door as they can find among the prefs in the event of an event
Hmm ... wondering if it makes sense to swap some FNMAS into FNMAJ - similar coupon but at 20% discount.... I presume there's no reason to think the different pref series will be treated differently if there is a deal / conversion / etc.?
Thanks!
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Yes - but also ‘defendants do not believe ADR would be productive’ .... so I’m not sure what you make of this?
Thanks!
From the attached document...
"Plaintiffs’ Position: Given that they believe there is a reasonable probability for settlement, Plaintiffs believe the case could benefit from ADR procedures such as mediation. Plaintiffs’ counsel have discussed ADR and their response to this provision with their clients. While Plaintiffs believe that ADR procedures could be useful, they do not believe that proceedings in the case should be delayed during the pendency of any such procedures.
Defendants’ Position: Defendants do not believe ADR would be productive."
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Emily,
I think some people tried to tell you this before on the board. Your last post is a perfect example of why you should not get back in, and probably should take a big step back from stock investing.
Greed and Fear. It kills you.
I’ve been there and it took me a long time before I could look at quietly accept that the stocks in my portfolio weren’t doing what they were supposed to be doing ... AND not react much one way or the other. Whether FNMA or FMCK, just ask yourself if your thesis has changed. If yes, act. If not, don’t.
Hope that helps.
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Backside cover for court cases that are ongoing
This footnote. ..What exactly are they implying?
“In order to propose changes in the Federal Government’s role in housing finance, this proposal outlines policies related to the privately-owned GSEs and ending their conservatorship. Nothing in this paper should be construed as implying that the GSEs are agencies or instrumentalities of the Government nor that FHFA as conservator is operating as an agency of the United States.”
https://www.whitehouse.gov/wp-content/uploads/2018/06/Government-Reform-and-Reorg-Plan.pdf
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Sunrider, I did this presentation on Genworth MI Canada that answers most of your questions https://onbeyondinvesting.com/blogs/blog/ira-sohn-2018-investment-contest-finalist-short-genworth-mi-canada
Couple quick points, they get paid upfront in one lump sum payment so there isn't a steady flow of premiums coming in. They also recognize most premiums as revenues in first 5 years, so they are really susceptible to slowing market as insurance written decreases.
The pay the bank upfront for lost interest, they then take possession of the house and sell through power of sale to recover their losses. So losses are taken immediately, and they have to hold, maintain, repair houses when a bankruptcy occurs, which is an expensive process.
Mortgages are recourse, but that matters far less in recovery than people think (like companies get 52% vs 50% recovery due to recourse). The reason is once a person loses their house its hard to get blood from a stone, there is also the PR implications of being aggressively collecting from people in dire straits.
Hope this helps. Let me know if you have any further questions.
Awesome thank you. So lgd = 50% and loss to mortgage insurer 50% less equity, so call that 31% of principal assuming everyone is at just 19% equity. Now all we need is a good estimate of the default rate over the next years.
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Hmm ... I’m wondering whether we’re getting close to the point where this becomes shortable?
From my time in Canada, I recall that there is government and private mortgage insurance, and they should be the first loss tranche, after the borrower, of course.
Does anyone know if the insureres are obligated to immediately pay off the entire loan amount to the lender in case of borrower default or are they able to pay obligations as they arise (as is the case with MBI and OCN for bonds)?
In the latter case one would expect that the insureres will be hit less hard - they still have premia coming in and can pay obligations from those ... there would be dividend cuts, but it may not be catastrophic.
If the banks can immediately recover their principal then that would be a bloodbath for the insurers given that insurance is taken out where people don’t have a 20% cushion, and a lot of people should be dead in the water with a 12% drop as that chart on the prior page indicates.
Of course not all of those will be unable to pay their obligations, and I think those mortgages aren’t non-recourse ... but I thought I’d tap into the wisdom of this board to see what people think.
Thank you.
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My computer screen and headphones shed tears listening to the argument and reading the draft of the arguments.
Judge comments that the Third amendment effectively nationalized the companies. He also questions "So what value is left for shareholders after the Third amendment?". Defense argues that the companies were already worthless at the time of the third amendment...Judge comments "its worth nothing then, and its worth nothing now - zero then, zero now...zero in the future"..."they are investors and they are crazy enough to keep doing that..."
Judge "Could you give me a scenario where there could be value (for the shareholders) under the third amendment?"...@31 minutes...listen to the response for what it's worth
The defence really infuriates me at times and the judges even more so. Normally goes something like this:
"Whats left for shareholders?"
"your honor, you have to remember the tax payers put up x billion dollars"
And?? How does that impact whats left for shareholders?
What do you mean? That’s standard practice in Donald times - his classic response to something he doesn’t like ... “yeah but what about Hilary/bad person x doing x?”(even if completely unrelated :)
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Bought EPA:ALVEL, Netnet with 65% upside to NCAV and active share buybacks
Bought more SRC calls, spinoff is at the end of the month.
Bought a large position in MXP futures in my currency system. (Moves 50% of my foreign currency exposure from USD to MXN)
What gives you comfort that they got a handle on operations so that they can continue repurchasing shares? I only had a cursory glance through the annual report but it seems like lots of issues with assets. It's cheap, but is management competent and honest?
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small position in LQ pre-spin calls in (h/t to clarkstreetvalue)
I wonder about the use of options in this context. The calls will be adjusted to deliver the spin and $8.xx in cash. Is your thought that remainco will start trading up quite quickly? Do you intend to roll the options if nothing happens for a while?
Thank you!
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I do, if people get together and push. Only takes 5% of shares outstanding in Alberta to call for a special meeting of shareholders. When people are ready to go that route with extra support, a company of that size has to take it seriously due to costs.
Listening to the call, it is obvious that the decision to enter oil based mud business in the Permian was a poor decision. Margins ended up being sub 5%. So they quickly decided to shut it down from warehouses that opened only a year ago. Even if they had invested more heavily to support it and rapid growth from customers, margins would have been 7-8% vs their traditional 15-20% business.
Who made the math on this before moving in? Obvious that margins would have remained low even in a best case scenario. They mentioned that it required a lot of cash flow/inventory to support while they just came out from a near death experience and cash remains tight...
The good news is that there is no lease break-up fee. Costs will be some tanks clean up cost, liquidating existing inventory and some already happened since customers bought at a lower price vs them moving it to another warehouse and paying freight.
Canada has been poor for all services companies due to AECO pricing, pipeline restrictions and weather: rapid start of spring break-up and now longer than normal spring break-up!
So it seems that the business will normalize this summer. Although, losing Q1 profitability is not good and if it had not been for the poor decision to go after a low margin business in Texas, Q1 would have been weak due to Canada but, that is it.
Cardboard
Well, for what it's worth, you'd have my vote if you get shareholders organised (not that I own many shares)!
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@Sunrider
You are probably correct. But it's one thing not to mention the GSEs, but another to not mention the entire housing market at all? Whether or not he had prior affiliation with the GSEs, he has definitely had involvement in the housing/real estate market (and it affects all Americans). It also may be a sensitive issue for him given his affiliation to Paulson / Schwarzman.
Well, the housing market != the real estate market. The housing market is part of the RE market. And you can happily build and sell offices, hotels, casinos and even luxury condos without ever worrying about the GSEs.
Not trying to start an argument here ... just saying. The Donald is so self-focussed and absorbed that it would not be surprising at all, not only that he's got no idea about this, but also that he doesn't actually care.
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Side note, does anyone else find it strange/interesting that Trump has never once mentioned the GSEs or mortgage market during his election campaign/current term, considering he made his wealth in the real estate market and the significant role housing has in the the economy.
I think there is no question this is premeditated. Not sure I could give a good answer for it though.
I'm not sure that's the simplest explanation (which should be the preferred one in the absence of more data) ... what about him simply never having thought about the GSEs. A poster up-board made a point about him having made his money in RE. Well, that's somewhat debatable (although I think Trump steaks wouldn't have contributed all too much), but more importantly the type of RE he's been dealing in has absolutely nothing to do with the GSEs, so there's absolutely no reason for him to have these on his radar. Most people (especially those that voted for him) do not know what the GSEs are, what they do, and why they are necessary, so why should he care/mention them/otherwise be bothered.
Don't get me wrong, I'd like to believe that there's a good reason (for shareholders) for his silence ... but you need to develop rather convoluted theories for that when the alternative is much simpler.
... and this ain't X files.
Cheers!
I agree. Trump says/tweets so many things without thinking, he has to have a reason for de facto radio silence on the issue.
While I struggle to think of plausible reform scenarios that wipe the companies out, I find it even harder to imagine one that involves this level of silence beforehand.
Is Italy dying
in General Discussion
Posted
Well ... maybe.
Though there are many Italian companies which are, in fact, not Italian in so far as their revenue mostly comes from elsewhere (RACE). There are also those where even in a low growth environment may have a reasonable chance at decent returns from structural changes (Telecom Italia - split of network).
... just a thought.