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Here is the transcript for the August 13 Status Conference, courtesy of timhoward717.com. 81314-transcript-717fair.pdf

Great color Merkhet, thank you for sharing your thoughts. I will provide a link to the transcript when available. The harder the government digs in, the more I am convinced of the weakness of their case. I believe that the government is going to great lengths not only to avoid producing documents that hurt their case, but also to keep the original authorizing source for the confiscation out of the public eye. I have no doubt that the genesis of this entire mess comes from the occupant of an office without corners.

Years ago, Tepper came in for a Q&A because he was friends with someone at the bank I worked for. Halfway through, someone started rambling on with a question about "correlations...and their associations with beta...and the potential impact on alpha...", before the guy could finish his question, Tepper said "Stop!, I have no idea what you are talking about and I don't know a single thing about alpha, beta, or any of your greek terms. I just look for simple situations where I think I can make money." The audience laughed.

The cross motion for summary judgement (linked below) is one damning argument after another against the government's defense that basically amounts to "we are the government, we can do as we please". Choose your weapon: exceeding authority, violations of the APA, failure to consider required alternatives, violations of fiduciary duties, to name just a few. A judgement could happen anytime by Reagan-appointed Judge Lamberth that would have the dramatic effect of tossing out the entire 2012 sweep amendment. Apply a 20% discount to the preferred shares for appeal risk and the current holders would still enjoy a double from today's prices. http://timhoward717.files.wordpress.com/2014/06/6214-perry-reply-in-support-of-summar-judgement.pdf

With both cases at a critical juncture the spring is wound tight. Informed speculation that either/both case(s) could be blow open any day can be found on this site: http://timhoward717.com/2014/06/25/order-fairholme-case/#comments I am sure both teams of attorneys follow this site as is is the best source of commentary about case developments. Preferreds are still trading at 35-40 cents on the dollar.

Meanwhile the noose tightens in the takings case in Federal Court. It is coming to a head with the Govt's desperate attempt to avoid handing over discovery materials relevant to the background and current thinking of the sweep amendment by offering a Motion for Protective Order. http://timhoward717.com/2014/05/30/motion-for-protective-order-filed-53014/ http://timhoward717.com/2014/06/01/last-gasp/ What do they have to hide? Apparently a lot as they claim disclosure will destabilize the world economy! The length and weakness of the govt's argument against supplying discovery materials is a strong indication the information is devastating to the govt's claim that sweep amendment was effected to "stabilize" the GSEs. Judge Sweeney has ordered a joint status conference for tomorrow. A ruling against the govt here may force the end game to come much sooner than the market has estimated. Preferreds trading at 36-40 cents on the dollar.

By the end of this month, FHFA, charged by statute with a mandate of conserving and preserving the assets of Fannie Mae and Freddie Mac, will have sent $158 billion from the Companies’ treasuries to the government’s Treasury pursuant to the Net Worth Sweep—$130 billion more than Treasury previously would have received under the 10 percent fixed dividend provided in its stock agreements. Treasury and FHFA would have this Court believe that they had no idea the Net Worth Sweep would give Treasury such a windfall. The Net Worth Sweep was needed, the agencies say, to save the Companies from a “downward spiral” caused by borrowing money from Treasury to pay Treasury a cash dividend that could have been paid inkind, without any borrowing. In their view, the massive transfer of wealth to Treasury is just a happy (for the government) coincidence. Of course, FHFA and Treasury are desperate to prevent this Court from looking too closely at this narrative. And for good reason, as the contemporaneous statements from the agencies in 2012 reveal a very different rationale for the Sweep Amendment: to prevent the Companies from “retain[ing] profits” or “rebuild[ing] capital,” to begin the “winding up” of the Companies’ affairs, and to “ensure [that] existing common equity holders will not have access to any positive earnings from the [Companies] in the future.” The agencies had no authority to embark on that course in 2012. Accordingly, Plaintiffs ask this Court to vacate the illegal Sweep Amendment. From the cross-motion for summary judgement filed two days ago by Perry/Fairholme/others in the APA complaint currently being held in DC District court. (Document attached) Good reading. cross_motion_1053.pdf

The Richest Man in Babylon, Clason, I read it as a teenager Contrarian Investment Strategies - The Classic Edition, Dreman, I read it in my early twenties The Little Book That Beats the Market, Greenblatt, Word-for-word probably the best ever The Essays of Warren Buffett, Cunningham Timeless wisdom Common Stocks and Uncommon Profits, Fisher Good investments don't need to be distressed

Really enjoyed this one, thanks for the recommendation. It's not hard to see why WEB loves these guys. They became some of the world's richest men by creating a dream atmosphere for the any PSDs (poor, smart, and a deep desire to be rich) and a nightmare for any underperforming senior executive. At one point, 10% of their bank's workforce was removed every year due to underperformance and it wasn't uncommon for them to appoint as CEO in one of their companies an employee who was a mere seven years out of school. By setting up a salary plus incentive bonus compensation structure to reward only results, they made multi-millionaires out of hundreds (thousands?) of employees many of who were under the age of 40. Reminds me of this: https://www.youtube.com/watch?v=UtDIijmFbqw

It was bad enough when Al Gore called me " immoral, unethical and despicable". But now I learn I am a bigot! Damn, what a bad week I'm having! Oh well, it will all be over soon: http://www.drroyspencer.com/2014/01/al-gores-10-year-warning-only-2-years-left-still-no-warming/

I couldn't disagree more. This type of thinking is dangerous and will ruin the Ivy league grad due to a false sense of entitlement, and will ruin the non-Ivy league grad by encouraging early defeat. I retired young after 25 years in the finance industry and I can assure you that contacts, networking, and degrees from self-important schools are meaningless. What matters is your positive attitude, and your effectiveness in helping others (read=your bosses) meet their goals. I saw one recruit get hired for having the guts to tape his resume to a pizza box delivered to the head of trading at lunch time. I saw another with a community college degree spend time getting coffee, fixing printers, running errands, and became so well liked they made him a junior trader. Today, he runs the High Yield desk. My last boss graduated from Kutztown State (how many can even guess which "State" this school resides?). I could go on and on. The point is that there is always a position for people with a good attitude and in the end it doesn't matter where you came from. My advice: Stop strategizing. Spend time on the things you enjoy. Find those that could benefit from your efforts and offer your work to them.

"The bill aims to establish the new system within five years of enactment, though it provides a series of possible extensions, raising the prospect that Fannie and Freddie could continue to operate for at least another decade while the new infrastructure is built." http://online.wsj.com/news/articles/SB10001424052702303287804579443601120329542?mod=WSJ_hps_sections_markets&mg=reno64-wsj Its a long shot, but even if the bill does become law the GSEs will be around for years and years.

If you look at all the incentives involved, they all heavily line up on one side. You are correct and in investing in these types of situations in the past if you have somebody on your side willing to fight and has resources my experience has been good. If these were not present I would not invest in these securities. Packer Agreed. This is a very complicated case and will require years of legal wrangling. Small players, like me, wouldn't stand a chance against the government even with the merits on our side. Fortunately, we have on our side willingness, resources, and some of the highest quality legal teams available.

Twacowfca, as usual your timing is perfect! Sanjeev, count me in for another $5k as a donation to the COBAF board to be used as you see fit. I will hand you a check at the annual dinner. It's a small amount compared to the value of this board but I hope it eases some of the burden.

I do think Treasury coerced the FHFA into violating its charter as conservator. The FHFA director has no incentive to hand the keys to Treasury. The Treasury, on the other hand, has billions and billions of reasons to enter the Third Amendment.

This has no bearing on shareholder rights. The conservator is appointed to conserve and perserve the asset of the institutions, which are owned by all shareholders.

Fasinating! Could you provide a source for your claim? Plaintiff attorneys would love to have a smoking gun like that. Or maybe it's just another of their "undisclosed" policies? Either way, don't waste your time, there is no such "duty" to Treasury. The goal of the conservatorship is "to perserve and conserve the Company's assets and property and put the Company in a sound and solvent condition". Source: FHFA, page 1 http://www.treasury.gov/press-center/press-releases/Documents/fhfa_consrv_faq_090708hp1128.pdf Nothing is mentioned about a "duty" to Treasury. Rather, on page 3, discussing rights during the conservatorship: "Stockholders will continue to retain all rights in the stock's financial worth;".

The administration had a policy since 2010 to shut out the common shareholders from all earnings but it was never disclosed to the common shareholders? Who decided this was not a disclosure item! I look forward to the discovery process. We will very likely find more examples where the administrations public statements (or overt omissions) that are at odds their internal dialogue. If that happens, the government's case will move closer to indefensible. This was an internal document in Treasury, so Fannie and Freddie may not have known about the policy until later. Yet in their 12/9/13 Motion to Dismiss, the government claims the FHFA, acting as conservator, acted alone in entering into the Third Amendment. They claim the FHFA acted without any coercion from the Treasury and entered into an agreement where the Treasury gets all earnings from the GSEs forever. They would have us believe that it's all one crazy coincidence that in 2012, the FHFA formalized an undisclosed internal Treasury policy that had been in place since 2010! I am not gullible enough to believe it, and I don't think Judge Sweeney will either. Discovery will get to the truth.

The administration had a policy since 2010 to shut out the common shareholders from all earnings but it was never disclosed to the common shareholders? Who decided this was not a disclosure item! I look forward to the discovery process. We will very likely find more examples where the administrations public statements (or overt omissions) that are at odds their internal dialogue. If that happens, the government's case will move closer to indefensible.

Just finished this book. Gripping indeed. Thanks for the recommendation. It never ceases to amaze me how easily otherwise good people can be compromised when they get into the mix with bad characters.

I have a few questions as well. If I read correctly, the Insurance Co. surplus will double from $30mm to $60mm. It's a tall order to double the book and do it profitably. What is the growth mandate and how much stress will it have on the underwriting performance? Insurance is hyper competitive and my experience is that small niche insurers do not have a competitive advantage and often are at a significant disadvantage to the larger more established firms who have the benefit of extensive long-term relationships and decades of frequency/loss data at their disposal to identify risk factors. Who will this insurance company compete with, where will they underwrite, and what type of policies will they emphasize?

Spot on. Attitude is everything. The key to working for others is to cheerfully make yourself indispensable to as many people as you can. This attitude works wonders for your compensation and future prospects. Do the work others are unwilling to do. Pay attention to details. When asked to do something, follow-up later the same day and let your boss know that you have made progress and give a specific date/time when you will finish the assignment. Do this even if you believe the project is worthless or a waste of time. Respect his authority, and just do it. Be humble, quickly admit when you are wrong, and never make excuses. Your reputation will grow and so will your leverage. People will take you seriously when you tell them you want to earn more or take more responsibility, and you will be presented with other opportunities inside and outside your firm. Most people in your age range feel underpaid, so you are not alone. If you are legitimately underpaid (not just whining), you are probably doing good work. Recognize that in the future you will likely be overpaid. Compensation is never neat and tidy so don't let it distract you from your key goal which is to gain a reputation for effectiveness. At 25, you have lots of time. I took me years to understand these concepts and I made some bad mistakes along the way, but applying the above and a little luck allowed me to walk away from formal employment at 48 with more money than I will ever need.

Raising cash by cutting long exposure and leverage. Not macro related. I want to own assets with a healthy asymmetric return profile but as prices have increased the return profiles are too balanced. Last time I held this much cash was mid-2011.

There is a simple explanation. Large IB's make it very difficult if not, almost impossible, to efficiently invest personal funds into anything other than government bonds or mutual funds. The downside to an IB for even the appearance of personal investments made with pervasive insider information is extreme. Rather than take this risk, smart IB management will prohibit specific stocks, or make the process of pre-clearance so cumbersome as to make personal investing not worthwhile. Plus, they want their employees to focus their energy on the mother ship, not personal gain.

Fixed income MBS securitization and dervivative trading. Fixed income credit, securitization/structuring and management. 25 years.