rros

Thanks Doc. Very good. Sea change.

Yes, that is exactly how it happened in the past. The question is, will Trump go easy on it like Obama did?

I agree that turning on junior pref dividends hurts recapitalization, at least in the short term. The only circumstance in which it would help is if the companies want to issue new common shares to rebuild capital and want to offer a common dividend (for more attractive pricing), thus forcing a reinstatement of junior pref dividends. I still think it is probable we get a voluntary conversion to common offer in the near future. I have now rebalanced 100% to prefs and all in Fannie, whose circulars do not allow any amendments without approval from 2/3 of shareholders. FNMAT is a good bit more liquid than most other pref series, but FNMAS is far more liquid (using 30-day volume averages as a measure of liquidity). The liquidity gap between FNMAS and FNMAT greatly exceeds that between FNMAT and the other series. That's why I include FNMAT but not FNMAS when looking at correlation between price as a % of par and dividend yield. The R^2 value is well down in the last few days, sitting at 0.72 (0.75 on the bid and 0.69 on the ask). To me this signals an increased probability assumed by the market that we see a conversion offer or redemption as opposed to a reinstatement of dividends, though it is an increase off a low base. fnmat has a lot of weak hands. Or maybe tired hands. Or... someone planning on big exit upon some kind of announcement. Therefore, moving their stash to the much more liquid fnmas/fmckj.

Thank you, Chris.

In the past, almost like clockwork, prices going up meant a hidden explosive ready to be thrown at us by some judge. That could mean today a SCOTUS denial to hear our cases. However, given the current legislative news the effect of that explosion may be diminished. Re going all in. For me it was at $ .45, for Berkowitz $4.50/$5. Anytime seems to be the time. As Livermore put it... making money sitting on your hands.

https://www.wsj.com/articles/government-shifts-gears-on-fannie-mae-freddie-mac-1513515600 shhh... http://archive.is/QdGy8

Height Securities updates on GSEs Height Securities says the outlook for Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) improved significantly over the last week as housing finance reform was taken up by Congress. "While a copy of the draft is not available at present, there are some additional details emerging. The GSEs will either lose their charters or the charters will be very limited. The entities will be considered guarantors and regulated by the Federal Housing Finance Authority," updates the firm. "We expect the GSEs will continue to operate in conservatorship until they are recapitalized," adds Height.

You mean like the 2015 exit made possible by an orchestrated leak from... was it Alpha Capital Partners in DC, before everything tanked a few months after that? It's possible.

Well, I speak out of my butt. But you seem to hear things and have sources... so we'll see.

https://www.congress.gov/bill/115th-congress/house-bill/4560 I can understand someone seeing a link between this bill, Hensarling's FF hatred and Joe Light's article. But then, this was introduced by Rep Fench Hill, has no co-sponsors and will be voted on on Tuesday. Does it matter that Hensarling's name isn't there as in taking no part? The bill's new section clearly states "preservation of capital during periods of low net worth". I continue to believe this bill anticipates a move by Treasury/FHFA to retain dividends. Housing Trust funds are not part of the PSPAs or its amendments. They are part of HERA 08 and one way to handle these payments is by congressional action. Another one is by Watt undoing his prior pay-out move but here he may be of 2 minds unable to resolve the conflict. Would Hensarling ever support a bill that has as one of its titles "preservation of capital... " which is actually presented as a remedy? Maybe I am being naive but it really makes no sense to pay out the funds (although the amount is peanuts) while attempting to build capital. I understand where IU and investorG are coming from but if there is talk of starting to retain earnings/building capital and a 40-page bill is making the rounds in the Senate pointing at (shareholder friendly) legislation in 2018, this bill makes sense. I know many will disagree. In general, a shareholder friendly bill that resolves all issues wins over administrative action that can be undone later on. I sense that the idea of a dysfunctional Congress has become so widespread and it is so in-grained in our minds that it's hard to believe there may be some kind of minimal accord. But maybe there is. Lastly, a conspiracy theory about a bill rumored to be friendly to appease investors so that the new Jumpstart sails through Congress seems far-fetched.

hmmm. lots to think about here. especially since we don't know what mnuchin wants. on one hand, he thinks extending jumpstart for a year is fine since he really does want to work with congress and avoid friction with the Republicans. on the other hand, he could recoil from this, realizing he loses leverage in negotiations in 2018, and play chicken with Congress if they resist completing the govt funding or tax reform over this. he might also want to settle lawsuits with a 4th amendment, and this could scuttle that plan. there's not a lot of volume in the lower price preferreds which tells me that the mkt doesn't fully buy this joe light article. Lets see what the end of the day volume is on the preferred. Put in an order for the less liquid preferred and extremely hard to come by. Who would be selling with this news at these prices? I try to think at things from multiple angles. what if the joe light article was simply a way to grease through the jumpstart extension, and ultimately means little? or what if the corker plan pays back preferreds but only over many years, which reduces the NPV? I wouldn't be writing this if conveniently the jumpstart renewal didn't appear 12 hours after the Bloomberg article. Did you even read that bill that was posted? It appears as an extension of 1 year BUT it actually tries to stop paying out money for the housing trust funds while assuming dividends will stop as well. What this bill (Corker/Warner) is trying to achieve is prevent Admin to nuke the Srs. because... my view, they want to do that in the housing reform bill and this little bill is a prelude to allow recapitalization and build up of capital. The original jumpstart was two lines. It only referred to tying up Treasury's hands. Had no language on anything else. This is much more than just an extension. It is already meddling with potentially a 4th amendment that will stop dividends. There are still funds/retail that use any rally to unload. A bit disheartening. @ Orthopa that wayne comment wasn't nice. And we still don't know the end to this movie. My view why Mnuchin is implicitly okeing all this. He said any reform comes after build up of capital. The above bill appears to: a) give congress 1 more year for reform b) strongly suggests fixing the coming zero net worth capital as it includes language of "not paying dividends". we're not seeing this the same. do you think mel watt is eager to stop funds to affordable housing if he withholds sweep dividends? I don't. I see this as an attempt to thwart any 4th amendment and continue the sweep until Congress acts, if they do. It's all speculation at this point so yes, we differ :) My speculation is that there have been lots of talks behind the scenes and that Watt has also ok'd this jumpstart that stops monies to funds because he may believe reform is close at hand. Remember, even Hensarling said that any new bill should include provisions to affordable housing and that may include money sent to housing trusts. Since these are yearly payments, they may not miss any if a bill that includes the referred language is signed into law during 2018. Again, complete speculation based on this new jumpstart. Based on this bill the scheme may look like this: 1. 4th A stops dividends. (Treasury/FHFA) 2. Reauthorization of jumpstart is signed into law: a) 1 more year for reform, b) no payments to housing trusts. 3. Recap begins and zero net worth is voided. 4. Reform begins: includes competition to FF (Fed Powell), paid-for narrow gov guarantee, eliminates the Sr. shares as paid out, reorganizes FF as reinsurers allowing GM to securitize. Includes affordable housing measures.

That's fine. I did not think it was derogatory... just trying not to throw more coal into the fire in case he was unhappy about his decision. But it looks he has no regrets.

hmmm. lots to think about here. especially since we don't know what mnuchin wants. on one hand, he thinks extending jumpstart for a year is fine since he really does want to work with congress and avoid friction with the Republicans. on the other hand, he could recoil from this, realizing he loses leverage in negotiations in 2018, and play chicken with Congress if they resist completing the govt funding or tax reform over this. he might also want to settle lawsuits with a 4th amendment, and this could scuttle that plan. there's not a lot of volume in the lower price preferreds which tells me that the mkt doesn't fully buy this joe light article. Lets see what the end of the day volume is on the preferred. Put in an order for the less liquid preferred and extremely hard to come by. Who would be selling with this news at these prices? I try to think at things from multiple angles. what if the joe light article was simply a way to grease through the jumpstart extension, and ultimately means little? or what if the corker plan pays back preferreds but only over many years, which reduces the NPV? I wouldn't be writing this if conveniently the jumpstart renewal didn't appear 12 hours after the Bloomberg article. Did you even read that bill that was posted? It appears as an extension of 1 year BUT it actually tries to stop paying out money for the housing trust funds while assuming dividends will stop as well. What this bill (Corker/Warner) is trying to achieve is prevent Admin to nuke the Srs. because... my view, they want to do that in the housing reform bill and this little bill is a prelude to allow recapitalization and build up of capital. The original jumpstart was two lines. It only referred to tying up Treasury's hands. Had no language on anything else. This is much more than just an extension. It is already meddling with potentially a 4th amendment that will stop dividends. There are still funds/retail that use any rally to unload. A bit disheartening. @ Orthopa that wayne comment wasn't nice. And we still don't know the end to this movie. My view why Mnuchin is implicitly okeing all this. He said any reform comes after build up of capital. The above bill appears to: a) give congress 1 more year for reform b) strongly suggests fixing the coming zero net worth capital as it includes language of "not paying dividends".

Maybe I am interpreting this wrong but this bill is only about stopping all FF's outflows of money. It says, while not paying dividends do not pay contributions to the housing funds. In other words, keep all the money with the companies. So the bill has been written assuming dividends will also stop. Is this correct?

Amazing how nothing leaked given what is at stake.

Perhaps this means dilution to common will impede great appreciation while preferreds might see face? But Chris, aren't you pre-2012?

Probably because of what he said, not what he wrote: Briefly, wind down, charter elimination and all-or-nothing approach are out. Gov guarantee, affordable housing goals, multiple layers of private capital -diversified- stacked up before gov guarantee and DeMarco/Bright are in. Also, Heitkamp said “new ideas are percolating up,” including “basically maintaining” Fannie and Freddie. That is one area that Hensarling does not appear ready to compromise. He emphasized Wednesday that any bill should eliminate Fannie and Freddie.

all of this is like having a board meeting before a newly-installed chairman comes into the room -- while the discussion is interesting, it's merely the prelude. imo the stopwatch starts whenever tax reform is completed (or fails) and mnuchin / phillips address the elephant in 1h 2018. mnuchin has already said, recently, he doesn't support shutting down FnF (and phillips mentioned getting them out of conservatorship eventually) -- so we all want to know what does mnuchin want and also is he going to take the lead or follow congress. in the mean time, we're adrift with buyers sucked in only when prices decline. Forgive me for postulating how various groups are going to think or act, but my take on Congress is that they are basically followers rather than leaders and will therefore wait to see what Treasury (Mnuchin) will propose. Vis a vis Mnuchin, I assume first that he stands for government deregulation (i.e., removing FnF from conservatorship). The fly in the ointment is that the flow of much free money coming from the NWS must be really hard to give up. However, overriding this is that, as a Trump minion, he will wish to stick it to the Democrats and symbolically to Obama. In that case, he would choose to restore FnF to their previous status and meanwhile take the money to be gained by exercising the warrants. Can you imagine Elizabeth Warren if such a restoration were to happen? As I indicated before, I believe that the various investor lawsuits are like higher probability (although still quite unlikely) lottery tickets and will most likely be unsuccessful. locus, I welcome your interpretation. As you, I have also believed for a while Trump has an overriding, irrational motivation to stick it to Obama. Although conservatorship is a Bush creation, stealing from FF via the NWS is entirely an obamination.

Isn't it this the way politicians seek to increase their leverage for concessions? First order of business, say absolute "no" to everything. Then, scale down. Corker on the tax bill was a no to the bitter end maybe because he asked for the unacceptable: concessions, not granted. A theory.

You may be right. And the hatred to FF by R may be overwhelming. But my simple, back of the envelope thesis on which to base this bet is "what is the most disruptive thing that can happen to the real estate market from now on? And what is the least disruptive?" Actions may be based on this as opposed to ideology. Markets may soon peak, a correction may follow. Earnings may struggle next year with close to full employment. Igniting the economy may mean higher interest rates faster. Amid this picture, interfering with the real estate market could bust the economy. Mnuchin, being an expert and at 30,000 feet might have a different take. But then, he might not. The worst possible scenario for R's come the elections next year would be the start of a recession. Staying in power may override FF's hatred.

Wayne, i am in a happy mood tonight so I will dream that hating FF implies shutting them down and a big gift to the preferreds. Either by renewed and stronger court cases or by paying them out. But I admit, the hatred was a big oversight of mine. I got blindsided by Corker's defeat.

Or someone can resurrect Mulvaney's.

What Chris said. That language would be a really arcane way of dealing with such a simple problem. Looks like this is the final bill voted on this morning around 2am: https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rXqXuQfYbRas/v0 A search for the words above including DTA yields nothing. There is, however, language for net operating losses carryovers (nols) but this is expected in a tax bill. I would have expected that nols related to the GSEs would have been addressed individually and separately, like nols of insurance companies in this bill. But no reference to Fannie/Freddie/FHFA. I hope I am right. With Corker now a pariah and an invisible Senator for the rest of his term, should we get excited about Monday's opening? The window of oppo for Corker to do anything prior to sending the final bill to Trump seems now non-existent. Just as supporting any of his reform plans. Will he and Warner get railroaded? What else is to fear? SCOTUS not taking our cases? A grenade coming out of left field by Gary Cohn, although he also seems on the way out?

Draft https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rXqXuQfYbRas/v0 A search for gse/conservator/fannie/freddie/fhfa/warrants yields no results. Looks like the revised bill might be ready later tonight. Will the revised bill include all the amendments? ---- OT PART VIII-INDIVIDUAL MANDATE SEC. 11081. ELIMINATION OF SHARED RESPONSIBILITY PAYMENT FOR INDIVIDUALS FAILING TO MAINTAIN MINIMUM ESSENTIAL COVERAGE. (a) IN GENERAL.-Section 5000A© is amended- (1) in paragraph (2)(B)(iii), by striking "2.5 percent" and inserting "Zero percent", and (2) in paragraph (3)- (A) by striking "$695" m subparagraph (A) and inserting "$0", and (B) by striking subparagraph (D). My medical insurance went from $350/m before ACA to $1300+/m. A mess.

Manager's amendment lol Looks like a loooong list.