Luke 532

These things are still so insanely cheap. Heck, some at 41% of par (FMCCL)! Are they liquid enough to buy though? Is that the ask? 20.50/21.00 - highly illiquid

These things are still so insanely cheap. Heck, some at 41% of par (FMCCL)!

Kennedy to Calabria: "I encourage you to saddle up and go!... Congress is going to do nothing, you need to get started and fix this car wreck."

Mnuchin prepared remarks for Tuesday... Mnuchin_Testimony_9-10-19.pdf

Plaintiffs want 6% interest for the 7 years since NWS started. That's probably where the rough 150% of par calculation came from. I'm hearing this 3rd party so take it for what it's worth, but it does seem to make a lot of sense to ask for more than par.

Media Teleconference at 2:00 p.m. ET Wednesday, September 11 on Fifth Circuit Court Strike Down of Net Worth Sweep. More here: https://investorsunite.org/media-teleconference-at-200-p-m-et-wednesday-september-11-on-fifth-circuit-court-strike-down-of-net-worth-sweep/

https://seekingalpha.com/article/4290548-gse-shareholders-win-landmark-5th-circuit-legal-victory#alt1 Treasury now has a plan out with the stated purpose of recapitalizing Fannie and Freddie as promptly as practicable. That said, if Trump loses the next election and this separation of powers lawsuit is not resolved, an incoming democrat can fire Mark Calabria and change the course here. That's hypothetical, of course. As such, preferred shareholders are basically in the drivers seat. They have valid claims and there's really no reason to settle for just par anymore, especially with the Treasury plan having come out. It is now impossible to raise money in the next 15 months without settling the lawsuits because who is going to invest a meaningful amount of money with courts ruling that the government broke the law to hurt shareholders and not only that but the shareholders are making it so that the people running the government can get fired by an incoming administration thereby changing course midway through a recapitalization. Preferred shareholders have valid claims that the government jumped the shark when it entered into the net worth sweep and violated their contracts. Todd Sullivan says plaintiff lawyers are talking 150% of par for an expected settlement. That's more or less what I heard. My point is that the government needs to settle this and get it done quick at this point and they just lost a major legal ruling so now they really have no choice. In other words, the government just released a plan to recapitalize the companies and the plaintiffs can prevent that from happening if they refuse to settle the lawsuits. As such, plaintiffs now are in a position to determine what they are arguably owed in order to drop the lawsuits in order to help facilitate the recapitalization.

Here's the interview: https://video.foxbusiness.com/v/6084640350001/#sp=show-clips

Me too. It's possible he said that so the meeting with the Finance Committee goes smoother tomorrow. But that's anybody's guess.

No idea, just an investor as far as I know that is following the situation. I wasn't saying his tweet contained non-public information if anybody got that impression, just wanted to share it since it seems to align with recent events like Mnuchin's comments this morning as well as the plan released this past week.

I know you all know, but if anybody is still looking to initiate a position or add and you want to avoid all the action of the high volume series, then take a look at FMCCL (50-par) and FNMAH (25-par). The everyday Joe is going to be looking at FNMAS first so the others may lag a bit giving you a better entry. Yes, talking my book as those are my two largest concentrations in this name, but what I said still holds true. Wish you well!

Thoughts? Does the timeline below look accurate based on the plan, Mnuchin's comments, etc.? GSE timeline is set. @FHFA capital rule and SPSPA amendment by end of Q4'19. Congress gets until end of Q1'20 to legislate reform as GSEs get approval for capital restoration plans. Quick recapitalization to ensure end of conservatorship by January 2021. $FNMA $FMCC As an aside, gotta hand it to Maria, she brought the heat: "investors really were screwed (sounds like Kudlow's tweet from a few years ago)," "the director and structure of FHFA is unconstitutional," etc. It's been said that in previous interviews Mnuchin/Treasury has told her what she is/isn't allowed to ask about, so if true, allowing her to get these talking points out in the open "screwed," "unconstitutional" is pretty interesting (could be a way to get Obama to take a lot of heat).

Massive. I view "3-6 months" as more significant than the 5th Circuit ruling (as someone who trusted @MarkCalabria comments to end NWS and @USTreasury saying they want to rebuild capital). 70% of par is no longer the short term floor. $FNMA $FMCC

I hear ya. I'm not in the euphoric camp, but pleased with Friday's ruling. I'm merely turning over every stone, hence the questions about plaintiffs expecting 150% of par.

Discussion from Todd Sullivan on plaintiffs seeking 150% of par. Listen to minute marker 26:20 at the following link: https://valueplays.podbean.com/e/7-jun-14-2019/ The following quote is at 29:50... "Based on the things I've heard and the people I've spoken to, they are really confident that 100% is their ground floor. And they're going to get damages. Damages are going to be another 50-60% on top of their par. That's not something they're looking at as a hopeful scenario, they're looking at it like this is what we'll be owed. The government will argue differently but this is what we're going to get." Note: this is from June, so long before the positive news from En Banc that we heard this past Friday.

I tend to agree, but the reason I'm asking these questions is that a reliable source told me that the plaintiffs expect 150% of par and that par in their minds doesn't represent any compensation for the 7 years they've missed out on dividends due to the "potentially" illegal NWS.

Thank you. So base assumption is par or slightly less, let's call it 90% of par, and then once converted it trades along with common because, well, it is common at that point.

I believe this relates to the Lamberth case (Delaware law) not the collins case (federal law). collins might still have a federal interest accrual on payments in excess of the 10% moment. Would you say greater than 100% of par is likely, not likely, unknowable? I'm trying to place weights on various outcomes: 70% par, 80%, 90%, full, 110%, 120%, 130%, etc.

Apparently Mnuchin will be interviewed by Maria Bartiromo Monday morning on Fox Business News.

Thoughts? https://www.valueplays.net/2019/05/31/subs-gse-investment-change/ Under Delaware law, (according to plaintiff atty David Thompson) if plaintiffs win, they are entitled to “pre-judgment” interest. It typically comes to, on the low end 6% annually (courts split on simple or compounded) from date of injury. This would be from Sept. 2012, the enactment of NWS. Total damages mean preferred final value ~150% of par. Rather than paying cash, this could be rolled into conversion. Edit: this was posted with Todd's permission

Yes, that or an agreement to be converted at par with an anti-dilution clause. It's possible plaintiffs ask for more than par given they have some leverage now.

Emily, for the love of everything good and holy, would you please reference your quotes? Thanks in advance.

I'm more interested what the stock does two weeks from now. I bet we get either NWS ended/modified or a settlement by then.

+1

Christian, thank you for your continued legal analysis! You are an incredibly valuable member of this community.