[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

WSJ eddy board says releasing Fannie and Freddie under a consent order during the lame-duck period between administrations is the “least bad” option.

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

"What time is Scotus hearing on Wednesday? The Finale "

 

"11:00PM Singapore Time (SGT)"

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

Plus Warner's silence.

Plus the Warner, Crapo, Mnuchin dinner Wednesday night.

Plus the Maxine panic letter 11pm last night.

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

A few bullish quotes, in my opinion, from hearings this week...

 

Senator Crapo:

“While my preference was for Congress to pass a bipartisan deal, it is long past time to make the hard decisions and address this last unfinished business of the financial crisis. Because of that, I would encourage you and the director of the FHFA to continue to take important steps that move the system in the right direction. The status quo continues to be unacceptable.”

 

Mnuchin:

“Well, let me just say, I don't think that they should be let out from conservatorship without appropriate capital. There is obviously different opportunities to accumulate capital and to raise capital. This is one of the areas that I will continue to try to work with this committee and others. I think there should be housing reform. I think that the appropriate scenario is for these to have real capital and ultimately them be released.”

 

Powell:

“I would just echo the Secretary's point that I think we would all—I would certainly like to see—the GSEs return to private hands over time and the housing finance sector and system standing on its own two feet with a lot of private capital behind it.”

 

Mnuchin on consent order:

“Despite the fact that the Director and I are having conversations, we have made no decisions at Treasury whatsoever. We are contemplating. There could be a scenario where at some point between the zero capital and the full capital requirement, there would be a consent order and they would be released subject to consent order. There has got to be significant capital to be released.”

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

SCOTUS live oral arguments, December 9th at 10am...

https://www.c-span.org/video/?477438-1/federal-housing-finance-agency-consolidated-oral-arguments

 

Credit to this Twitter account:

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

but the takeaway as I think you allude to is that the smoke (such as this letter, Bright's letter and Warner/Rounds letter) would indicate that there is fire

 

Also, Warner and Crapo took Mnuchin out to dinner Wednesday night, after the hearing in which Warner said nothing negative about GSE's and Crapo was positive.

 

Forgot to give link:

On Wednesday night, Senators @MarkWarner & @MikeCrapo took Secretary Mnuchin to dinner, two sources tell me. Among other topics, they discussed the bipartisan COVID relief framework. Warner is one of the Dems most involved - so here's another way lawmakers are working the WH.

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

but the takeaway as I think you allude to is that the smoke (such as this letter, Bright's letter and Warner/Rounds letter) would indicate that there is fire

 

Also, Warner and Crapo took Mnuchin out to dinner Wednesday night, after the hearing in which Warner said nothing negative about GSE's and Crapo was positive. 

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

Everybody should read what Orthopa said in his previous two posts.  Then read it again.  And again, until it sinks in.  Don't overthink it, folks.

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

Mnuchin testifies twice this week:

- Tomorrow, 10am before Senate banking

- Wednesday 10am before House financial services

Per @USTreasury public engagements calendar

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

Any news on the PSPA timing? Have you spoken with your source? Thx Luke

 

Haven't received an update, so previous stance of highly confident PSPA by Inauguration is probably still my source's view.

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

Interesting action in $50 preferreds to start the morning. Someone has bid exactly $17.50 for exactly 4,285 shares each (comes to just under $75,000 each) on FREJO, FMCKK, FREJP, FMCCO, FMCKP, FREJN, FMCCH. I've been watching these tickers a long time and have never seen such coordination across issues. Someone wants to get in.

 

That's only about $500,000.  Irrelevant, IMO.

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

The only part of this bet I care about is that the loser also gets something valuable.

 

Like a 7-figure payday...

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

You were right on the rule timing Luke, congrats.

 

Thanks, I appreciate it!  But my source should get all the credit. 

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

From Joe Light's Bloomberg piece:

 

The FHFA has also begun a push in earnest to amend Fannie’s and Freddie’s bailout agreements with the Treasury Department. A different senior FHFA official said the agency and Treasury Department are actively negotiating an amendment, which the FHFA wants to finalize this year.

 

The stars appear to be aligning...

 

Very nice!

 

Per FHFA officials, the move to finalize the capital requirement tees up FHFA and Treasury making amendments to the PSPAs to end the net worth sweep sometime before the end of this year, which would allow the GSEs to retain all of their earnings. (Current cap is $45 bil)

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

The FHFA’s final capital rule for Fannie and Freddie is out. Maintains 4 percent requirement

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

Thanks for the update. I take it that no news is good news on the PSPA timing?

 

I think it depends on when capital rule is finalized.  Give or take two weeks afterwards is the expectation on PSPA.

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

Don't be caught off guard by the finalized capital rule this week (I would guess Friday after market close).  And then, more importantly, about two weeks after finalized capital rule the amendment to the PSPA. Just a hunch.  ;)

 

Update: source is telling me capital rule might get pushed to next week.  No update on timing of PSPA.

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

Don't be caught off guard by the finalized capital rule this week (I would guess Friday after market close).  And then, more importantly, about two weeks after finalized capital rule the amendment to the PSPA. Just a hunch.  ;)

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

Assuming the final PSPA is similar to what Phillips had in mind and discussed earlier in the year.

 

+1

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

My bigest worry right now is that Mnuchin is not on board which messes the process. Hope that all things were planned before the election, but the pace of the reform makes me doubt if its too late.

 

ACG: "Calabria, Mnuchin and Powell have a very good relationship, one team, no distance, no friction."

 

They, ACG, reiterated this point on a call today.

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

https://www.housingwire.com/articles/with-biden-win-likely-fhfa-doubles-down-on-ending-gse-conservatorship/

With Biden win likely, FHFA doubles down on ending GSE conservatorship

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

Interview: https://www.housingwire.com/podcast/former-mba-president-david-stevens-on-the-2020-election-and-housing/

 

David Stevens had the following to say today:

-acknowledges that Republican-controlled Senate is a massive problem for him

-the lame duck action to make permanent changes is legit

-he knows housing isn't a priority for Biden

-doesn't think Biden will focus on Calabria or his job (i.e. Biden not going to be in a rush to get rid of Calabria)

-Biden has no power to get refi-fee rolled back (not going anywhere in short run)

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

Gary Hindes latest blog opines on Solicitor Generals oral argument strategy for December 9 - not since the thrilla in Manila has there been a set up like this.

http://delawarebayllc.com/images/The_shameful_state_of_the_federal_courts.pdf

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

The Democrats are favored to sweep. 

 

I suggest everybody take the time to watch this.  It is almost 5 hours long but it will give you an entirely different perspective, based on some very interesting and verifiable data, than what the polls are showing.  It drastically changed my opinion on the odds of who I think will win.  Super interesting.

[FNMA and FMCC preferreds. In search of the elusive 10 bagger.]

As of today when they were asked, ACG has not changed their opinion on this level of confidence.

 

 

https://files.acg-analytics.com/wl/?id=shIIixOKejR2zEc8DlZsZiDRgmhHAutt

 

80%+ chance PSPA by inauguration day (if Trump loses)*

 

95% chance of SCOTUS unwinding NWS (obviously, if no settlement prior to their decision)

 

This equates to a 1% chance that neither happen: (1 - 0.95) x (1 - 0.20) = 0.01.  Or, in other words, a 99% chance we either (A) win SCOTUS or (B) PSPA by inauguration.

 

*Note: the 80% PSPA chance was from a few months ago during a call ACG opened to public, but they confirmed this week when I asked that % still valid.

In other words, my take-away, pricing of junior prefs represent a severe discount in the market that doesn't represent what is actually happening behind the scenes.