Eye4Valu

Like a broken clock twice a day, eventually he'll be right. Of course, the majority of his investors will probably have left him by then. I think he has good points, but I wish he'd stop talking about his mistake of incorporating depression era data in his stress testing. John, you were being cautious as a good investor should be. Time to get over it. Yes you missed the rally, but you'll be able to hit a home run or two when the market crashes. You and your two remaining investors will be rich.

Cheung Kong Property Holdings, Sun Hung Kai, Galaxy and Wynn Macau.

I'm guessing Obama and Lew were discussing the budget ceiling. Another go round in Nov.

SHLD. Although Bruce doesn't consider this a speculation.

I don't think the U.S. has any incentive to settle. Right now they get to keep all the $$$. Only reason to settle is to avoid public disclosure of discovery materials. I suspect that the courts will keep the discovery materials under seal, but allow the plaintiffs' attorneys to utilize them under seal. Thus, no reason to settle.

Preach on Reverend

I'm pretty sure FAIRX's Fannie/Freddie exposure was always around 11%. 10% pref, 1% common. I've always found his exposure to the pref to be an interesting contrast to Ackman's exposure to the common. My thinking has always been that the pref is a contract that the gov has breached. I think the courts are going to have to decide this one. While RRR is a win win solution for everybody, everybody is too entrenched in their desire for the money to settle.

Settlement or release is certainly the hope, but I'm not getting my hopes up. This has already played out over an extended time period, with more waiting to come I imagine. That said, I hope you're right. I think eventually the parties will reach a favorable outcome for all involved.

Avon is trading not only at its 52 wk low, but at its 10 yr low as well. Noticed that Yacktman has been building a position and recently added to AVP. Also read that COTY offered $10 billion for AVP a couple of years ago. Was that what this thread was initially about? AVP's current market cap is around 2.5 billion. Does Yacktman think they will be taken out, or that AVP can be turnaround? AVP appears cheap here upon first glance, but admittedly have not done any DD. Anybody know more about AVP at present time?

The Plaintiff's claims were dismissed for lack of jurisdiction because the Plaintiff lacked privity of contract. Plaintiff held common stock only. One of the holdings from the case follows: "Privity of contract, or some exception to privity requirement such as third-party beneficiary status, is required as jurisdictional prerequisite to contract suit in Court of Federal Claims." I believe the Preferred Stock is a contractual obligation that places its holder in privity with FNMA/FMCC, thus jurisdiction is proper due to the breach of contract. A little knowledge is a dangerous thing. It's important to reiterate the Fairholme motto: "Ignore the crowd." That applies across the board on this controversial position.

It's straight forward in my mind. When I buy a stock, I succeed to a residual ownership interest in the company's liquidation value. It's no different for FNMA/FMCC. The Treasury has the right to 79.9% of the residual interest. A current stockholder is entitled to the rest in accordance with their respective ownership interest. When I buy FNMAS Preferred Stock, I expect the "Liquidation Preference" [Fannie Mae's term from Offering Circular:http://www.fanniemae.com/resources/file/ir/pdf/stock-info/series_s_12062007.pdf] to be "$25 per share plus accrued dividends from the most recent payment date, whether or not the dividend was declared." That is what I'm entitled to via the contractual obligation that is created when I purchase Preferred Stock. Whenever that is. Fannie Mae has breached the terms of its contract with me by not following the Liquidation Preference terms. This breach has occurred due to the actions of the former and present conservator. The conservators' actions contravene the terms of HERA. Give away all future profits while placing the entities in a sound and solvent condition? It's not a conservatorship. Even if you place them in receivership, what happened to my liquidation preference rights, irrespective of when I purchased? I like the breach of contract cause of action a lot here. Awful lot of talk about a taking however. I also believe it is a regulatory taking, but like the breach of contract action best with respect to the Preferred. By the way, this type of cause is properly heard in the U.S. Court of Claims. Don't be surprised when Sweeney decides that jurisdiction is proper. You heard it here first. From the Offering Circular: "In the event of any dissolution, liquidation or winding up of Fannie Mae, holders of the Preferred Stock will be entitled to receive, out of any assets available for distribution to preferred stockholders, $25 per share plus accrued dividends from the most recent Payment Date (whether or not declared but without accumulation of any undeclared dividends for prior periods)."

Can you please elaborate on that? In brief, the factors involve contractual rights and rights in liquidation, irrespective of future government sponsorship. Make no mistake, I believe the common shareholders have the right to any residual interest, not the Treasury. However, common shares are not contractual in nature, and are bottom of the barrel in priority.

I am a lawyer but don't claim to have unique insight into the outcome here. I've read and heard from many intelligent and well versed parties that believe there is no 30 yr. without FNMA and FMCC. I doubt there are several alternatives that can be effectively utilized to preserve it. Capital and liquidity are huge constraints in this regard. I believe any party who is long should own the preferred foremost, and should view the common as an option. My take is that the preferred is a contract and holds a liquidation preference. HERA provides for liquidation in accordance with preference rights through its receivership provisions. The U.S. has a strange hybrid between conservatorship and receivership in effect. What is transpiring is unprecedented. In my opinion, U.S. actions violate HERA. I believe there are several factors that make the preferred an investment, not a speculation. I also believe there are several factors that make the common a speculation, not an investment. That said, upside in the common exceeds that of the preferred. For what its worth, Fairholme is weighted in the preferred (approx. 8%), with a small (approx 1%) stake in the common. Fairholme's preferred stake is not insignificant. Ackman owns more than 10% of the common of both FNMA and FMCC, but this combined stake represents only 3-4% of his portfolio. I heard Ackman state that while he never wants to lose investor's money, that is a possibility here, and thus the stake does not represent a large holding for Pershing. He of course thinks that the common will pay off. He doesn't like the limited upside of the preferred. I don't think this situation will be resolved anytime soon. I would say 2017 at the earliest. As Bruce mentioned, this is an investment for people with patience, persistence and courage of conviction. Having a legal background has supported my conviction, but of course, I cannot predict the outcome.

Jurgis: Point taken. In my mind, it would be a single position. I plan to put some money in SPY when the market is much lower, but still own individual companies as well. I guess I just think of SPY as being one position, but it is obviously 500 different positions.

BRK trading below book value is a good option since it is already well diversified. I think buying a S&P 500 index fund with the S&P below 800 is another good one. Otherwise, I could see putting 100% in if I thought the risk of capital impairment was 0. Just depends on the situation, your understanding of it, and your conviction to stick with it. Even a well diversified portfolio is not assured of positive returns.

Isn't this thread an example of what is being complained about?

Long term puts? LEAPS essentially.

Does anybody know what Ackman said on his Q1 conference call on FNMA/FMCC? Saw brief tweets from ValueWalk, but was looking for clarity.

Hopefully this message board! Do share your special situation ideas!

Interesting as always! Thanks!

To me Buffett summed it up best. If interest rates were to stay low for a long period of time, then the market isn't overly valued. However, if interest rates were to rise, then markets are indeed rich. We know at some point interest rates will rise. While the market may not immediately deflate, it will certainly start that process. Timing, as always, is unknowable.

Bad things...in more places than just Greece, although it would bear the brunt of it. Outcomes can't accurately be predicted in advance. If I had to guess, there would be an immediate and drastic devaluation in currency, together with even more severe lack of access to markets, capital and otherwise. A depression in essence.

But aren't most if not all female TV reporters hot? Because WEB's office assistants and the Britney Cool girl aren't so hot. No offense to them. They are obviously talented in other areas.

WEB has got to be involved in some capacity.

Awesome! Thanks!