Eye4Valu
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Posts posted by Eye4Valu
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On this note, how many here believe Paulson's machiavelic true plan was temporary support (Willet's reference to optimistic start of the Conservatorship) to later dissolving the entities (carried on by Geithner via the nws strategy, Willet's reference to the darker turn of events)?
Was Paulson referring exactly to this situation in today's bloomberg article?
A very high chance if you ask me. I have read On the Brink. Tim Howard is exactly right: the companies were not bailed out, they were seized and decapitalized for ideological and policy reasons.
Emily, what say you?
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Does anybody here think that throwing lawsuits to the wall to see what sticks may actually be someone's plan to portray shareholders as frivolous clowns hoping for a windfall?
Wait... isn't that what we are?
Speak for yourself and keep on trolling!
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OK, which one of you sent the letter to Judge Sweeney? ;)
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Let's all just agree to disagree. When something material happens here, please let me know. Maybe 5th Circuit? Maybe next year?
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Herbert Stein's Law: "If something cannot go on forever, it will stop." Question is, when it stops, do shareholders make any money? I guess that question is what makes a market.
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Mnuchin has always been clear that FNMA/FMCC reform is a priority, but not the highest priority. It's no surprise that this is getting pushed back. He is committed to a fix but is not going to reveal more on what he's thinking in that regard until he pulls back the curtains. Tim Howard was right in that the status quo will prevail until a legal victory provides some pressure, or until Mnuchin shows us what is behind the curtains. I think he realized that people hang on his every word, and that he has to be very careful what he says, especially prior to the midterms. I personally don't think he has changed his prior viewpoints on the GSEs, which should eventually be favorable to them, but has to run the political gauntlet.
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so what specifically do you think will happen for the next 5 years -- status quo in conservatorship? if not, what do you specifically envision happening in a restructuring that torpedo's the minority shareholders from these levels?
I expect nothing to happen, everything remains as it is. as I mentioned before, I don’t see a pressing problem. Kicking the can down the road, is common in politics , even more so, if there is no issue with the can. The chances of a lawsuit driving a change are already very slim after 10 years and so many losses.
My business law professor gave us some valuable advice one day in class. He said that one of the biggest mistakes lawyers make is thinking too much about the last case, and not thinking enough about the next case. What he meant by that is it's important to read dissents and think about the way other judges or courts might interpret the law, and not just rely on the prior ruling. I think that lesson will be applicable here to all that overweight the Lamberth opinion. The 5th Circuit indicated that they were willing to think about the law here.
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Just to be fair - the people you are relying on (Rosner and Howard) stand to benefit monetarily from a recap release/moelis scenario. That doesn't necessarily discredit any of the above but it's important to understand incentives, conflicts of interest, and human bias.
Just so you know. I can model things myself. Familiar with Intex? I am. So while yes they pointed it out, I can verify it myself. Believe me or not. I truly don't care.
What you and others should be asking, is "why is the FHFA mandating products that are structurally flawed?"
And yes while I understand that there may be motivations to shoot the messengers here, there are 0 dissenting voices or really anyone that has asked about what happens with these products in a downturn OTHER than those two and Parsons at Moelis, because no one is paid to do so. Howard actually addresses that on his blog. I'll let you dig around and find it.
And if you actually are John Carney I'm wasting my time, because in that case, you're possibly the worst journalist to ever claim to be one and are already bought. Joe Light coming in a close 2nd.
Have a nice day.
Love it! You're awesome BlackCoffee!
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Just to make sure only.. have you read the SPSPAs? There is a specific mention to what may happen if there is an injunction granted by any court.
An injunction is dangerous. The SPSPAs have their own self-triggering explosive mechanism. Courts can see this. The commitment terminates instantly leaving companies severely undercapitalized. I am starting to think of Hank Paulson as some kind of genius. Or a complete fool who landed the deal of the century by mistake.Presumably if they were private and actually allowed to pay down the sr prefs & allocate their own capital, they would have also have done a capital raise whereby existing investors would be more than happy to pay down the 10% yielding senior debt in exchange for some dilution
Fair point, and I agree with what you said.
But I'm looking at this from the perspective of a possible legal victory that would unwind the NWS. It's easy to say that voiding it as if it never happened would eliminate the seniors, but I don't remember anyone bringing up the undercapitalization issues it would create.
It's probably moot anyway, any court decision that unwinds the NWS would get appealed anyway, though I don't know what would happen to all the dividends in the meantime. Perhaps they would go to escrow, being returned to FnF if the appeals fail and sent to Treasury if the decision unwinding the NWS is overturned? That would make a recap a complete nightmare because FnF wouldn't know how much capital they need to raise.
As Tim Howard points out, an injunction would motivate Mnuchin to resolve the situation. Favorable ruling from 5th Circuit has the most potential in the near term to trigger this. SCOTUS would be very likely to grant cert on appeal. Not sure if Mnuchin would let SCOTUS rule on it or settle prior. I used to think the later, but now think the former is likely. Ultimately, I'm not sure how spineless Mnuchin is on advancing administrative reform. He may be more or less spineless than we think. A favorable ruling that advances the arguments made in Judge Brown's dissent would go a long way to bringing Godot around.
Not denying your point on SPSPAs. Any court victory in favor of plaintiffs will automatically enjoin the sweep though. So what then?
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An injunction is dangerous. The SPSPAs have their own self-triggering explosive mechanism. Courts can see this. The commitment terminates instantly leaving companies severely undercapitalized. I am starting to think of Hank Paulson as some kind of genius. Or a complete fool who landed the deal of the century by mistake.Presumably if they were private and actually allowed to pay down the sr prefs & allocate their own capital, they would have also have done a capital raise whereby existing investors would be more than happy to pay down the 10% yielding senior debt in exchange for some dilution
Fair point, and I agree with what you said.
But I'm looking at this from the perspective of a possible legal victory that would unwind the NWS. It's easy to say that voiding it as if it never happened would eliminate the seniors, but I don't remember anyone bringing up the undercapitalization issues it would create.
It's probably moot anyway, any court decision that unwinds the NWS would get appealed anyway, though I don't know what would happen to all the dividends in the meantime. Perhaps they would go to escrow, being returned to FnF if the appeals fail and sent to Treasury if the decision unwinding the NWS is overturned? That would make a recap a complete nightmare because FnF wouldn't know how much capital they need to raise.
As Tim Howard points out, an injunction would motivate Mnuchin to resolve the situation. Favorable ruling from 5th Circuit has the most potential in the near term to trigger this. SCOTUS would be very likely to grant cert on appeal. Not sure if Mnuchin would let SCOTUS rule on it or settle prior. I used to think the later, but now think the former is likely. Ultimately, I'm not sure how spineless Mnuchin is on advancing administrative reform. He may be more or less spineless than we think. A favorable ruling that advances the arguments made in Judge Brown's dissent would go a long way to bringing Godot around.
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You guys are missing the point as usual. Sometimes founders have to create grand stories to raise the money to finance the work to get to the point that they aren't stories anymore. So many great companies have been built this way that it's very typical of a value investor to jump all over the leaders who fail to make the transition. Reflexivity is real and Holmes did not prove as skilled at mastering this art as Musk, Trump or Bezos.
Classic case of value investors missing the point, again.
So Musk, Trump and Bezos were all frauds who eventually turned the corner?
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He was on StarTalk with Neil deGrasse Tyson just the other day. Worth checking out if it interests you.
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May be irrelevant to the situation, but didn't know this.
"Brian Callahan, the top lawyer at Treasury, was granted a waiver concerning issues involving his former position as general counsel at Cooper and Kirk PLLC. The law firm represents Fairholme Funds, which recently filed a lawsuit against the Treasury Department and the Fair Housing Finance Agency.
McGahn's waiver allows Callahan to participate in discussions about policy decisions pertaining to housing finance reform, even though "some of these discussions could at some point touch upon issues that might impact the litigation."
"Brian Callahan, whom Trump named as deputy general counsel at the Treasury Department, won a letter from Treasury’s designated agency ethics official, Rochelle Granat, saying, “This memorandum documents that I have granted you a limited authorization pursuant to the Standards of Ethical Conduct for Employees of the Executive Branch (Standards) to allow you to participate fully in policy matters related to housing finance reform even if an issue arises that might impact pending litigation in which your former employer, Cooper & Kirk PLLC, represents one of several plaintiffs. Notwithstanding this limited authorization, you have elected to refrain from any participation in the management of the litigation, including any communication with your former employer concerning this matter.”
his linkedin resume shows he was at C&K only a few months, but as partner after a stint on senate staff. former dc circuit clerk and...gibson dunn associate.
Conflicted and connected.
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May be irrelevant to the situation, but didn't know this.
"Brian Callahan, the top lawyer at Treasury, was granted a waiver concerning issues involving his former position as general counsel at Cooper and Kirk PLLC. The law firm represents Fairholme Funds, which recently filed a lawsuit against the Treasury Department and the Fair Housing Finance Agency.
McGahn's waiver allows Callahan to participate in discussions about policy decisions pertaining to housing finance reform, even though "some of these discussions could at some point touch upon issues that might impact the litigation."
"Brian Callahan, whom Trump named as deputy general counsel at the Treasury Department, won a letter from Treasury’s designated agency ethics official, Rochelle Granat, saying, “This memorandum documents that I have granted you a limited authorization pursuant to the Standards of Ethical Conduct for Employees of the Executive Branch (Standards) to allow you to participate fully in policy matters related to housing finance reform even if an issue arises that might impact pending litigation in which your former employer, Cooper & Kirk PLLC, represents one of several plaintiffs. Notwithstanding this limited authorization, you have elected to refrain from any participation in the management of the litigation, including any communication with your former employer concerning this matter.”
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My bet would be on Mnuchin driving the train. Kudlow seems more concerned with private capital entering the secondary market than on whether you purchased common or preferred shares pre or post sweep. I think 9 out of 10 posters/observers of this thread would hazard that any purchase of common or preferred shares is speculative in nature. Bruce Berkowitz has discussed why he thinks purchasing preferred stock isn't an outright speculation due to its contractual nature. He also emphasized how the contractual rights are assigned to the new holder irrespective of when purchased. All of this got me thinking about the speculation versus investment dichotomy. While that line is never clear, to the extent holders here, including myself, are speculating, Buffettpedia.com offers the following on this link http://buffettpedia.com/2017/08/investment-versus-speculation-2/:
Benjamin Graham, widely known as the father of value investing, said that “outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook”. He acknowledged speculation is necessary and unavoidable, saying that in many common-stock situations there are substantial possibilities of both profit and loss, and the risks must be assumed by someone. But there is intelligent speculation as there is intelligent investing. He mentioned three ways in which speculation is unintelligent: (1) speculating when you think you are investing; (2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; and (3) risking more money in speculation than you can afford to lose.
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I am trying to make sense of all of this. Having visited the links recently provided by this thread, here are my conclusions:
(1) This is a highly politicized and extralegal situation because a large segment of Congress and perhaps federal judges seem to hate FnF (due to past history) and a group of powerful financial interests would like to take over the business of FnF.
(2) The Treasury Department has in my opinion robbed at least the junior preferred shareholders of their just proceeds.
(3) According to the ruling of the DC District Court, the relevant law, as amended, apparently gives the Treasury the power to rob the shareholders.
(4) The DC Court demurred on judging the constitutionality of the law.
(5) The Supreme Court demurred on hearing the case, probably with the excuse that there were other relevant cases ongoing in the lower courts.
(6) In an ideal world, the Treasury Department would be exceedingly vulnerable to civil suits and the enabling law would have already been declared unconstitutional with the strongest possible rebuke to Congress and the Treasury Department.
(7) In our current reality, the odds that private shareholders will receive reasonable compensation by 2019 are, in my opinion, no better than around 50-50 (see next item).
(8) In the long term (several years), if enough court cases are filed, the odds will increase geometrically as the power of the number of cases N (i.e., the probability P of success in at least one of the cases will be something like P ~1 - (1 - p)^N, where the caret (^) indicates exponentiation and the probability of plaintiff success in any one court case is p). I have assigned the value p ~ 1/3 based on the split of the justices on the Perry case, which is the only source of an actual number for the estimate.
(9) Note that the probability of ultimate success is never one in the model proposed in item (8).
The point is that this case involves factors that are counter to our Constitution, including improper legislation (i.e., unconstitutional), Executive Branch actions that would be considered criminal if a private citizen had done the same thing, and apparently criminal collusion against FnF on the part of interests competing for the same business and perhaps with the conscious complicity of government employees. This is a massive headwind for private shareholders and could easily end with the shareholders receiving little or nothing for their initial investments, including the amount of the original investments, especially if the government and the judicial system are able to delay significantly the ultimate proper judgement for the plaintiffs.
I am not a troll-- just a fairly ignorant indirect shareholder trying to decide on my best option. Please tell me that the above is too negative or that my conclusions are simply wrong. Thanks.
Emily will answer all of these questions for you.
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Love how one of the judges asked if the conservatorship was the government's version of Hotel California
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Mnuchin's recent comments seems pretty consistent with his past comments. Restructuring the GSEs into privately owned utilities makes the most sense. I think Mnuchin knows that, or at least that's what I hope.
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Why not just give this the time it needs and stop posting on it every hour? You're right that you will eventually find out what is going to happen. I suspect you'll either be right, wrong, or somewhere in between.
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L Brands Inc (LB) because it appears to be selling for a reasonable price, and you can have the Victoria Secret's Angels strut their stuff at the next annual meeting! ;)
Well nobody can argue with that on the face of it. But somehow it has an unBerkshirey feel.
I agree, but it would be entertaining!
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L Brands Inc (LB) because it appears to be selling for a reasonable price, and you can have the Victoria's Secret Angels strut their stuff at the next annual meeting! ;)
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It just means they decided not to hear the case, so the appellate court opinion stands. Nothing more, nothing less.
FNMA and FMCC preferreds. In search of the elusive 10 bagger.
in General Discussion
Posted
Am I the only one who thinks Bruce is pretty straight forward in his semi-annual report that he still likes his investment in the preferreds? Here are some quotes: "We remain confident in our preferred equity ownership." "Trading at approximately one-quarter of their intrinsic value, we continue to view the preferred shares as an excellent investment." His cost basis was below the price he sold at. He used the losses he took on selling some of his SHLD position to offset those gains. I wouldn't read too much into the reduction and portfolio re-balancing. Once this works out, he'll sell his position like he always does, and will be off to the next investment no one believes in except for him and maybe a few other contrarians.