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Eye4Valu

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

    in General Discussion

    Posted

    I'm sure you all know as well as I do that they'll make a ruling eventually. I'm sure it's not that far off, even though it has taken much longer than anybody would have thought. I just hope it's the decision that we weight as the most likely, i.e. remand. Although I wouldn't complain if they reversed Lamberth's decision in its entirety. Could that be why Millet is taking so long in writing her dissent? Maybe it reads like War and Peace!

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

    in General Discussion

    Posted

    David Thompson sums up the difference between the preferred and the common quite well right here:

     

    "As I indicated, under the terms of the contract, Fannie Mae and Freddie Mac are not permitted to pay dividends to common stockholders unless they have paid dividends to the preferred. So that’s an important distinction and candidly, if the common stock is worth a penny, then Fairholme’s preferred should be money good."

     

    Anyone who has taken a first year accounting course should know that.  It's not exactly news.

     

    Edit: That was kinda rude,mea culpa.

     

    Who said it was news? David Thompson obviously thinks it is an important distinction. I'm assuming there is a reason he is managing partner at Cooper & Kirk, and you "experts" are blogging on a stock forum. I wonder who gets paid more by the hour?

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

    in General Discussion

    Posted

    David Thompson sums up the difference between the preferred and the common quite well right here:

     

    "As I indicated, under the terms of the contract, Fannie Mae and Freddie Mac are not permitted to pay dividends to common stockholders unless they have paid dividends to the preferred. So that’s an important distinction and candidly, if the common stock is worth a penny, then Fairholme’s preferred should be money good."

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

    in General Discussion

    Posted

    Then sell out of the position(s) if you hold one. If you don't like how slow the wheels of justice move, and if you see no other possibilities outside the wheels of justice, then this clearly isn't your cup of tea. The future outcomes of this situation regarding timing and/or recovery are uncertain. Neither positive/negative sentiment is appropriate at the present time. But if you clearly don't like the possibilities here and are hung up on the semantics of the word "settlement," then please move on and spare us your commentary.

     

    Hmm ... all quite disappointing. If we play this through: government objective is likely to drag this out for as long as possible and it knows that this judge is pissed off, so they will not seek to keep her favourably pre-disposed. Money and attorney fees don't matter. More time taken is better.

     

    So - it seems very likely that they will seek to appeal this and, as per what you guys are saying, it will take time - even though it will likely be rejected. So we'll look at another half year or year just to get back to having 56 docs disclosed and the P in a position to then call for more docs.

     

    I guess at this point really a two pony race (Fairholme, Perry) with the Fairholme Pony just tied to a post next to the pasture to graze for a while. Assuming there's Perry remand or reversal there will be a bit of movement but short of the government growing tired the returns keep ticking down (don't see it as likely that government will 'settle' as you guys all call it).

     

    So with prefs offering an 8.62x return but the ultimate holding period now stretching probably to 5 years or more (for me), it's an annualised return of 50% ish... not bad, but wouldn't it be nice if this was just over at the end of the year and we could book an actual cash return.

     

    ... I'm pretty sure there will be delays on all fronts - so the Perry pony may get back onto the track but it'll probably have to drag a lumber cart behind it. Make it six years and it's down to 43% p.a., go to 2019 and it's 36% ....

     

     

     

    They would not.

     

    Also, Sweeney just granted the government's request for an extension.

     

    she is being very careful, bending over backwards to seem reasonable....i guess

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

    in General Discussion

    Posted

    A settlement is a real possibility with the next administration. Remember that the GSEs run out of capital in 2018. 2017 is likely to be a year of potential reform and/or settlement with regard to the GSEs. If there is no settlement, the cases will obviously wind on. What would make the government want to settle? I think: (i) adverse court rulings; (ii) unsealing of damaging documents to the public, not just plaintiff's attorneys; (iii) downturn in housing or the general economy; (iv) recognition that there is no substitute in terms of capital adequacy; (v) recognition that 7-8 years into a tepid recovery is no time to experiment with housing finance; and (vi) why reinvent the wheel. I'm sure there are some others I'm not thinking of. I certainly wouldn't rule out a settlement, but wouldn't count on it either.

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

    in General Discussion

    Posted

    Revolving Door Laws maybe?

     

    https://www.fas.org/sgp/crs/misc/97-875.pdf

     

    "Under federal conflict of interest law, at 18 U.S.C. § 207, federal employees in the executive branch of government are restricted in performing certain post-employment “representational” activities for private parties, including (1) a lifetime ban on “switching sides,” that is, representing a private party on the same “particular matter” involving identified parties on which the former executive branch employee had worked personally and substantially for the government; (2) a two-year ban on “switching sides” on a somewhat broader range of matters which were under the employee’s official responsibility; (3) a one-year restriction on assisting

    others on certain trade or treaty negotiations; (4) a one-year “cooling off” period for certain “senior” officials barring representational communications to and attempts to influence persons in their former departments or agencies; (5) a new two-year “cooling off” period for “very senior” officials barring representational communications to and attempts to influence certain other high-ranking officials in the entire executive branch of government; and (6) a one-year ban on certain former high-level officials performing certain representational or advisory activities for foreign governments or foreign political parties. This law also applies the one-year “cooling off” periods,

    and the restrictions on representations on behalf of official foreign entities and assistance in trade negotiations, in the legislative branch to Members of the House and to senior legislative staff, and applies the two-year “cooling off” period to former U.S. Senators lobbying the Congress."

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

    in General Discussion

    Posted

    Perry Capital Liquidating Funds; Quote from Bloomberg: "Perry Capital’s less liquid positions will be sold over the next year, or longer. Some of them, including its remaining preferred shares in Fannie Mae and Freddie Mac, “will take time, energy and capital to successfully realize an appropriate result,” Perry wrote in the letter. The core team will remain in place to aid in the liquidations and capital will be returned quarterly as transactions are completed."

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

    in General Discussion

    Posted

    regarding a potential settlement, the plaintiffs would likely only drop their cases for upfront certainty / payments.  otherwise they will likely plow on in the courts, and accept the risks (0 value) and time (years) that entails.  a 4th amendment could be later overturned by the next president or congress.

    Besides - such a settlement couldn't guarantee that another party takes up the case again and re-sues, not really possible for current plaintiffs through their settlement to bar future plaintiffs ... :)

     

    What about dismissing cases with prejudice and the statute of limitations on all actions? A settlement is possible.

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

    in General Discussion

    Posted

    The potential returns for a favorable outcome for either pref or common far outweigh any time value or opportunity cost considerations. It's well worth challenging in the courts for the next five years if necessary. I think the whole case is about more than just the potential returns, even for the hedge funds. This is about the nationalization of private companies and the rights of shareholders in the same. Its about what a conservatorship stands for legally, and what fiduciary responsibilities that entails. FNMA and FMCC are essential for all Americans. This is a fight worth fighting at all costs, for however long it takes, and I think the Plaintiffs are willing to take it that far. Let's find out if our system of checks and balances actually works. 

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

    in General Discussion

    Posted

    A settlement would work similar to the way AIG was released from government control, with shareholders dropping their claims/lawsuits. With the Jr. Pref having a liquidation preference at par, I don't see why holders of it would agree to settle for less than par. Perhaps they would agree to convert it to common pursuant to some kind of rights offering.

     

    Edit: I agree with CH that it would have to take the form of a 4th Amendment.

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

    in General Discussion

    Posted

    I think the Defendants will find Judge Sweeney increasingly irritable, to put it mildly, if they defy her order and/or continue to delay the proceedings in her court. Awarding the Plaintiffs their attorney's fees could be just the beginning. I think Tim Pagliara demonstrated his legal sophistication on Twitter when he put "Can you spell S-A-N-C-T-I-O-N-S."

     

    On another note, something that came to my mind that I thought was beneficial to the Plaintiffs was that Judge Sweeney has been reviewing the sample of documents upon which various assertions of privilege are being claimed. In doing so, she is reviewing and getting to know the evidence in this case in depth. She is going to know more about it than any other judge thus far. That can't hurt our cause in her court, as those documents are likely explicit in the Defendant's plot to prevent shareholders from obtaining monetary recompense.

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

    in General Discussion

    Posted

    I agree that reversal in Perry appeal is low prob. Obviously anyone long would like a remand. If there was a remand, and Sweeney released the docs, it could be like the Battle of Midway. But let's assume a worse case scenario for a minute in Perry, affirmance. The pref and common would get a huge haircut. You would still have the Court of Claims. My question is would you buy, sell or hold at that point? Would you capitulate?

     

     

    Fairholme/Berkowitz

    in General Discussion

    Posted

    To get Bruce's take, all you have to do is read his reports and transcripts from his conference calls. He obviously has different viewpoints than you all do. He doesn't believe FNMAS/FMCKJ entails a binary outcome. He addressed this very question on the most recent conference call. He believes they ARE the mortgage finance system in America. You all clearly believe it to be a binary outcome, but that is what makes a market. He has a take on SHLD that you all don't agree with either. He very clearly thinks SHLD is worth multiples of its current market cap. He has done extensive research for years on the name. You all think its a zero. I have to laugh, because Bruce reminds me of the white sheep going against the flock as shown on his webpage, and you all remind me of the black sheep headed the other direction. Who knows who is right, but I give Bruce credit for unique ideas, for ignoring the crowd, and for putting his own money where his mouth is.  I doubt the critics are short either security. I also seriously doubt Bruce wants to blow up his own fund and substantially decrease his own net worth. With the market at all time highs, which strong free cash flow generating businesses do you see trading at steep discounts? What opportunity costs are you talking about?

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