tede02

It seems like the pressure just continues to build. Now Joe Biden's buddy is an investor in Fannie/Freddie and is suing the government (apologies if this was already posted but I hadn't seen it). http://www.bloomberg.com/politics/articles/2015-10-09/a-biden-buddy-picks-a-fight-over-mortgages

Regarding the proposals made by Corker, it seems like everything he wants to do could be implemented within the existing GSEs. However, as I understand his proposal, he would wipe out the existing GSEs and basically just replace them with one or more newly created entities that incorporate the changes he would like for the system. I suppose "getting rid of Freddie and Fannie" sounds good politically in some circles. But practically speaking, it seems kind of dumb to eliminate these two massive institutions that have decades of knowledge, experience and data in mortgage finance, not to mention their existing infrastructure (employees, technology, etc.) and start from scratch. Additionally, as I understand Corker's proposal, it still incorporates the key to the entire US housing market, government backing (although a bit watered down). Ackman, Bethany Mclean and others all seem to be correct in that there really isn't another viable option other than the GSEs if the country wants to maintain access to the 30 year fixed rate mortgage. I guess we (as a country) could set-up new institutions with different names. But what's the point (other than politics) if the system is fundamentally the same (meaning the government backing largely stays in tact)? It is all political.

Well written ni-co. That is a very good summary (at least as I perceived it) from Dalio. What this story also tells me is we're lucky that the entire world didn't experience some nasty deflation following 2009. There definitely was some, but I'm getting the picture that it could have been far worse as was the Great Depression. Bernanke clearly was worried about it. With respect to fiat money, I'm not sure how big a difference it makes. I'm certainly no expert here. If I understand Dalio correctly, interest rates stay low because people and businesses are deleveraging instead of spending (during this part of the cycle). Therefore, demand for credit remains extremely low.

I've been listening to some of Ray Dalio's stuff this week. He talks a lot about cycles and how most people are surprised when events happen that they've never experienced in there life-time even though these events have been repeated throughout history. This got me thinking about interest rates. What is the historical precedent for what seems to be very low rates? Looking at the ten year Treasury data on Robert Shiller's website, I found that the ten year yield dropped below 4% in February of 1880. Rates stayed below 4% until 1911 (over 31 years). A few decades later, rates dropped again for a long period. The ten year yield dropped below 3% in June of 1934. Rates basically did not get above 3% again until 1956 (with the exception of two months in 1953 when rates briefly exceeded 3%). That's essentially 22 years of rock bottom interest rates (just like we have today). Economists have been saying for over 3 years that rates have to rise, and like many, I used to just accepted the idea at face value (they have to rise because they are really low). But history certainly seems to suggest otherwise. Lastly, Dalio's 30 minute video on "How the economy works" is worth watching. It helped be better understand that is makes sense for rates to stay low for an extended period of time as much of the world deleverages.

And I'm sure they wouldn't mind a headline to the effect of "taxpayers earn $200 billion profit on Fannie/Freddie bailout" I absolutely agree. I understand doughishere's point, but don't see any repubs taking this angle. Populism is sweeping across the US as evidenced by the leading candidates (on both sides) for president. I don't think politicians of either side want ANY association (real, imagined, direct, or indirect) with hedge-funds.

This sure does make you wonder what is happening behind the scenes. Politically, I suspect that neither the White House or members of Congress want any headlines to the effect of "hedge-funds earn millions/billions in legal victory against Treasury".

@doughishere Extremely well put! I wholeheartedly agree.

Shock Top Pumpkin Wheat. Tis the season.

Did anyone see this over the weekend? Looks like nothing really new but it is a negative viewpoint: http://www.wsj.com/articles/fannie-and-freddie-shares-still-look-unappealing-1440189097 This paragraph in particular struck me: "The district court’s dismissal assumed that Fairholme’s allegations about the government’s motivation were true. Yet it ruled that even so, Fairholme’s lawsuit had to be dismissed because the law authorizing Fannie’s and Freddie’s rescue barred courts from second-guessing the decisions of the conservator, the Federal Housing Finance Agency. The government’s reasons were irrelevant, the court said." It still seems like quite a stretch to argue that the net worth sweep was necessary to "rescue" the companies.

I missed out on buying an iShares ETF, HDV. Down over 40% before trading was halted. Already back up. Tried to get a limit order in but was too late.

The list is not what I was looking for (it's right on Freddie and Fannie's websites). I'm just interested in discussion regarding the differences between the various issues to speed up the learning curve a bit, that's all (why do some issues seem to be more popular than others for example). Thanks guys.

Looking for a little help here. I've been going through the entire thread looking for discussion around the differences between the various series of preferreds. In the first dozen or so pages several people posted attachments with info around this but they are no longer available. I'm looking at FAIRX's holdings and see that Bruce owns a variety but is most heavily invested in the Series Z Freddie and Series S Fannie. Any suggestions here? Thanks in advance.

I don't know anything about "all the oil bugs on this site," but I've found it interesting that Buffett has been pretty horrendous with his own timing of oil investments. As I recall, he bought Conoco Phillips in 2008 around the time oil was peaking. More recently he bought a big chunk of Exxon when oil was over $100 per barrel. Figuring out the direction of commodities in the short run seems to be an impossible task. But it is interesting looking out decades. Population estimates are generally very accurate as I understand it. The world is projected to have an additional 2 billion people by mid century. Its hard to imagine that not putting significant upward pressure on commodity prices over time. But year to year seems impossible to predict.

Highly doubt there would be a question on this. My guess is over 95% of the American public have no idea what Fannie and Freddie even do.

LMAO! Sure didn't expect sharpton to weigh in on this issue.

I purchased NLY and SIR this week. If you're looking for income, they may interest you. I believe both have been punished due to the threat of rising rates. Both are selling comfortably below book which should provide some margin of safety (though I would expect they'll temporarily decline if/when rates rise). But I'll probably just buy more. Added to BXE and CHK this week.

Is the FINRA number the same as your CRD # (central registration depository)? If it is, type your name into broker check at http://brokercheck.finra.org/. This will give you your number. I personally hold the series 7 and 66. Can't help you on the 65 unfortunately.

This is an interesting development. I never read her first book but I did see the movie which was excellent. It just appears that the pressure on this entire situation continues to build. I agree with doughishere that it appear that maintstream media is starting to catch on to this story more. My instincts say that the pressure alone will force an outcome at some point. This is really an interesting story. I haven't followed it as closely as others here. My exposure is indirectly through my holding in FAIRX. Nonetheless, thanks to Merket in particular for the ongoing deep analysis and commentary on this subject.

This kind of reminds me of a point that people in law enforcement talk about. There's always a new batch of young men coming of age to do a bunch of stupid stuff. The same point goes for bull markets. There's always a new batch of people who haven't gotten burned and jump into the fray. I also chuckle about those who get into day trading during a bull market. These people fool themselves into thinking they are actually doing something of value. All the while they probably would have made more money just owning the market and doing nothing.

This little bit really resonated with me from Stanley Druckenmiller. Its from a Bloomberg article where he's talking about picking managers: Druckenmiller looks for “almost a sick compulsion to win and compete.” Citing his own experience, he said that passion fades when managers have other interests, including children. “Go young,” he advised the audience, saying that the best money managers are between 35 and 45 years old. http://www.bloomberg.com/news/articles/2015-05-13/druckenmiller-says-rates-could-remain-near-zero-10-years

I'll put this out there. Maybe one can think of value investing as a mistake because it doesn't work all of the time in every market (as evidenced by others here, notably the big mutual fund managers during the most recent bull market). But that's the beauty of it. It works over time, but not every time, and that's why everyone doesn't adopt it. Joel Greenblatt talks about this in his book "The Big Secret."

Its baked into human psychology. Robert Shiller's book "Animal Spirits" couldn't have a more appropriate title. Human beings are extremely influenced by herd behavior. Very few people, in my experience, are true contrarians naturally. "What everyone else is doing" appears safe. Being a contrarian appears dangerous or imprudent.

I read two Navy Seal memoirs over the winter. Couldn't put either one down. Easy reading: Lone Survivor: Marcus Luttrell Seal Team Six: Howard Wasdin About a year ago I read Nate Silver's, The Signal and the Noise. I would also highly recommend it.

http://www.forbes.com/sites/rickferri/2013/01/10/ts-official-gurus-cant-accurately-predict-markets/ This is a great study. I used some of the data here in an annual presentation I give every January. My favorite part of the article is the data on Jim Cramer's accuracy (or lack- there-of). Sadly, a lot of people take his "advice".

+1 One of my favorite quotes: More money has been lost reaching for yield than at the point of a gun.