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Jcmeg35

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Posts posted by Jcmeg35

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

    in General Discussion

    Posted

    What's really the point of the govt sitting on this now that they can't sweep the profits?

     

    The last letter agreement reduced the incentive for the government profiting, but since liquidation preference was and is still in place, one can make the argument they profit, but at a later date. I, personally, am dubious of the idea that the NWS being ended suddenly creates some kind of urgency for a Yellen Admin to settle. There is clear incentive for JPS to settle (and I now think Par is a best-case scenario), but I just don't see it on the Treasury side. If UST was willing to roll the dice on SCOTUS hearing the case, they are not gonna get religion now and settle before ruling. Seems like only thing that could do the trick would be a major adverse ruling from SCOTUS, as others have echoed.

     

    So much analysis here was based on the assumption that Mnuchin wanted to end the conservatorship in a manner equitable to legacy shareholders but that was never the case so all this analysis has been faulty. Mnuchin on the way out the door still talks of legislation aimed at restructuring the GSEs while his policies have firmly worked to destroy the interests of legacy shareholders. Mnuchin teed this up for Yellen nicely. She doesn't have to do anything and this is on cruise control until SCOTUS. Yellen has already stated that the GSEs need to be "restructured" and in her opinion the best option is for legislation. But she must wait for the SCOTUS decision before this can be done. (Note, she may or may not do that because the status quo may be preferred for Treasury).

     

    Our hope is that SCOTUS (or remand) unwinds the NWS, and a forced settlement occurs with JPS. That's it. Otherwise, in the event of a loss there are any number of options where JPS get nothing: selling core assets to private firms while leaving a worthless shell behind, legislation for new entrants to have an explicit backing, or, status quo.

     

    I'm staying in and betting on a SCOTUS win.

     

    +1

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

    in General Discussion

    Posted

    What's really the point of the govt sitting on this now that they can't sweep the profits?

     

    The last letter agreement reduced the incentive for the government profiting, but since liquidation preference was and is still in place, one can make the argument they profit, but at a later date. I, personally, am dubious of the idea that the NWS being ended suddenly creates some kind of urgency for a Yellen Admin to settle. There is clear incentive for JPS to settle (and I now think Par is a best-case scenario), but I just don't see it on the Treasury side. If UST was willing to roll the dice on SCOTUS hearing the case, they are not gonna get religion now and settle before ruling. Seems like only thing that could do the trick would be a major adverse ruling from SCOTUS, as others have echoed.

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

    in General Discussion

    Posted

    Unreal. Pre-market bid/ask imply that commons will be down slightly while preferreds get hammered again. A lot of people must have read a different agreement than I did last night.

     

    The disparity in the commons vs. preferred has been around a while, but the common have really outperformed Preferred since the start of the year. My guess is that it is a result of both liquidity and where fast money was positioned on the expectation that this announcement would be more positive.

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

    in General Discussion

    Posted

    I think all opinions and offerings should be welcome but also all of them should be subject to ridicule and getting shit on. That keeps things honest.

     

     

    Agree. One of the purposes of this is to listen to different opinions. Otherwise it's just an echo chamber...

     

    Agree as well. I think it is important to constantly challenge one's thesis.

     

    While I think it is clear that the market is now saying it doesn't expect any action from Mnuchin, based on current prices, I think the risk/reward is relatively favorable. The market has priced in no PSPA, but there is still time before 1/20 for MC to do what he has said he was going to do. There have also been whispers that Biden Admin would not continue R&R, but we have not yet heard anything from Yellen on the topic. While I won't hold my breath for an upside surprise, I think, again the Market has priced in her not being faborable to R&R, though it is possible she is open to workig with Calabria. Lastly, the legal cases still hang in the background as options that provide additional upside.

     

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

    in General Discussion

    Posted

    At this stage, the market appears to be agreeing with the view that nothing is going to happen or any action Mnuchin takes will be very underwhelming...

     

    Dates came and passed with no result. I recall the last key date was 12/9 and I don’t think that anything happened then either.

     

    Two weeks from now, Mnuchin is out, the administration will change and everything will get a new hard look.

    Back in 2016 when Trump got elected, the thesis was that Mnuchin would help out his hedge fund buddies and get Fannie and Freddie privatized again at favorable conditions. This didn’t happen, unless they waited for the last two weeks to do it.

     

    The lawsuits didn’t go anywhere either. I don’t see much reason why the preferred and stocks don’t fall back to where they traded in 2016. I know I am only a casual observer but that‘s how I see it - a classic way of thesis creep.

     

    Yeah, but those were OUR dates, based on assumptions that sometimes turned out wrong. The question is whether Mnuchin ever had a "date" other than last minute. We may never know, but while time is running out, the last minute has not yet arrived.

    What makes you believe something will happen at the last minute? That’s another one of OUR dates? These papers are like call option that on January 20, imo.

    At least the executive action part of the value will expire. I am not sure what the lawsuit part is worth.

     

    Even if executive action were to occur, there is a strong likelihood that it will just be reversed.

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

    in General Discussion

    Posted

    I wish Mnuchin would stop talking and just do something, whatever it is. However, my general take is this: Four years ago, Mnuchin arrived on the scene and said, "I'm the quarterback, I'm going to get this done." Today, he says, "I'm the punter, it's not my problem."

     

    I don't disagree, but the reality is, if he is planning something they want to get the market ready so it doesn't come as a "shock". This is why, I think, there has been so much media coverage to get everyone ready to expect some action (hopefully PSPA + Consent) as a forgone conclusion.

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

    in General Discussion

    Posted

    I agree that the scenario TBH seems a little far fetched. However, with a lack of explanation for the resignation, and given the timing, it seems hard to think it somehow is not related to either the finalized capital rule or PSPA (or lack of an expected PSPA).

     

    Bold assumption by Tim Howard:

     

    jtimothyhoward

    NOVEMBER 13, 2020 AT 10:59 AM

    I saw that, and, given the timing–a November 9 resignation date–viewed it as the first tangible external sign of a possible negotiated deal to end the lawsuits being pushed though before the December 9th oral argument at SCOTUS. While I certainly could be wrong, one interpretation of the resignation is that Brickman did not agree with one or more of the key terms of the proposed settlement, and his board did not back him up, so he resigned. If that is correct, it also would imply that Fannie’s board and management DO agree with, or at least are willing to accept, the proposed terms of settlement, and that it will go forward. But there could be other reasons for the Brickman resignation as well. Perhaps we’ll learn more soon.

     

    Yeah, he is reading a lot into it considering that no reason for the resignation was given.

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

    in General Discussion

    Posted

    I think he is referring to Tim Howard.

     

    On Nov 9th MTH wrote: "As one who for the last dozen years has worked to have Fannie and Freddie released from conservatorship in a way that maximizes their value to both homeowners and shareholders (existing as well as new), if you were ask me to choose between a quick settlement of the lawsuits and a release of the companies under a consent decree with terms set by Calabria–and Calabria remaining FHFA director for the next four years–and the invalidation of the net worth sweep by the Supreme Court next spring and the potential for their release under a new FHFA director appointed by Biden, I would unhesitatingly pick the latter. I believe that once the net worth sweep is reversed, the rationale for keeping Fannie and Freddie in conservatorship evaporates, irrespective of who is president. But I also believe that Biden will WANT them released–and functioning effectively–as a matter of public policy (and will do my best to try to convince the Biden economic team of the wisdom of doing that.)

     

    This squares with the same point I wrote on October 2: "And a Biden win could see a return to capital requirements that are more realistic. Reduced capital requirements under a GSE-friendly Democratic administration coupled with a SCOTUS win for investors is the catbird seat for holders of preferred."

     

    It looks quite good at this point. I doubt there will be much action from the lame duck administration, but there should be a steady upwards march from here.

     

    I don't know who MTH is, but he/she is counting on SCOTUS a lot more than I am. I would much rather have a decent settlement now than shoot for the moon with SCOTUS and risk coming away with nothing.

     

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

    in General Discussion

    Posted

     

    Thanks, thought that was probably the case.

     

    @cherzeca given that this was initiated by the sixth circuit do you think it is misplaced to read into this as being the beginnings of settlement talks involving the bigger cases?

     

    http://www.glenbradford.com/2020/11/fnma-fanniegate-997/

     

    no I wouldn't say that.  6th C doesn't want to have to hear this appeal. trying to head it off by requiring an attempt at mediation...which won't go anywhere.  this is court administration. no tea leaves here

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

    in General Discussion

    Posted

    At this week's @MITgcfp Future of Housing Finance conference, @MarkCalabria

    stated that @FHFA will release mile markers that indicate when capital is enough and sufficient, and said that "we as an agency need to be ready." Sounds like a consent decree to us! #GSEs

     

    Not sure I quite get the quoted part of this tweet. Ready for what? If released under consent decree the terms would have been determined already.

     

    I wonder if the mile markers will be released with or as part of the capital rule?

     

    I watched the discussion, and if memory serves me, the "need to be ready" was around the change to capacity as regulator. He discussed quite a bit building up this capacity within the agency - having own analytic capability compared to relying on GSE's, hiring economist, etc.

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

    in General Discussion

    Posted

    There has been some discussion during the summer around the idea that if Trump were to lose, Calabria and Mnuchin will reverse the NWS, make a deal to settle litigation, and do a consent decree to ensure the work doesn't get undone with a change in administration. With the prospect of a contested election and no clear winner for 1 month+, I would think that this situation would put such a "big bang" event in some level of jeaporday. Curious to hear others thoughts on these risks.

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