orthopa

Per HoldenWalker on twitter Calabria says we will know more regarding the capital rule in 2-3 weeks.

Even someone who has followed the GSEs for 6 months (certainty not the 6 plus year as I have) could see though the comments yesterday. FHFA is hiring a financial advisor to raise capital for gods sakes right now! Even a half ass attention span could see through and piece together Calabrias comments since he was confirmed. Ill tell you what I see as a silver lining in this, the market believes this receivership threat. Congress maybe, the general public could give two shits but Calabria and Mnuchin did their job in front of hostile questioning that at some points got to the core of why this is going to happen in my belief (Paulson). They continue to cast doubt on the process just enough to make this look like they looked at all options, protected the tax payer, and were left with no other option. Calabria can say now yeah I told you guys i was ok wiping shareholders out like I said at the hearing.....but I had no other option but to enrich them because that was the best path and I followed the law like I told you I would.

Luke is this in an article?

This is the exact reason why the receivership bullet was put in the Administrations plan. Easy fall back for this bullshit in front of the freak show.

Instead of a long contribution my final observations boiled down to mainly 2. 1. This was a political show and the 3 head honchos pandered to the crowd quite well. 2. I still see the biggest risk of this investment as time. I wouldn't let a couple hours in front of a bunch of politically motivated retards sway anyones thoughts. I think the show these idiots put on shows this. Even though they are helpless they can still throw a couple insults on the way out. Obviously the capital rule and the 4th amendment are the next big steps. In light of what I find to be the biggest risk above is who knows when this will happen.

IMO I think the fact he even mentions the consent decrees means they will. If not needed, why even mention it? I think calabria continues to under promise but at some point will over deliver. What are your guys interpretations of the retained earnings projections? 9-18 months but when does the time period start? The latest batch of retained earnings is from Q2 so are we already at 4 months of retained earnings? 9 months is 3 quarters and we are already on the second quarter of retained earnings in a couple weeks. Next is obviously 4th amendment and capital rule but what gets GSEs to point capital wise to operate under a consent decree sooner? Private placement?

I agree that thinking about that time frame is disappointing. As cherzeca said Im quite surprised and happy this request comes less then a month after treasury's plan was released but this does tie in with Calabria's 12 month of retained earnings. From a preferred stand point in regards to price/valuation Im still looking at the PSPA amendment where the Srs are retired, any settlement as a result and or the possibility of the consent decree as avenues to see a higher % of par. For preferred holders the date/determination of conversion is of course the end game as that will determine final value and if converting to common is a good idea. That should come way, way before the last tranch of common is sold by the treasury. Looking at the AIG IPO it was from May 2001-Dec 2012 so it took ~18 months but hopefully preferred holders can find out her fate way before Phase II gets going.

+2 I have an exactly opposite view than most of you here. I had a tight stop and was stopped out of my big 20% position last Thursday and since then I've been flat. I was gonna post this yesterday but was too busy. I think a major top is right here. $14 is the key resistance for FMCKJ. The market reaction has never been worse. A positive court ruling only caused a false break out. Then this Monday's 20bn capital retaining news only caused a big volume down day, followed by another big volume down day yesterday. If you look at the daily chart since the positive court ruling and count how many down days you get vs the up days, and the volume on the only 3 up days, you'll see how little buying there was. This is the one of the few classic topping actions. I don't see any reason to continue holding this stock. It will either go flat or go down. This will be my last TA post here. I don't like being taunted over and over by lots of you. Thanks! Bye Felicia!

Finally the day has come. The NWS effectively over! Now I'm inpatient for the final PSPA. ;D No question IMO this gets done in the end. Inertia is the greatest force in the universe as cherzeca has said. Now just a waiting game to the ultimate outcome.

Well looks like today is the day, unless it gets pushed to Monday to really test everyone's patience. :o

Maybe I have drunk too much of the Kool Aid but I don't think it worth the time of worrying about unknowns at this point in the game. Mainly because if the shit hits the fan and this process is upended in a permanent fashion I am stuck in an illiquid security that will open the next day down multiples of 10 down in percentage. I feel that if this works out I do well and get par (maybe par plus). More or less its a homerun or your done. I've positioned it accordingly as a result. In my mind I have taken the treasury plan as well as comments made by both in to account. I think if it was still mainly a legal driven investment I would be much, much less bullish and less invested but the 2 most important people in the equation I think have laid out the path pretty good. I think the biggest unknown unknown and that could detract from rate of return is the timing of all of this. We have been disappointed timing wise before and certainly could happen again. I would be confident assuming par for preferred by Jan 2021 and discounting back 8% or so till now to get fair value, because in the end I think par is inevitable. I know this may sound naive but I think this is all being driven/done by/for Paulson. I think there is no question it as because I find it hard to believe the Mnuchin/Calabria really care that much about Housing Finance to go through all of this and deal with the skepticism, hassle, and, criticism unless there was a greater objective or benefit. Not to mention this has been very carefully calculated process from those put in power, to timeline and comments made by those in charge. This is Paulsons pay pack from Trump. This is why you don't hear Paulson talk about it, Trump talk about it and Mnuchin/Calabria have made very pointed comments about shareholders and how they don't care about any return they may receive. The much, much easier thing would be to leave this as is and drag it, leave to the next administration or leave it up the courts. But they aren't and you have to ask your self why I think.

I would also add the person who has distanced himself the most from this has been Trump. Outside of a comment on FnF back in May? about very smart people working on FnF I dont think he has even commented on it in nearly 3 years. Once the ball gets rolling as cherzeca says and even worse case if Pence takes over Mnuchin/Calabria still in place. Trump leaving via losing the election is more concering to me as that means Mnuchin and Calabria (maybe) go to.

the most likely snafu is not being able to raise money in capital markets. lots of possible reasons. then you are in a very slow cap rebuild through retained earnings. but even then, based upon a leak of a calabria talk to FHFA staff, it seems fhfa will release GSEs from conservatorship pursuant to an agreement covering their operations. that was very encouraging to hear...if it happens. I assume that there is a 4th A in connection with any release that nukes the seniors prefs. there are many other snafus other than cap markets lockdown, such as scotus reversing collins, but I dont think they would be the headline risk. The day after that happens we should wake up to preferred close to par +/- some arbitrage opportunity I would imagine.

You'd think. Yet the preferreds fall every day. Just rotation to commons? Im honestly perplexed to a degree also. Preferreds aren't much higher then back just before the Lamberth decision yet look how far we have come and where we are. Maybe it takes the NWS being off permanently or release of capital plan to see much closer to par. Either way seems like price will be up substantially overnight like after the 5th circuit ruling. TA hasn’t turned full bullish yet, and the ruling isn’t strong enough to disrupt TA completely like a full NWS cancellation would. I think it’ll just be a matter of few weeks before it is ready to go, which is why I haven’t bought yet. We will see!

You'd think. Yet the preferreds fall every day. Just rotation to commons? Im honestly perplexed to a degree also. Preferreds aren't much higher then back just before the Lamberth decision yet look how far we have come and where we are. Maybe it takes the NWS being off permanently or release of capital plan to see much closer to par. Either way seems like price will be up substantially overnight like after the 5th circuit ruling.

I agree with myself and you. ;) Again as you lay it out, and I think about it what seems to be the biggest risk is the time you maybe invested vs optimistic perception when you buy. I am loaded up pretty good so Im fine for now unless one thinks we are getting less then 50% for par....

Anyone have thoughts on the 6-12 month time period before IPO? It seems after ~6 months of retained earnings and preferred conversion we should be pretty much on way building capital. Potential investors/at least the heavy hitters are aware of the potential and earnings of FNF. Do they really need to see another year of what they can earn before they would invest? Seems like gov giving themselves some cushion but I don't see it being necessary. Thoughts? Also noticed in the inteview that he said its up to the companies to raise the money/IPO. He is only there to regulate, just like Treasury only there to protect tax payers investment. Nice way to deflect the enriching shareholders. Everyone just doing their job to protect their agency. Hopefully there is a big internal push within FnF to IPO quickly and not dick around for a year.

Another nicely timed interview(on purpose) with some more new vague comments and some clarity of some older vague comments. Great questions by the interviewer also.

Partly to help myself think this out but per HoldenWalker99 on twitter one way Treasury could get FnF to statutory capital levels then regulatory levels is to first let the GSEs start to retain capital via letter agreement before Sept 30. Start to retain capital. Then cancel Sr Preferred. Jr preferred then would contribute 33B to core capital. Retained earnings would build over time to get to DFAST level of 43B in capital. Then operate under consent decree until remainder of capital raised. I would think preferred would immediately trade to par once the Senior preferred are cancelled in this scenario as they would be counting towards core capital.

FWIW lot of time in front of the camera for these two since the treasury plan release. No pushback outside of Brown just being a retard during the hearing, no pushback, no enriching hedge fund bullshit.

I found this word choice interesting as well, using "amendment"... could the amendment be done this month instead of simply replacing sweep with commitment fee? Could things on the amendment be done prior to December? Very interesting if so, but probably he wasn't choosing his words carefully and he just meant NWS replaced by commitment fee... https://www.reuters.com/article/us-usa-treasury-housing/u-s-treasury-eyes-action-on-fannie-mae-freddie-mac-by-months-end-mnuchin-idUSKCN1VX1NM “That’s something that the FHFA (Federal Housing Finance Agency) and we are working on. We are actively negotiating an amendment, and I think our objective is to try to get it done by the end of the month,” Mnuchin told CNBC in an interview. Your right it certainly could have been choice of words but what the hell would take 90 more days to work on a final amendment? You know full well Calabria and Mnuchin have been discussing this for months and know what they are going to do. Your telling me they are just negotiating this now? They havent modeled this stuff out from start to finish ie Treasury Plan release to recap? Of course they have. Just write the damn amendment, negotiate terms and lets go. I do have to say hearing the CNBC interview my impression was he was implying a new final amendment not just stopping the NWS as he says "amendment by the end of the month". He also said 90 days working with congress. He said 3-6 months I think last week on Fox business news but I think the SBC hearing and the recent lawsuit result has moved things up internally in the treasury. 3 months puts us 1st of the year, 11 months to election. Absolutely no reason why IMO why FHFA captial rules are not out (I believe they are done already and if not only due to recap scenarios being worked out) and final amendment not done by 1st of 2020. At that point lets go with the recap plan. I know Calabria recently said will retain a year of earnings next year but he also said IPO in early 2020. Treasury and FHFA may not have come out and said it but I think the recent ruling really has moved things up in regards to acting. I think if there is a final amendment by end of Sept and not just ending NWS there is no question this is the case and I think capital plan out/action by early 2020 is a very high likelyhood. Maybe they are relieved as this is what they wanted anyway. I think after years of waiting all of these interviews/comments by Mnuchin and Calabria (urgency and hints more and more every day) we are going to be presently surprised for once both on what happens and how fast.

Where was that from today?

I know the intersection between technicals and value investing can be very blurry but for FWIW where the price levels are stuck on the preferred is where there was consolidation and a lot of trading in the price as FNMA was taken into conservatorship in 2008. This goes for nearly all the preferred looking back at most recent highs and highs in the last couple of years. Hard to believe there is still some trapped money but many maybe relieved to get out even or playing this for some reason. A very squishly explanation I know but just saying....

I think mnuchin is also playing heavily into the bad cop role so no one can in hindsight or concurrently say he gave up more then he should have or enriched any of the hedge fund crowd. You have heard very little of that from the media which is a good thing of course. I think once the PSPA is negotiated which many think will be Q4 I think the risk due to Trump/Mnuchin leaving goes down significantly. Its FHFA's baby at that point. I don't know at what point the recap becomes irreversible but once any third party capital comes in the common value and conversion level should be set. I dont think doing that before Jan 2021 is that much of a stretch. I know this may sound naive but there is no way we lose from this price at least on the preferred. I personally believe all of the possible scenarios are unlikely to begin with and the recap is pushed on as a result anyway. think if you buy at 100% of par you could lose from that level but from these levels no way. I think there is a large group of people who 1. Dont understand the trade. You really have had to been following this for a couple years to see the turn around in perception, politics, understand relationships, why certain people were put into power and positions. 2. Really understand the housing market or at least whats important. 3 Understand the lawsuits and their implications. 4. Understand the possible recap scenarios and how you could get hurt or helped. Think about it. This group of say 10-15 posters were salivating waiting for the treasury plan to come out. "Everyone" else couldnt give a shit about housing policy etc. I would say unless by dumb luck almost everyone buying the preferred with a good understanding is a sophisticated investor. Not that the common investors aren't but thats where all the fast/retail money is that pushes the price all over the place.

I agree, will likely give another opportunity to add if so inclined. Estimating roughly that the lions share of reform/recap done by next fall its very likely that still at these prices there is nearly a double for some of the preferred in 12 months time. Is there another option to lever this up outside of margin? Even at the most egregious margin rates alot of money can be made in 1 year here it seems. Buffett, Munger, Druck, Soros talk about that fat pitch and swinging for the fences. This seems like a pretty juicy one over the middle with a planned negotiation on paper from the counterparty regarding the security, a favorable court ruling, a motivated administration who just got the blessing of congress and pretty good chance captialization is kicked off by the end of the month with the NWS ending.