orthopa

As hokey as it seems I wonder if the admin/those in charge float/leak these little tidbits from time to time to gauge outrage/satisfaction of all of those involved. Im still planning for end of 2020 to temper my own expectations. Anything sooner is a win that way. :D

Those Moelis numbers cannot necessarily be counted on. Phillips said that Mnuchin wants the companies out of conservatorship by the end of this presidential term, and I take that to mean the companies will be recapped first. Moelis ran its numbers from mid-2017 to the end of 2020, but starting at the end of 2018 means you have less retained earnings to recap with. That means more equity needs to be raised, which means more dilution. Also, Moelis was going to offer a 3:1 conversion rate (3 commons per $25 of par value) because the JPS holders have to agree to any conversion. But the FNMAS:FNMA ratio then was around 2.5:1. Now it's 4.4:1, and a bit higer for FMCKJ:FMCC. That probably means a 5:1 conversion rate instead, so more dilution again. I'm starting to think that $5 is actually a stretch for the commons, and if Treasury tries to cram through a really really fast recap then common holders could actually lose money from here. I'm staying away from them. Thanks for your insights. My oversight was not considering the 2020 deadline and time past since Moelis. With conversion to common no need to consider dividends right? Wonder why market still respecting div yields for many of the preferred still.

It sounds like from the look of it the commons are not going to be wiped, just dilution which was a big fear of mine and why i avoided them. If all of this reporting is true then there looks to be much more upside to the common at 9.62-13.15. I hold all preferred but they conceivably could be converted to common either way but this reporting looks like just a straight return back to privatization. 6.7-9.2 times on the common at these prices....

Am I wrong in saying this is the first time Phillips has confirmed or said these things? Again market not buying it or ignoring it. Maybe market thinking time to implementation makes the securities still unattractive at these prices? Not sure what else needs to be said here besides when and how much. Market saying still no more then 25% of par at this point.

Later this month Treasury releases its semiannual currency report. We will see if Mnuchin has changed his stance re China as currency manipulator. Not too long ago he was squarely in the moderate camp looking for an amicable solution. He now appears to be aligning himself with the more radical side at the WH. Is he being pressured to get in line with the 'war on China'? Point being, relying on Mnuchin's original view on Fannie and Freddie may have become quicksand. 'renewed his push' ? more like 'dribbled out his stale rhetoric'. Thats what I am referring to. He said get them out of government control 2 years ago now. Of everything that could be pushing him towards speeding up the process the housing market sure wasnt one them. Will have to see if that changes. Redfins CEOs comments recently are concerning.

I'm well aware of the wall street adages of predicting recessions and how money can be lost but the way the US market and markets around the world are "acting" makes me think growth is slowing and we may have seen the peak at least in the economy for a while. At the risk of getting into a wordy disseration but with PMI readings, employment, consumer sentiment, and the stock market at all time highs in the face of rising rates it seems at a minimum peak growth maybe behind us. The market is up single digits to date and although valuations are not extreme this was on top of a huge stimulus tax package. 2019 we lap that and are things going to be that much better with the effects of the tarriffs and higher cost debt? What happens to the economic indicators then? We hear out of Washington everyday that growth is accelerating and best ever. Best ever is almost always near the top. Every other stock market is getting crushed and the Fed still has a huge bond portfolio to unwind. At a minimum we will see the wealth effect take a turn for the worse with rates rising, lower stock market valuations and in turn decreasing home prices. Housing is already slowing down due to rates and the SALT tax exclusion. Im by no means calling a market top but someone famous once said its better to be roughly right then precisely wrong. At a minimum 12 months from now its not unreasonable to think a market devaluation due to multiple compression (pick a number, 5-10%) is coming. We saw it today in tech and FB earlier this year. The high flyers are coming down. I promised myself after 2008-2009 to not stick my head in the sand when things got too good. At a minimum I think a healthy caution is warranted and I know myself Im going to have to really readjust expectations for growth and valuation over the next couple of years. Thoughts? How much better can it really get?

With the recent market turmoil and rates rising as they have been I think Mnuchin maybe forced to act sooner then he may have wanted as I think/bet housing is going to start to get hit. Home prices are starting to fall already on the coasts and homes are not moving nearly as fast as they used to otherwise as prices have not come down yet. It isnt simply that linear but rates going forward to have found a bottom and prices, ie the wealth effect will take a hit. Im not calling a top in the economy or recession necessarily but valuations of every asset are going to start heading down. For time sake I hope this is addressed before Mnuchin has to worry about a housing related crash but 6-12-18 months from now housing prices are going to start coming down. Hopefully will provide a push in the right direction.

I would say its because the buyers and sellers think the best price for buying and selling is very similar.

One would have to wonder if we have met or coming very close to the all in moment if one is inclined to do so. Best would be to hold out till midterms later this year then go for the gusto. Seems like time is the biggest impediment to ROI at this point. If you were willing to put 5-10% etc of your portfolio with what we as investors knew 2-3 years ago it seems like a significant increase in exposure would be in order relative to what is thought/known now. I was willing to put up to 10% of my portfolio with a coin flip of whether or not they were going to be "wound down". Where we sit now an increase in exposure should be in order no?

They are giving a major hint, possibly. Mentioning that they are private companies repeatedly is encouraging. Explicitly stating that they are privately-owned, and then completely wiping out shareholders (instead of just massive dilution to common), would seem to set the White House up for lawsuits that could come back to hurt them. I think they are smarter than that. It reads to me that they are making a concerted effort to mention that they are privately-owned companies. "However, this system is challenged by the operation of two privately-owned Government sponsored-enterprises (GSEs), Fannie Mae and Freddie Mac..." (page 75) "Competition to the duopolistic role played by the two privately-owned GSEs would be an essential element..." (page 75) "In order to propose changes in the Federal Government’s role in housing finance, this proposal outlines policies related to the privately-owned GSEs and ending their conservatorship." (page 75) "Under the current system, Fannie Mae and Freddie Mac, two privately-owned GSEs, buy and guarantee..." (page 76) I know I get it. Im just to the point now that I'm ready to hear the damn plan for those holding shares. I think its been laid out pretty clearly that they are not going away, out of conservatorship etc etc. How many more times do we have to be told that? My observation seems to be the markets...what the remedy? Until that is set out in stone prices of preferred will trade at a small % of par and common like options no matter what the leak, innuendo, etc. We are past that stage. Still many questions to be answered. What happens to preferred? Is it redeemed at par? When? Dividend? Convert to common? etc. Reading the tea leaves was 2-3 years ago. What determines this investment is not whether or not shareholders are compensated (Im speaked preferred). Its how much and how long will it take to get it. That's the investment thesis for this now. Both are unanswered and why still trading at ~20 of par for some issues.

Market seems to be tiring of the speculation and really wants only a final decision at this point. Can we call agree on the fact the FnF are not going away and coming out of conservatorship? No more reason to speculate. Basically at this point I just want to know what I get for holding my preferred shares going on 4 years now. In the bloomberg article that came out Stevens was very supportive of the plan. Maybe that endorsement and revoking the charters are what is scaring some people still? Still of course no mention of what will happen to the shareholders.

Looks like we would have been golden before the sweep.

It means there are less people short then before.

If you want an article that attempts to kill the rally, look no further than this. Ideologically fueled nonsense that starts with the assumption that FnF were a cause of the financial crisis, and manages to assert that the proper way to run a federal conservatorship is to shrink the companies' footprint. https://www.forbes.com/sites/norbertmichel/2018/05/22/is-mel-watt-setting-up-another-bailout/#2e174f861572 I thought Joe Light's piece was actually rather informative, and not slanted against shareholders as he sometimes is. I agree I learned something. I think we know why the RNC piece means/has meant nothing now.

Just had to throw my $.02 in which is broadly inline with others. Looks like all we have to do is just sit and wait huh? So we need either a change to the 3rd amendment, receivership(unlikely due to mnuchins comments) or some other congress and a new path forward. A lot of maybes but maybe this is Stevies' thought all along, wait till Hensarling, Corker out and work with new congress after all. Does the fact that the stock still trade mean it will see value eventually? She mentions this as a reason?

I think there is no question this is premeditated. Not sure I could give a good answer for it though.

It seems like fatigue with this investment is setting in. Maybe the end is near! ;)

1+

I have a core position that I hold on to. I just use the rest to jump around and hopefully take advantages of the sways of the market. The correlation directly reflects the market's opinion of the probability that dividends ever get turned back on. I leave out FNMAS and FMCKJ on purpose to avoid liquidity premiums tainting the data, but I include FNMAT when I perhaps shouldn't. Im surprised the market even bothers to take divs into account at this point with some trading at the % of par that they are. 10 years into this mess for some reason that is still respected.

Anyone changed there mind on any of this? Any new thinking. Im think of just selling late. warrants are in an IRA so there are no tax consequences. Leverage appears to be in single digits on a percentage basis looking at last couple of months.

:o :o :o :o :o :o :o You sound like the losing team complaining about the ref. I think was referring to your constant whining an often little value added. Just a hunch.:)

You sound like the losing team complaining about the ref. I think was referring to your constant whining an often little value added. Just a hunch.:)

This looks to be relevant http://www.businessinsider.com/ken-moelis-million-dollar-coin-flip-with-donald-trump-2017-7 Maybe gives a little idea as to why Paulson was in on the Moelis plan and how the name Moelis came out of no where with a grand plan for housing reform. We can speculate as much as we want but the intertangled web of connections and relationships is starting to become quite obvious. Even more so who is on the outside (AEI, MBA, corker, hensarling) and who is on the inside.

Meh. Quote from Michael Berman: "As chairman, Berman's top priority will be to continue MBA's role in redesigning the government sponsored enterprises, Fannie Mae and Freddie Mac. "I am honored to serve our industry as MBA's 2011 chairman," Berman said. "MBA will continue to lead the battle to restructure GSEs with private capital and a new, clearly defined, but limited government role in guaranteeing mortgage-backed securities." Context of Michael Berman for those unfamiliar: https://www.nytimes.com/2015/12/07/business/a-revolving-door-helps-big-banks-quiet-campaign-to-muscle-out-fannie-and-freddie.html Seems to be thwt the conclusion of this argument is too keep everything the way it is , since it seems to work just fine. Exactly. People are slowly coming to that realization. Those motivated to change the way it is see opportunity but so far has proven very difficult. I mean the entity has functioned since the great depression with one hiccup, albeit large no doubt. The source is up for debate but it seems most are finding there is no better system how imperfect it may be. Those involved also have come to this conclusion during a time of little to no market stress or panic and not when the GSEs maybe needed to function again the most. All this talk of private capital is a luxury when private capital will assuredly dry up during bad times or a panic.

Mnuchin didnt mention keeping the 30 yr mortgage just restructuring FnF. FnF is the 30 yr mortgage in Mnuchins eyes and IMO he does not see them going away. Now he only mentions not putting the tax payer at risk. So now we have in Mnuchins eyes and what he has said: 1. Out of conservatorship 2. Maintain 30 yr mortgage -> FnF not going away 3. Not put tax payers at risk 4. "Restructured" So we get a new/different gov guarantee and capital structure. 2-3 years ago there was a legitimate thought or chance that FnF as an entity were going away. That is gone now. Now its "just" shareholder treatment and how it relates to "restructured". Im still comfortable holding but agree it is annoying. Best way to not get annoyed is to lower expectations. Plan on this getting done before Trumps out of office. Thats how I look at it. Any news otherwise is good news.