SnarkyPuppy

https://en.wikipedia.org/wiki/Straw_man

What FCF ratio are investors paying for crypto now? One example - some of the decentralized exchanges have tokens which receive trading fees as dividends, programmatically guaranteed via smart contracts. Recently traded for 20-30x earnings and growing ~100% a month. Absolutely can be valued using using DCF but doesn't fit your narrative - so don't look further!

NFTs are definitely quite bubbly (wrong side of Gartner hype cycle). With that said, plenty of extremely interesting opportunities across crypto right now - we've discussed BTC's thesis at length but the DeFi space is fascinating and worth checking out -- if for nothing more than intellectual curiosity. People on this board mocking how dumb crypto is (essentially implying superior IQ and analytical abilities) without spending any meaningful time understanding the space strongly resembles the value-above-all crowd mocking anyone paying >15x FCF regardless of quality just a few years ago. Most of the space is extremely nascent and 95% of projects will fail (similar to what happened in '90s) but if you're not absolutely fascinated by a meritocracy based pseudonymous developer ecosystem attempting to rebuild the financial system using first principles, you're just being stubborn.

Right. Bitcoin is the first asset in mankind with a) no counterparty risk when transferring at scale and b) where one can get on a boat naked and travel from the US to China carrying $10bn memorized in their head with no physical trace (before you get excited and try to challenge how risky this is - this is an extreme example to help explain what is unique and valuable about btc. a more moderate way of doing this would be to write down 10 of the 16 private digits and memorize the remaining six). gold is valued as a hedge of extreme outcomes (hyperinflation / financial system collapse) that are very low probability events. btc is a better version of gold. If you're still slamming your first on the table and yelling tulips: what could cause you to change your mind? Is it possible you're suffering commitment/consistency bias? A lollapalooza effect combined with real fundamental value (fundamental for value investors is discounted free cash flows which is fine - nobody is saying you have to invest here. but the tulip argument ignores that censorship-resistant/seizure-resistant/inflation-resistant store of value HAS fundamental value in a different way). Just because there are plenty of idiots in this trade (embarrassingly so) does not mean the thesis doesn't have some merit. There are real attack vectors for bitcoin, just rarely discussed due to the cheap common counterarguments that are usually made.

Highly shorted + passive influence as the article describes

I think you are misunderstanding how the SPS dividend works. The SPS don't get a dividend until FnF hit their full with-buffers capital level of 4% of adjusted total assets, even if a future FHFA director makes a new capital rule due to Section 5.15, unless Yellen and the new FHFA director amend that out. Once full capitalization is reached ("Capital Reserve End Date") the SPS get the lesser of any net worth increase from the previous quarter and 10% of the SPS liquidation preference. But dividends to other classes of shareholders subtract from net worth just as earnings add to it. So once dividends are paid out to other preferred and common shareholders, the SPS gets the rest of what FnF earned in that quarter. What that means, paradoxically, is that the SPS are at the back of the line in terms of dividends once full capitalization is achieved, and the SPS get no dividends at all before that. It remains to be seen how easy or possible it will be to sell new common shares who have zero liquidation preference ever but will get normal utility-like dividends. Without a settlement to the lawsuits and private capital raises the SPS will get no money from FnF for decades. Not even a commitment fee, unless a future FHFA director and UST Secretary reinstate it. Altogether this agreement actually gives Treasury an incentive to move quickly on raising private capital: slow accumulation of retained earnings provides less taxpayer protection (in terms of how much capital stands in front of UST's LOC) compared to fast and large capital raises, and those raises accelerate UST's timeline to getting payments on its SPS. The SPS dividend also answers a question I had, which was "what would FnF do with all their earnings once they hit full capitalization?" I couldn't imagine the government would be okay with private shareholders getting enormous dividends, and FnF would have no reason to save any money past full capitalization anyway. Now we know: UST gets all the extra money. Something else to consider is that 4% of adjusted total assets, the threshold at which the SPS divs turn on, was $265B as of last June and grows with FnF's asset base. I use 2.5% per year as a ballpark. FnF's combined core capital, though, was negative $167B at that time. That's a $432B gap! FnF make around $20B in earnings per year, but the 4% target grows at $6.6B per year right now and faster in the future as the 2.5% increases compound. Carrying out the math, that means not only will FnF not be fully capitalized through retained earnings by 2028, it will never happen at all! The smallest the gap between FnF's core capital and the requirement gets is $72B in 2065, then the compounding of the 2.5% becomes greater than $20B per year and the gap starts to widen again. Now, assuming flat earnings of $20B per year is probably unrealistic. If they also grow at 2.5% per year, which I think is reasonable because FnF's earnings are also roughly proportional to the size of their asset base, the $432B gap closes in a finite amount of time, but not until 2044. Note: only the SPS balance on the balance sheets count (negatively) towards core capital, a total of $193B for FnF combined. Increases to the liquidation preference due to the letter agreements, including the one from Thursday, are not reflected on the balance sheet and thus don't affect core capital at all. "unless Yellen and the new FHFA director amend that out" Absent SCOTUS - this whole thing is moot due to the possibility of future amendments

There's really no reason for the UST to settle or equitize the senior preferreds. You need to win SCOTUS APA or lamberth. The govt can let the liquidation preference rise to the 3% threshold and then continue to effectively receive the net worth sweep (10% of a large liquidation preference). Although the government isn't receiving cash, there is a benefit to taxpayers having less risk as the GSEs retain capital - and once they hit it the government gets to keep its dividend. It's ironically the opposite of the "private gains, public losses" - they've quite literally flipped this. The GSE entities fund the losses - the govt reaps the gains. Why would they give this up? Mnuchin seemed to be an outsider, seemed to have the appropriate incentives/relationships, and pseudo-communicated that this would be resolved. He didn't do it. There previously was margin of safety in this investment in that, if we were wrong about Mnuchin, the preferreds would not decline to $0 as there remained a legal case with some reasonable % of success. There is no longer multiple pillars of margin of safety - you need a legal victory. Hoping a future UST will somehow be favorable to you is too optimistic. My view is that you cannot assign any reasonable probability of success on the admin front anymore - I'm stunned that some of you are continuing to read into "yellen was briefed on the plan" tea leaves. And I think most are in over their heads trying to underwrite SCOTUS. cherz, while informed, has been consistently wrong in his legal predictions. It's an incredibly complicated area and I suspect there's an element of luck involved. Forward returns are quite attractive on a long-term basis. IRR to par value through 2030 is higher than you can reasonably achieve on most investments. The longer you're in a position - the more commitment and consistency bias you suffer from. I've learned over time that thesis creep can be even worse than being brutally honest about being wrong. I've materially reduced my position.

My favorite dipshits are those who enter threads to tell people who are having a bad day that about their prescient forecast, after the forecasted event occurs. Yikes.

I cannot understand Ackman not plowing out here

If I understand correctly, it seems in the plaintiffs best interest to settle as there is a clear path to junior preferreds receiving par value in 2 to 3 years. The big assumption of course is Yellen's appetite for settling. Are there any inaccuracies in the below? $35bn = retained equity capital 9/30/2020 $198bn = 3% of assets 9/30/2020 (required for exit from conservatorship) $228.8bn = current liquidation preference 9/30/2020 Assume $30bn of incremental retained equity capital via earnings through 9/30/2021. = $65bn = retained equity capital 9/30/2021 (=$35bn+$30bn) = $258.8bn = liquidation preference 9/30/2021 (=$228.8bn+$30bn) The GSEs are *each* allowed to raise $70bn under two conditions: - settlement of all litigation with > $5bn at stake - UST exercises its warrants (which would occur concurrently with settlement) Assume $140bn capital is raised on 10/1/2021. = $205bn = retained equity capital 10/1/2021 (=$65bn + $140bn) = $258.8bn = liquidation preference 10/1/2021 (*pretty confident that the equity raises would not increase the liquidation preference but would appreciate challenges) At this point, the GSEs will have achieved the required 3% of assets milestone which, aside from resolution of all material litigation, is the key milestone required to exit conservatorship. If the capital structure at this point remains as is (it wont), you're looking at the senior pref dividend of $26bn against ~$30bn net income which should cover dividends for the $33bn junior pref. Of course, additional common equity can be raised to further reduce the senior preferred position.

I actually think the current rumored reporting is consistent with a lot of what you have been predicting. We'll see. Mnuchin probably browses this thread and is stealing your idea - hence the last minute change. Mnuchin = emily?

LOL @ the legal path

I suspect this is a bit of an overly optimistic take and the most honest/appropriate assessment of the current situation given the reporting is that there will be a PSPA amendment, but it will ultimately only achieve a similar outcome as the Sept 2019 letter agreement. There are good reasons why this may be wrong, but I unfortunately this has to be your base case at this point. Haven't sold any shares since, to your point, nothing specifically concrete has been reported. But at this point you have to consider this as a very real possibility.