investorG

fairholme fund is underperforming again this year, by around 23pct. hard to imagine him not having further withdrawals and some forced selling.

could wait a few years from now and even with a win could get paid a couple dollars per share (where it was in 2012) with some interest sprinkled on. or lose. hopefully the Moelis team realizes that the par value transaction was a stretch goal and goes for a reasonable number at some discount to par that's well above current levels.

fairly pathetic securities prices at the moment. hopefully someone in power realizes this is America, relatively soon, and takes an appropriately fair course of action that benefits all parties.

after listening to much of the hearing from yesterday, and in isolation, is it better to have the team of waters / cleaver / Maloney in charge of the fin services committee in 2019 vs. sean duffy and republican crew?

Hello, everyone. we're 2 months away from midterms now. since mnuchin and phillips explicitly punted the issue in feb/march, that's likely when the door for any potential action theoretically re-opens. IMO Mnuchin needs to see the lay of the land for the next 2 years before deciding on his strategy; some legislative options will open / close depending on what happens. My hope is that the warrants are the backup plan to fund the wall if the Republicans lose in November. In addition, if FNMA hasn't hit the 10pct moment until the Sep-30 payment, it was hard to do something with the sr preferred until that milestone was/is reached. Finally, the more court cases we lose, the lower the expectations from jr preferred shareholders for value, making a fair compromise easier to accomplish.

Good thing my thesis doesn't depend on the courts. With that said, a court win would be a nice bonus to speed up the process. it's highly likely the shareholders lose or receive a small payment from the remaining court cases. mnuchin might wait for the cases to fizzle before acting administratively. this would also allow for another legislative crack in spring and summer 2019. if you're out there, Mr. Mnuchin, please in the mean time stop the sweep after the 10pct moment is hit. And in your view, what would the legislative approach most likely be -new Congress aside- and what would an administrative solution may look like? rros, mnuchin said to congress recently he prefers an explicit guaranty at the security level. this requires congress. also, there's been a lot of work done in the senate committee and pat toomey or sherrod brown (if he wins his race) are the likely future chairman (depending on who wins control) and either would probably want to give it a firm shot imo. plus, the extra time lets some of the other court cases fizzle. finally, a legislative solution is more official and permanent. still, there's a good chance it fails in the end. a true administrative solution is likely something near the moelis plan but that's probably a late 2019 potential event. What I believe is fair is a parallel process whereby he works legislatively but also - once the 10pct moment is hit for both companies - freezes the sweep and institutes the commitment fee in its place to get the capital build going - the companies are massively overpaying for the backstop capital committment at the moment. And, if the warrants are the backup plan to build the wall then he wouldn't want to wait too long to get things started.

Good thing my thesis doesn't depend on the courts. With that said, a court win would be a nice bonus to speed up the process. it's highly likely the shareholders lose or receive a small payment from the remaining court cases. mnuchin might wait for the cases to fizzle before acting administratively. this would also allow for another legislative crack in spring and summer 2019. if you're out there, Mr. Mnuchin, please in the mean time stop the sweep after the 10pct moment is hit.

I admire the board's residual hope that the courts will deliver for the minority shareholders but I don't see it happening. Perhaps there's some small chance that the claims court rules it was a taking (a long time from now, including appeals) but the preferred shares were trading below $2 when the NWS was implemented and so the payout would likely be modest. Imo, in the end after all appeals / deals / etc..., no investor windfalls will be allowed by the collective government apparatus, especially given the hedge fund narrative. The market is saying that loud and clear (and this is not an under-researched / inefficient investment among the smart hf community). At this point, I believe we're betting on the powers that be coming together offering a fair compromise where all parties get some but not near all of what they believe is fair. In that hoped-for scenario, the warrants would almost certainly stand (rather than some random subjective sr pref conversion like Tim Rood suggests) and jr preferred would be either surrendered via voluntary tender or converted to common around 50-75pct of par, while the sr pref would be retired in line with the full original 10pct interest + principal payment conclusion. The warrants can build the wall as Trump's backup plan if Congress doesn't fund it. Good luck to everyone. This scandal has been a disappointing yet mostly unnoticed blemish on our country and I truly hope that the current administration sees this as a real priority to quickly fix starting in about 3-5 months. Thousands of Americans are counting on them to do the right thing.

That might be wishful thinking. It reads to me like he is diversifying a bit other than his massive position in St. Joe. Odd for a guy like Berkowitz to diversify but he was down to something like 3 or 4 positions so perhaps he felt the need, and the heat from his investors, to spread it out a bit. I'm guessing he's also realizing it's unlikely that par value is a realistic upside target. In a hopeful future deal, it's necessary for both sides to compromise.

The news certainly is concerning. On one hand I love the thesis and the odds of administrative reform into a utility/Moelis/etc. seem to get stronger as time goes on and news is released. On the other hand one of the largest players who is in on a major lawsuit has reduced his position. Perhaps it's redemptions (but he didn't reduce St. Joe's and he has bought other new stuff). Perhaps he thinks the time it takes to win is going to still be a few years (and he thinks St. Joe's and other new investments will appreciate in a shorter time period). Perhaps he has lost faith in his thesis. Perhaps he knows something from his lawyers that will be detrimental to his case. Berkowitz doesn't hold very many large positions, but he still does have a large position in the GSE's. Clearly St. Joe's is his favorite holding at the moment. Personally, I'm not selling any of my holdings as all-told I still really like the investment, but him selling this much is concerning. I dont know his motivations but it's hard for underperforming funds to hold 25-30pct positions in investments that are viewed as dead money for 12+ months. Unlike many of us, he has outside investors to answer to -- so he sold this and bought some other more traditional positions. Good chance he was disappointed in the lack of leadership on the matter.

Seems reasonable - he has a big business to run and surprisingly phillips-mnuchin early this year punted to 2019.

nice close reading rros first point is that Ps had standing to make constitutional claim, that they were injured sufficient to present a controversy...something judge schlitz in bhatti mangled. yes Ps have been injured and at least the court got that right. second, notice that this opinion was a three way split, with no one judge agreeing to all pieces of the APA/constitutional claims analysis. so, something of a committee horse looking like a camel. third, however, the remedy doesn't redress the injury, and this is where I think the female judge said this was as far as she could go. I think it is important that HERA does not have a severability clause, so that this is not a case where congress has preauthorized a court to excise some term it finds unconstitutional and then reinstate the "cured" statute. also, the court likely saw judge kavanaugh in PHH merits panel decision declare cfpb unconstitutionally structured but also remove the for cause provision prospectively...but there is a big difference in the cases. in PHH Kavanaugh found that cfpb also violated the statute, so the constitutional claim was icing on the cake, and the constitutional retrospective remedy not necessary. here, the APA claim was denied, so the constitutional remedy "should" have been applied...especially after scotus in Lucia said Ps should receive remedies that encourage them to make constitutional separation of powers challenges cherzeca, i'm not sure on the timelines of some of these cases and appeals but i guess it's possible some could last well into 2019, and perhaps go to the SC. How does Mnuchin / Congress potentially make a law in 2019 without knowing the resolution of the cases?

I'm grateful for Judge Haynes to write about all of the shareholder injuries etc. But to say that getting rid of the NWS wouldnt fully remedy the plaintiffs' constiutional injury, and instead they would be satisfied that going forward the FHFA guy can be removed at will is shocking.

depends on whether appealed. I would think fhfa has to appeal, and Ps certainly will. if the appeal is taken by scotus, my guess is that administration may hold fire. just a guess thank you. unlike many investors, mnuchin can easily sit back and wait 4-6 months to get a better sense of how things stand - he's already given himself the time cushion. but some of these cases seem to be drifting to 2019-2020 and so at some point (hopefully after midterms) perhaps he needs to just get going on a plan without perfect info from the courts. could this ruling help in any other pending court cases like the perry remand, Sweeney, Delaware, or saxton? thank you

does this change mnuchin's apparent timeline of a) working with congress first in 2019 and b) if that fails do something administratively? thank you

hello everyone, I hope you're having a nice summer outside of the disappointing FnF share price action. the clips from last week's hearing made it sound like mnuchin knows what he wants to try to do, preferably through the next congress but also with a less comprehensive backup administrative plan in mind. If possible to get through Congress, he likely supports most or all of Mulvaney's proposal from a few weeks back. If it's administrative, he likely wont get a government guarantee and perhaps would focus on FnF explicitly paying the Tsy for a backstop (committment fee). Either way, they need capital and the sooner the better. i'd expect him to become less reserved about his intentions after either the elections or the new year.

he likely wants a govt guarantee and also permanence of his actions -- both of these require congress not administrative. so, as he's said a month ago, he's waiting for a new congress, likely with different leadership in place. potential administrative action is late 2019 at a minimum. I just wish he'd stop the sweep in 2018 and turn on the commitment fee -- we're overpaying for the backstop in a big way. But turning on the commitment fee would change things little. Except for us. It doesn't look like he is going out of his way to help hedge funds/shareholders. Something has changed. The opposite more likely as these appearances happen at the exact moment of shares on the verge of a breakout. Anybody has any reason to believe J Powell and perhaps Mnuchin are in an Andrew Mellon “purge the rottenness out of the system” mission? Yellen would have stabilized markets long time ago. No help for markets, no help for hedge funds, no help for us. Why end the sweep, then? officially, to get the ball rolling on building capital while still leaving most critical reform decisions to congress. unofficially, because it's the right thing to do after the full sr pref + 10pct interest has been repaid.

Yep. Well, we know what the agenda is for the RNC. It can only be an agenda that, presumably, Watt doesn't support. Moelis? there might be some areas where he agrees with watt (hopefully shareholder owned utility) and some areas where he doesn't (3pct down payments)? the new fhfa director will theoretically be fully on board with mnuchin's view.

it's highly unlikely he can slap an explicit guarantee on without congress; among other reasons, this is likely why he's waiting another year.

how is Watt good? simple - his utility paper earlier this year likely stopped the corker bill by giving democrats cover to resist.

he likely wants a govt guarantee and also permanence of his actions -- both of these require congress not administrative. so, as he's said a month ago, he's waiting for a new congress, likely with different leadership in place. potential administrative action is late 2019 at a minimum. I just wish he'd stop the sweep in 2018 and turn on the commitment fee -- we're overpaying for the backstop in a big way.

was the government's reply due last Thursday in the Delaware case? I don't see it on gselinks.

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. probably the dividend correlation increases when limited positive news is expected over the near term (now). it likely shrunk when there was noise of resolution in the corker bill.

capital bought a little more in the quarter but the pershing info is old and stale. rather, i'm kinda anticipating some WSJ news story that ackman or some other large common holder has fully exited their common position. the adding portion was stale. the existing portion, I was guessing they might have been the seller but the filing you highligted does say 'presently' when referring to their 10pct stake. so my guess is likely wrong. if they aren't selling, and capital held/increased, i'm stunned that the common dropped 60pct between dec and april.

capital bought a little more in the quarter but the pershing info is old and stale. rather, i'm kinda anticipating some WSJ news story that ackman or some other large common holder has fully exited their common position.