Ahab
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Posts posted by Ahab
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I think this board is in a near-term "trough of disillusionment" re the possibility of getting significant things done in the next 6-12 months. At this point, Calabria needs to do more doing and less talking to get the market on board with his plan. Notice people's reaction to his joke yesterday asking if 'anyone had $100 billion lying around.' Give us the terms..
There are diminishing returns on telling people in generalities what you are going to do and then having them not believe you or question the timeline/integrity of your plans. Show, don't tell...
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2/3 of the subject matter experts on the GSEs are probably surreptitiously writing to one another on this very message board. I've given up on the mainstream financial media understanding GSE reform because most journalists have either not put in the work to understanding the history of Fannie/Freddie and the nuances of the reform debate, or they understand perfectly well what's likely to happen and have been told to gum up the works.
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I agree Jurgis. I'm inclined to think it will be an interesting lunch for WEB.
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I bought some (now in the money) GM 2021 calls yesterday.
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Sold more Tesla call spreads.
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I shorted CVNA, bought some OTM GM Calls, and rolled some Tesla call spreads. It was a good day, thanks Musk.
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In regards to the GSEs, they haven't done anything in 10 years and they won't do anything substantive now. But Congress will whine if they feel not included like the do-nothing bunch they are.
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I love this channel. I agree Castanza that Company Man does a really good job in telling business stories.
Sears, Kmart, JC Penney, Enron, Toys R Us, and Blockbuster are some of the companies profiled. He tends to really get at what makes a business interesting and the factors that led to its rise and/or decline (and occasionally its rise again).
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I think people are reading too much into journalistic suggestions about high, bank-like capital requirements. The people working on the recap aren't stupid, they aren't going to sabotage the raise by pursuing completely unrealistic standards. Game theory suggests a compromise figure that lets the reform continue apace...
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Couldn't have put it better myself. Personally, I think we are at the announcement of an announcement stage of the GSE reform plan /s.
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To paraphrase President John F. Kennedy, the time to repair the roof is not in the middle of a downpour, but when the sun is shining.
Reform shouldn’t have to wait for the next crisis. Reform is about avoiding the next crisis.
And by January 1 of next year, my hope and expectation is that we will be on the path to a new regime where the GSEs can start to build capital. At that point, the path out of the conservatorships will depend not on the calendar but on Fannie and Freddie meeting the mile markers we set out for them.It was insufficient capital that triggered the conservatorship, and it’s going to be sufficient capital that triggers an exit.
I will continue to consult with Congress on legislative reforms. And I’m hopeful that we’ll be able to find broad bi-partisan agreement on some key issues, as we have in the past.But while I’m committed to working with Congress, I’m not going to wait on Congress.
In fact, if you look at the statute, it contemplates an end to the conservatorships. The model is very similar model to how the FDIC operates. The law requires me to do what I can within my powers to fix the GSEs and then release them from conservatorship – and that’s exactly what I intend to do.
The FHFA conservatorship has lasted far longer than anyone expected. Back in 2008, as it was being debated and developed, I remember thinking that any conservatorship was unlikely to last more than 6 months.
It has now been more than a decade. And while leaving Fannie and Freddie in this state of limbo may be comfortable for some, it is unsustainable as a matter of economic policy and it is unfair to American taxpayers and families.
As a regulator, my primary concern is that the GSEs maintain capital levels commensurate with their risk profiles. And over time I think Fannie and Freddie ought to operate under essentially the same capital rules as other large financial institutions.Areas of concern for shareholders: discussion of bank-like capital standards (yet he was speaking to the Mortgage Bankers Association after all), stating that 10 GSEs would be preferable to 2 because market competition is generally desirable (new congressional charters would be necessary).
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I sold some more TSLA bear call spreads this morning and also bought some more far-OTM puts. I plan on scaling this short position from 10% to 20% of my portfolio this week.
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This is a very creative idea. Thanks for sharing allnatural!
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I've really been enjoying the board's commentary this week about commons v. preferreds. The investor in me says stick entirely to the preferreds, they are the safer side of an already incredibly speculative bet. The speculator in me: "Speculative you say? Wait hold my Beer!!"
So, I opened a stake in the commons on Friday (about 20% of my GSE position). My base case is that they are worth $9-12. I see far more dispersion of outcomes than with the preferred stock, but that is a risk I am wiling to take. Anyways, hope everyone has a nice weekend.
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My take on this speech is that it is moderately bullish for us shareholders. Trump is a volatile personality, so it is good that his mind (and not just that of his appointees) is set on recap and release. Mechanics remain TBD, but it was encouraging to hear the sentiments this board expresses daily said by the man himself..
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"My administration is committed to reforming our housing finance system...so important."
"we have many geniuses looking at it...and we'll figure something out..."
"someone said: why are you using wall street?" "Cuz I want to get very smart people, people that do this."
Major points (nothing this board didn't already know):
No reform has happened yet 10 years after crisis, GSEs still dominate the market (more competition would be desirable), taxpayers still on the hook (urgent problem in a recession), Treasury and HUD should develop a framework for a modern housing financing system, work with congress and also pursue administrative solutions to help the US housing system.
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Here we go, after a long Trumpian speech he's got to talking about Fannie Mae....
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@Midas
I also often find that Fanniegate comes across as annoyingly naive. Yes, I feel common holders got shafted. No, the common share prices aren't going to be worth $100 next year, barring God himself demanding it from the U.S. Treasury.
Gasparino is amusing, I consider him to be a national treasure. No other financial reporter is so consistently wrong on the hot stocks of our era. Whether it is Fannie Mae or Tesla, Gasparino can be counted on to provide bad internet banter.
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I'm curious what others think about Fannie Mae common at these levels. My very speculative opinion is that they currently are a better value than the preferreds (currently only in preferreds myself). The common share price reflects a wider dispersion of outcomes. To me, a bet on common is a bet on moderate dilution instead of maximum dilution. Yet, assessing probabilities about the recap's mechanics is what trips me up..
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I'm a huge fan of plans that actually work that happen to make me money.
In all seriousness, McLean is a good author and her book on the GSEs, Shaky Ground, is an enjoyable, illuminative, and quick read.
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Anyone think this has a chance of passing?
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I think Musk has attempted some audacious things in his career and certainly moved forward the timetable for EV adoption. Yet, Tesla is trying to tackle a business with a reputation for terrible economics.
Musk has played himself in his conduct and behavior. He didn't need to go for the "short burn of the century". He didn't need to overpromise on production figures, semi trucks, or the autonomy timetable. His social media showmanship and potential violation of securities, highway safety, and other laws are entirely his own doing. Ostensibly, he could have recently raised capital at $300+ a share. So Tesla's lean budget and coming cash crunch can be attributed in significant part to Musk's poor strategic decision making. The man is bold, but he isn't well and should have been removed as CEO months ago..
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@cherzeca
These facts certainly color my thinking and I see good reasons for optimism in the administration's approach. Although, in regards to Calabria's confirmation and the start of the recapitalization process, it's not over until the fat lady sings. I think that's why the market refuses to budge too much on the preferred share prices. We as shareholders have been hoping for years to wake up one day to a decisive change (legal or administrative) in the status of these entities. Until that day comes, risk and uncertainty will endure in hearty quantities.
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I would argue that the GSEs have far more near-term political risk as an investment than the big banks. However, assuming a recap occurs, I believe the opposite will become true. Every couple of years banks such as WFC are involved in some sort scandal or untoward activity. LIBOR rigging, banking for the cartels, and opening up accounts without consumers' knowledge are the kind of improprieties that end up on CNN, HuffPo, etc... With Fannie & Freddie by contrast, most Americans don't really know what they do or have emotionally intense opinions about them. Thus, in the long run, I envision Fannie and Freddie having less political risk than say WFC.
FNMA and FMCC preferreds. In search of the elusive 10 bagger.
in General Discussion
Posted
Well said Wiggins. I can't imagine the pressure the administration is under. Hopefully we see a favorable en banc ruling before months end to further help propel GSE reform forward. Have a nice weekend!