Wiggins

More prior comments from this user: "it’s a lottery ticket", "It’s not an investment ". Is that analysis too? If you think this "investment" is such a POS then please tell me why you're here discussing this "investment"? What do you hope to gain?

If you're very negative about this investment then offer actual analysis about that and then move on. Repeating "hopium" and "suckers" is not analysis, it's just insulting.

John Paulson recently made a comment that the Treasury's stake in the GSEs is 90-95% of their equity. Do you realize what that means for JPS?!!!!!!

Kaoboy has indeed spilled a lot of ink on this topic. He's extremely knowledgeable and experienced in the areas of restructuring, no doubt. This is a great read. But does he have experience in the restructuring of massive Federally-chartered institutions that cannot be changed or replaced easily? I noticed his whole restructuring thesis is predicated on changing the GSEs' charters (e.g., creating an explicit guarantee, etc.), which cannot be done without an act of Congress. That's a huge problem with his thesis, IMO. Let's set that possibility aside for a moment. If the Trump administration wants to release the GSEs administratively without Congress -which Trump has already said he would do-, then how can the JPS be restructured without the JPS's explicit 2/3rds vote approval? I see how common dilution can occur without a Congressional act, but I don't see how for JPS. The only relevant question that Kaoboy seems to address with respect to administrative release is the legality of the SPS taking a haircut. He cites Calabria's book. Really? What law? Which Federal Statute? Moreover, since the SPS liquidation preference is higher than the book value of the GSEs, then the SPS would already be taking a haircut. I think what Mnuchin was referring to is that the Government cannot give its property away for free. Fine, but that's a different problem and isn't it in fact favorable to existing shareholders? In administrative release doesn't the Government extract more value by respecting current shareholders? How about receivership? This can be done without Congressional approval, and JPS can indeed be wiped out in this scenario. But there are a whole bunch of reasons this seems unlikely. First, how would the Government get paid anything near what they would make with administrative release? They cannot sell the GSEs with their charters intact. They cannot even sell their SPS. They can only liquidate the GSEs assets. And the GSEs' greatest value is not in their assets, it's in their Congressionally-chartered business models. They used to have valuable portfolios but those are relatively small at this point. It would also create major havoc in the financial system. Back to the act of Congress scenario. Anything under the sun is possible here. Who the hell knows? But I'm in full agreement with Kaoboy here on the chances of that. First, the R's would most likely need to control both the House and the Senate, and even then there are many priorities that would come first. So in that scenario it's likely not happening until 2026 or later, whereas administrative action can occur very quickly. And I'd bet that Trump, now a one-termer, would have little interest in the huge amount of work required on Congressional action. Does anyone envision an 80-year-old Trump putting his nose to the grindstone in hashing out a new mortgage system in 2026? And for what, so he can shaft his major donors, some of whom could be serving in the administration? Here's another question for anyone worried about the act of Congress scenario. What would JD Vance do? I think it's an important question because if Trump wins and accomplishes even half of what he sets out to do, then I'd bet Vance is president in 4 years. In 2026 JD Vance is young and burnishing his political chops, not Trump. And Vance strikes me as a practical dude who definitely understands poverty and the importance of owning a house. Does anyone think he would expend his political capital to destroy "two great American companies" -to use Trump's parlance-, while tanking the US economy?

More catalysts re: Trump win: 1) https://www.racket.news/p/election-exclusive-british-advisors 2) https://nypost.com/2024/10/22/us-news/trump-books-joe-rogan-podcast-interview-in-final-election-push/

I don't believe the FT article for the reason stated in the article itself. It's too expensive to "buy" this election by buying the betting markets. It would be better to just buy ads, and even that doesn't work. As far as what's moving the markets and what's moving Trump's chances, I'd put far more weight on Musk catching a rocket and stumping in Pennsylvania. He's reaching a lot of young voters who otherwise might vote for Harris. That's huge.

Agreed. But perhaps it's even better when you believe as many do that in either situation it will go up from there. The win scenario goes up 100% and then likely increases to par in the next 1-2 years. The lose scenario goes down 50% and then, eventually, goes up likely to par. As far as whether it should be a "small" bet. I agree but that's of course a personal decision to each investor depending on risk and volatility tolerance. An adherent to the wisdom in "The Intelligent Investor" by Benjamin Graham likely would stay far away from this investment, and Graham would call this speculation, not an investment. I've heard comments here in the past of limiting this investment to only a few percentage points of your portfolio. But, there are all types, and at least one investor is 100% in with leverage. Not for me but more power to him.

Both commons and JPS are seriously underpriced at this point. I took a position in commons to add to my JPS stake. I continue to believe that these securities are seriously underpriced for technical reasons, not economic reasons. The main issue is the pool of investors who are willing to spend the time understanding this asset and to take the risk is very small, and those that are willing are already doing so. Still, I think there are a substantial number of investors in watch and wait mode, and when it's clear Trump will win they will jump in. We're on the cusp of that. So what will Paulson, or whomever is in charge for the Trump team do? Specifically, how will they approach the commons? Will they wipe them out with some sort of cram down, or will they do a Moelis-type plan? I favor the latter because I think Treasury would make more ROI by giving value to existing commons than wiping them out. Also, keep in mind that Bill Ackman, major commons holder, has endorsed Trump. Ackman will likely be involved, and his "bet on America" narrative would resonate with Trump and Vance.

You're correct. I misspoke because I meant 18-19% of current share prices, not of par. Sorry about that. Of par, the damages are approximately 2% for Freddie and 2.7% for Fannie, and both are accruing post-judgment interest.

Have had both but now 100% JPS. I stopped holding common after the 2021 SCOTUS verdict, which legalizes a wipeout of commons via SPS conversion.

If Trump loses the share prices will fall a lot, and I will buying.

This is a good discussion. I have been holding a long time also, and the opportunity cost has been significant. Money managers such as Berkowitz had to sell because they cannot have too many years managing clients' funds with no gain while the market has been this hot. If you are managing your own money, the question is: can you wait some more? Simply put, no government, D or R, is going to wait until 2032. Why? Because the cash sitting on the GSEs' balance sheets will be calling to them, ever more loudly with each passing quarter. Even if they DID wait until 2032 they would still release the GSEs because the realized capital upon release would dwarf a 10% dividend. Almodovar reported an $86.5 billion net worth for Fannie Mae in the most recent quarterly filing. And since -as Jared Bernstein put it- the "tear it down crowd has lost", the only viable mechanism for Treasury to access this capital is to release the GSEs. Pulling some shenanigans like wiping out JPS risks additional court cases, which would be particularly risky given that JPS are already due damages currently at 18-19% of par. The pending appeal could result in even higher damages, while you wait. Release is the reality staring us in the face. It's been a long dark road, but it's darkest before dawn.

Hopefully you bought some and have enjoyed the last couple of days.

Key article. According to this WSJ article out today, there is indeed an "administrative state", and the Project 2025 transition team even has a class for prospective administrative candidates called "..."Conservative Governance 101" that teach potential appointees about the "dangers of the administrative state"..." Most of the article talks about Trump disavowing much of Project 2025 and his history of tossing out well-laid plans in the past and doing his own thing, which may come as comfort to those worried about the plans for the GSEs in Project 2025, although in reality it's plan is incoherent and contradictory. https://www.wsj.com/politics/elections/project-2025-donald-trump-election-2024-b89ed4dd?mod=hp_lead_pos7

I awoke with this exact thought today but hadn't seen sholland's comment about it from last Saturday until this morning. Covid was a huge disruptor. It's hard to imagine getting this done during that time when everything was shut down for months on end. If you read Trump's letter to Rand Paul, it really lays out his thinking from a business perspective, with two points being that investors were screwed and the government can make billions of dollars off of their investments. Trump may not be a good businessman, but he is a businessman. I think this will carry the day. The great impetus for the administration to prioritize this is to unlock the $100 billion dollars or more going in to the coffers of his administration's Treasury.