Wiggins

Respectfully, I don't think this is a dumb question at all. To date, the US is on same trajectory as Italy. US cases are rising just as fast and testing has lagged similarly to Italy, unlike South Korea. In fact it's possible the US situation ends up being worse. It's hard to know for sure, but we'll know either way within a short 2 weeks. That having been said, I don't think it will be as bad in the US as it was in Italy. The US population is not as old as Italy's and the US has greater healthcare resources and greater industrial capacity to ramp up production of ventilators for the very ill. There are also a more flexible currency and other economic tools that Italy doesn't have. I think news will come out today or tomorrow that Italy is turning the corner; cases are trending down there. This will create optimism for the entire Western world. But the US needs to shift into high gear now. Not sure why that was an apparently dumb question. Either this entire scare is mostly bull or a freeze on mortgage payments is coming. How would it work? Being conservators, could FHFA just demand FnF cover losses? it was a dumb question because we are not Italy....yet

Just the Lamberth case by itself is enough to preclude receivership for JPS. He stated definitively that all rights transfer, so it covers all JPS no matter when purchased (e.g., after NWS).

Fair enough. I'm genuinely curious what percentage chance you would place on them being nationalized? I know it's impossible to quantify odds with something like that, but what's your best guess? Thanks. If a Democrat wins the election --- whatever odds you place on that -- nationalization now appears to be the base case to me. I'd welcome other views but $45bn (if they get to that) doesn't seem like enough escape velocity even if there's a 4th amendment in the lame duck given the Dems preference for nationalization (and of course many R's dislike current structure). Maybe $75-100bn would be enough (?) but that would require a large private equity infusion in 2020 that I advocate but don't now expect. There's a roster of think tankers that are likely ready to take on this task in 2021 if assigned. The combined current market cap of jr pref + public common is not enormous, ~$18bn at the moment, and so your guess is as good as mine what value - if any - would flow to shareholders from the legal system or political settlement in a potential nationalization. Of course I believe a fair outcome allows shareholders to participate in the financial upside that the govt has achieved since 2012 (in addition to the indirect systemic benefits FnF provided in 2008-2012). Nationalization is not only risky but is not necessary for the Dems to accomplish their housing goals, IMO. Biden, Warren, and Sanders all reference utilizing the GSEs to advance their housing plans: fund the Housing Trust Fund and reduce foreclosures. This can be done with private, regulated GSEs just like before 2008. Bloomberg wants to nationalize them, but his chances of being elected are around zero. Imagine Trump putting out an ad and playing the verified recording of Bloomberg saying that the bankers are "his peeps" and they're responsible for creating all the jobs in this country! LOL https://www.independent.co.uk/news/world/americas/us-politics/michael-bloomberg-goldman-sachs-bank-wall-street-leaked-audio-a9356721.html FWIW, Cowen agrees: https://news.bloomberglaw.com/banking-law/fannie-freddie-oversight-can-end-even-under-sanders-cowen-says

This whole situation reminds me of a comment from the Reagan days that Republicans hate big government and when they take control of it they prove themselves right. But in all seriousness, it has never looked better. The writing is on the wall, and on the floor, and on the ceiling. I expect JPS settled this year.

Probably delay anything material until July when the likely next decision point occurs post-Seila. That's consistent with the stock price and Calabria's repeated misleading statements on timing of capital rule and especially financial advisors. "... Calabria's repeated misleading statements... " Finally, someone who has noticed. I let go of most of my position -held since 2010- last summer after he flip-flopped. The fact that he reconsidered his views or showed cracks in his stance back then was the last -shockingly disappointing- straw. For me. I kept a few up until recently. But finally accepted the fact that those of us who had to withstand the advent of the NWS may never see justice. What I am left with is both a personal error in judgment -correctly assessing the difficulty of fighting the US government- but also an unpleasant taste for its inner workings. Specially, a leftist administration. Good luck to everyone. rros I take it from your comment that you held high hopes for a political/administrative solution, hence the negative view once Calabria waffled. You sound like you have made up your mind on the whole thesis as if it's all over. My question to you is how do you see the (negative) thesis playing out now? Delay? To me, the preferred have a pretty rock-solid case and the only negative thesis at this point is significant, continued delay coupled with hollowing-out of the GSE (e.g. spinning off CSS, new market competition, new onerous regulations, SIFI-type restrictions, etc). I think a lot of harmful regulations would have to go through Congress though which makes them unlikely. For what it's worth I have always placed a fairly high emphasis on the court cases, which is one of the reasons I have stayed in this investment. Yes justice is slow, but it is inexorable. I do not have a positive or negative thesis anymore. And I have not kept close track to most recent events. No, I did not come to the conclusion that "it is all over". I came to the realization that I could use the funds in a better, more predictable way. A way that may suit my emotional needs better, too. With facts I could put my hands on in spite of the perennial volatility of financial markets. Maybe the preferreds are made whole. Maybe shareholders get rewarded by courts. I do not know. I simply stopped being interested. Purely a personal decision. Thanks for sharing that and good luck for your current investments and henceforward. It's excruciating thinking about what you and what so many investors have gone through. It's such a terrible injustice. Your current position is 100% understandable.

Probably delay anything material until July when the likely next decision point occurs post-Seila. That's consistent with the stock price and Calabria's repeated misleading statements on timing of capital rule and especially financial advisors. "... Calabria's repeated misleading statements... " Finally, someone who has noticed. I let go of most of my position -held since 2010- last summer after he flip-flopped. The fact that he reconsidered his views or showed cracks in his stance back then was the last -shockingly disappointing- straw. For me. I kept a few up until recently. But finally accepted the fact that those of us who had to withstand the advent of the NWS may never see justice. What I am left with is both a personal error in judgment -correctly assessing the difficulty of fighting the US government- but also an unpleasant taste for its inner workings. Specially, a leftist administration. Good luck to everyone. rros I take it from your comment that you held high hopes for a political/administrative solution, hence the negative view once Calabria waffled. You sound like you have made up your mind on the whole thesis as if it's all over. My question to you is how do you see the (negative) thesis playing out now? Delay? To me, the preferred have a pretty rock-solid case and the only negative thesis at this point is significant, continued delay coupled with hollowing-out of the GSE (e.g. spinning off CSS, new market competition, new onerous regulations, SIFI-type restrictions, etc). I think a lot of harmful regulations would have to go through Congress though which makes them unlikely. For what it's worth I have always placed a fairly high emphasis on the court cases, which is one of the reasons I have stayed in this investment. Yes justice is slow, but it is inexorable.

Bove seems to ignore the major court victories that have already happened. For JPS, the only factor is time.

Some of the variable rate JPS have such a low dividend rate that it would make sense to just leave them outstanding and pay their dividend. One such example is FMCCL which has its dividend calculated as the 5-yr CMT rate, currently 1.54%. If dividends were reinstated this would trade below par. There are about 10 others across the GSEs that are like this. One way they could both incentivize conversion into common AND take into account dividend rates would be to offer a conversion based on a fixed percentage of par plus a fixed number of yearly dividends (e.g. 60% par plus 6 years of dividends). Thus, most of the JPS would be valued around par (between 90-110%) with the higher coupon JPSs being rewarded a little more. Just a thought.

Agreed. Bought some more JPS on Wednesday, but just a bit since I'm already fully allocated.

Great buying opportunity two days ago. Some JPS still selling at 1/3 par.

There was news published about Calabria and/or Mnuchin's comments in June that made the security prices go down, a lot. Then a month or two later there were stories that made the prices recover virtually fully and commons perhaps even more. This has repeated itself on a smaller scale several times. Now, there are comments by Calabria -filtered through media, of course- that have made the prices swoon once again. If you KNEW when/how/why these stories were being published and traded appropriately, you could do quite well. How much do you want to bet that comments will come out in the next few days or weeks that will reverse the trend? The main point is not that I know when this information comes out and thus whether or not to trade on it; I don't have any information on that whatsoever. I don't have inside information at all. The point is that the real information has been incredibly positive over time and continues to trend upwards. So, just sit tight and weather the storm. If there is another investment out there that's better, then by all means go for it. But I still like JPS here, a lot.

@IG and @SP totally agree, yes. I wasn't addressing the mechanics of how the interest of SPS would be sold (conversion, etc), just that it could be done. I totally agree it could be partial or any variation thereof. Y'all raise great points, it could be any and all of the above, including just pure optics, which makes Mnuchin's actions akin to 4D chess. An additional argument for pure optics is that if Mnuchin truly did want to play hard ball and squeeze blood out of this stone then he would slow walk this a lot more, and he (they) seem to be pursuing this urgently. An urgent settlement helps plaintiffs, methinks. I like JPS's position at this point, all around. Optics are sufficient rationale, I think. I always took Mnuchin's "compensation" statement to mean payment of a periodic commitment fee commensurate w the explicit "credit line" guarantee + warrants. In the scenario you describe where the senior prefs are sold in a secondary to the market - would these not naturally have to convert to common first to avoid a top-heavy capital structure and meet the likely capital rule? And this scenario does not contemplate whether investors would be willing to buy $190bn of securities that will continue to have a contingent liability attached (junior pref lawsuits). Whoever occupies the UST seat seems to immediately develop Sweeney's described schizophrenia. You either want to capitalize them and release them (per admin plan and testimony and FHFA strategic goals or you can keep fighting in court). With that said, I default to thinking this is purely optics for two primary reasons 1) Mnuchin and Calabria absolutely already have a plan for how this resolves itself. Public contradictions must be optics related bc these men are extremely calculated and probablistically are on the same page 2) Since Mnuchin's initial press release post election, he has been incredibly calculated in any statements on F&F

Mnuchin has said many times that taxpayers need to be compensated for SPS. That's what all the Treasury legal briefs say including the recent cert brief, and it's what Mnuchin has implied publicly. If Treasury wins in court, then the SPS represent the entire value of the enterprises, and selling that interest would make a capital raise that much easier. Don't you all see that as plausible and if not then why not? He may have his own opinions that the NWS is wrong, but then again he is fiduciary of Government. Optics are sufficient rationale, I think.

The level of corruption in the financial media is to be expected and nothing new. It should not come as any surprise. Michael Lewis and Tim Howard have documented it amply. One doesn't need overweening skepticism to see this, just a reading of "The Big Short" and "Mortgage Wars" will do.

Not only are the markets irrational, but they have a lot of help being irrational -especially with this investment: https://www.bloomberg.com/news/articles/2019-10-22/fannie-watchdog-willing-to-wipe-out-shareholders-if-necessary?srnd=premium yawn indeed (except for that author who gets a bonus based on stock price movement) Here's to the administration and the courts doing their work.

I agree, although I think there is more to this story that is significant. If you look at the last ValueWalk article citing Bove that I previously linked to, and also if you look at this one that you linked to, both are highly misleading and/or sloppy to the point of being manipulative, and in a similar way. This one was originally published as "premium" content immediately BEFORE the letter agreement was released on September 30th, and then released for free to the public immediately after that letter agreement. This is significant because Bove opines that the agreement to allow the GSEs to retain capital won't happen until the end of the year. Now, it's bad enough to report this a day or two before the end of the month, rather than wait to see whether they release it by the end of the month as they said they would. But to publish it AFTER the letter is released -and the letter shoots down your thesis- is ridiculous. He is basing his valuation on an event which has already gone the other way from what he was predicting. It is hard to know whether it is ValueWalk's fault or just that Bove is an idiot. But, one of them is extremely sloppy, idiotic, or again, purposefully misleading in order to manipulate the prices of the securities. I will add that ValueWalk brags on their website that their stories "move markets." The previous article I linked to from ValueWalk did the same sort of thing: it based a mediocre valuation of the securities on the en banc decision not having been made, AFTER the en banc decision had come out as favorable to investors. I was going to post this blurb above, but cherzeca had responded to my last post simply that "Bove is an idiot." And I agree with cherzeca on that so didn't want to bother people here with a link to poor content. But @cox022 since you noticed it I thought I would go ahead and mention this. I think it IS significant with respect to the securities going down. I also think it's significant because some commenters here seem to assign significance to selloffs, perhaps on a technical basis, and they trade accordingly. So if there is a bogus reason for the selloff that is identifiable then that should be taken into consideration. I have no idea whether ValueWalk is widely read and whether it is the culprit for the price action. I think the other (equally misinformed) reason for the selloff may be the ubiquitous hysterical comments that the liquidation preference is increasing and this diminishes or negates the significance of the letter agreement. The only way to draw this conclusion is to not have listened to Calabria or Mnuchin who have said for months that the liquidation preference will increase and that this is a temporary fix until they negotiate a definitive agreement on the SPS. My own take on all this is that there is a lot of bogus information out there and one can take advantage of the herd-like mentality of the markets. I have seen this as a buying opportunity and think the thesis is stronger than ever.

+2

haha I thought I was linking to this same article.... sorry don't know how that happened when I posted the one right before

https://www.forbes.com/sites/lisettevoytko/2019/09/27/herbalife-pays-sec-20-million-to-settle-charges-it-misled-investors/#1db8503580b8

Calabria was also interviewed yesterday (audio): http://indypolitics.org/redefining-fannie-and-freddie/?fbclid=IwAR2Y2I9kekicUpJgWkgEgNscWj_aAuUITAv5KtpRquOY8UXaV0xrC8nyko0 I think this is his longest interview and also the most reasonable. He says they will build capital for about a year. Some positives are that he corrected the interviewer a couple of times and said that they already ARE private companies with shareholders. And he mentioned the shareholders. His messaging overall is consistent, that he is there to get them out of conservatorship but major changes are up to Congress. Some negatives are that he still talks about fixing problems with their lending standards and de-risking them, but his criticism of the GSEs was more moderate than usual.

A SCOTUS decision would be helpful in sorting out the constitutional issues as well as confirming and putting guardrails on the APA malfeasance upon which the 5th circuit en banc so eloquently ruled. No matter what Mnuchin does, there will be uncertainty for investors until all that is settled. The only thing that can be settled by the end of the year is SCOTUS just taking the case. But methinks Mnuchin has to factor all that in including a likely final SCOTUS ruling before any negiotiation is settled. I'm not saying Mnuchin will wait, just that he has a lot to consider. What does everybody think the odds are of this getting done in the month of October? Thanks in advance for replies.

I think this is from his investor letter issued before the en banc decision, and Value Walk is thus reporting fake news. It sounds like it was issued on the Friday after the Treasury report was released, but immediately prior to the en banc decision coming down. If you scroll down the bottom of this link you will see this quote: "My belief is to continue to relay [sic] on the Fifth Circuit Court in Houston," he wrote. "If this court finds for the plaintiffs in some meaningful way, the debate on the Treasury Report will begin in earnest. Some resolution that makes all constituencies happy will be put in place. If the Fifth Circuit Court does not find for the plaintiffs, the debate on the Treasury Report will not begin in earnest until April of 2021." https://www.valuewalk.com/2019/09/fannie-mae-junior-preferred-shares/

Rop was filed in Michigan just prior to Bhatti being filed in Minnesota, and the two complaints are virtually identical. Rolg or others, have any idea what's going on here? If the judge is slow-walking this, how does that work exactly and when can we expect some action? Thanks

I thank everyone again here for all the great comments and congratulate all the holders. Just finished reading the excellent Willet-authored ruling. There seems to be some debate on COBF over relief and how it would affect commons. It seems to me "prospective" only deals with the constitutional claims, not at all the APA claims. The APA claim is remanded but the en banc majority lay it out pretty starkly. It's inconceivable to me, given Willet's utter dismantling of the NWS action under the APA claim, that relief would not include unwinding the great monetary damage done by the NWS from the get-go (i.e. from the date it was enacted). I mean, it violated the duty to "preserve and conserve", so the thought that relief would not somehow restore the unlawfully confiscated property just doesn't gibe. (Hey, I stole all your sheep and that was found to be illegal, but the ruling is that I get to keep all your sheep as long as I don't do it any more...no). And the largest monetary confiscation was immediately after the NWS was enacted, 2013. Thus, in some fashion, money is returned to the GSEs as Thompson discussed in front of the panel (Judges Stewart, Willet, Haynes...i.e., the Brinks truck conversation). This is likely accomplished as discussed by just voiding the SPS liquidation preference since it's considered paid down and then returns over-payment past the 10% moment, at least. The other alternative, return ALL funds paid over the 10% dividend and keep the SPS liquidation preference intact isn't likely logistically. But, either way, there is no conversion of SPS into commons causing dilution. Given this reality, the commons just gained massive value, possibly low or even high multiples of tens. So, I agree with the other previous comment to this effect. have fun!

https://www.wsj.com/articles/a-primer-on-the-future-of-fannie-freddie-11566898207?mod=hp_lista_pos3 Plan to be released "shortly after Labor day."