COBFInfinity

Of course they're not buying back preferred shares in the open market because: A) Conservatorship rules don't allow it B) Such a program would need to be made public before it begins.

I have no doubt he has better returns than me lately. I don't do his style of swing trading anyway, so I am not following any of his trades closely and I used to follow his blog but not anymore. But set aside investments for a moment. The point about COVID is that he is still, to this day, on the side of the lunatic fringe saying that it is completely nothing AS A MEDICAL ISSUE. If he is so utterly wrong about something so basic, I find it hard to have much confidence in his judgement on anything else. It seems like he could be a parallel to Larry Jeddeloh, who was the Director of Equity Research at Leuthold for quite a few years. Now, I haven't seen any of his work in the past decade, but he has run TIS Group for many years and it turns out he is a batshit crazy conspiracy theorist and in the years that I saw performance on his separate accounts, they were quite poor. I have to believe that Jeddeloh had some talent to have been a partner at Leuthold, but it seems the craziness overruled any genius he might have had. So Kuppy may well have a very good knack for some things, but at the same time he is inexplicably divorced from reality on some things. Could be a recipe for crash and burn.

Hmmm...I know him most for his obsession with shipping stocks that have performed quite poorly. He was also still saying just a few months ago that COVID is just like a typical cold. He has also shared some political views that are completely out of touch with reality (but we won't get into that here.) So I find it hard to accept the "always nails it" narrative.

Two people have mentioned ads. I don't recall seeing any ads. Is that for a mobile version?

Allnatural, You can't have an NWS 2.0 when NWS 1.0 never ended. The pretend capital account doesn't change the fact that the liability to Treasury is still growing. As for the FHFA's "expect further action" note, that is interesting considering that Mnuchin had tasked the new Treasury with reviewing the agreements by 9/30. But it also seems very unlikely that anything regarding the Treasury stake would be adjusted in any material way before a new director comes in, so I am curious what that might be.

The investment has and still does depend severely on SCOTUS. Plaintiffs could win takings case in front of Lamberth, which gets appealed to SCOTUS, then SCOTUS says no taking has occurred since the shares still have value. Go directly to jail; do not pass Go; do not collect $200.

I didn't make that trade in the first place. I think rates will still low indefinitely. I have doubts the Fed will raise the Fed Funds rate for many years to come.

When do you change the headline to "Fed CAN keep the rates low"?

As for lessons learned, I said a while back that I will never bet on a legal outcome again. Obviously, my conviction on that is even higher. The other lesson is to stick to contrarian investing. Value investors are constantly bombarded with comments from momentum investors that the way to invest is to buy more as the price increases, that's the market telling you you're right, etc. I have routinely disregarded that viewpoint throughout my years investing, preferring to buy low, and then buy more even lower. But after the 5th Circuit win in Sep 2019, after a pop to around 50% of par, the Pfds I track pulled back to about 45% and I told myself it was just profit taking, this was the moment to buy after the price going up. Those shares are down about 80%. I'm sure some momentum investor will come along and said I should have sold on the way down, but that's not something I do just because of price action. I finally let myself get lulled into the idea that buying high was a good move and it has been a disaster.

This 1:15 idea implies that par value is still a realistic target. I think that possibility went to zero yesterday. The best case is plaintiffs win another judgement somewhere along the line and instead of rolling the dice with the same clueless and hostile SCOTUS, a settlement well below par occurs.

Just wanted to mention for those who weren't watching the price action - the earliest trades after the decision was released caused a pop in common and preferred shares, but then soon sunk. Some investors either jumped the gun after seeing something positive but not going through all the details, or algorithms assigned to decipher the decision got it wrong.

Lol, it was already a call option at 20% of par. Sure, it's cheaper now, but dramatically worse odds of payoff. Even if plaintiffs win another trial, it will end up in front of SCOTUS again in 3-4 years and they can smash it down again.

There is no plausible restructuring with meaningful value to common or preferred without a court win, so that argument doesn't make much sense to me.

Yeah, he is. He has spent the last 7-8 years on the beach because he was counting on the payoff the whole time. That's one hell of a vacation, but I guess it's time for him to go back to work. Glen almost played a role in my position here. I had owned a small position in Pfd at the time of the NWS, at which point I dumped them and moved on. But a while later after the price had risen quite a bit, I was curious what was going on and found that Glen was writing articles about the GSEs. I said to myself, "This is the same guy who got scammed by dozens of Chinese frauds just a few years earlier, so I think I will not go back into this trade." Alas, along came Fairholme, Paulson, etc. and I decided to get in along side them. It turns out I should have maintained my skepticism of anything that Glen was doing.

I don't even know if it's worth reading this opinion. I'm only on page 4 and the number of logical errors and dubious reasoning already has me spinning.

Yes, it is an unworkable capital structure. It will have to change at some point, hopefully driven by an upcoming SCOTUS win for plaintiffs.

Don't know, but SCOTUS will release opinion(s) on at least one case next Thursday. Watch this calendar: https://www.scotusblog.com/events/

Do you have a link to this? Never mind, I found it. There are some on this discussion board who have taken the same stance that the NWS has been ended. I did not agree and still don't. But I'm not surprised the DOJ is taking that stance; they want the gov't to keep all stolen funds, past and future.

Yeah, pretty strange that they couldn't find someone to sell to. I would think First Eagle would have paid them something to take over that asset base.

I can't believe anyone still subscribes to the Milton Friedman philosophy on inflation. There hasn't been a useful relationship between M2 and CPI in decades, so why would it start now? Seems pretty reasonable that there will be some inflationary pressures as the economy fully re-opens, but to project that as a new long-term trend seems a bit premature.

We haven't heard much from any of the major institutional players since the amendment, but Fairholme's annual report is out (http://www.fairholmefundsinc.com/Reports/Funds2020Annual.pdf). But keep in mind that there are 3 Fairholme funds and sometimes Berkowitz will write something a little different for each one even in regards to the same investment. So below I consolidated his relevant comments on F&F. Fannie Mae and Freddie Mac's businesses are booming while in conservatorships. The U.S. Treasury has finally agreed to allow them to retain earnings for capital safety and soundness. Treasury still has not agreed that $191 billion of "loans and fees" have been repaid even after receiving over $300 billion of reimbursements and controlling 80% stakes. I expect The Supreme Court will remedy the rights of two highly successful private enterprises and further their exit from federal control. Until then, preferred shareholders remain in a volatile purgatory. A resumption of preferred stock dividends should benefit the Fund's current dividend of 2.0%. That last line sure is interesting. Does he really expect dividends to be turned back on, as opposed to an exchange of JPS into common?

60% of the time, it works every time.

It's a special game of musical chairs: "Who will screw us the least?" Calabria wants to the end the conservatorships, true, but he also wants excessively high capital levels. All of this discussion is a sideshow until SCOTUS opinion is out, or a settlement occurs first. If we lose SCOTUS, the preferreds will be back under 5% of par and we'll have all the time in the world to guess who might be our savior.

Simple: Sr Pfd can't be converted to common (if that's even being considered) unless all litigation is resolved. End of litigation is the first step in all of this.

I disagree that the NWS has been ended. I know, even Calabria has claimed that. But as long as the Sr Pfd balance increases right along with retained earnings, the GSEs are only building fictional capital. The NWS is not really ended as long as this continues. One thing that has been lost along the way is what exactly is meant by "capital". I'm seeing similar problems in my discussion with Tim Howard on his blog. I can see five different ways to define capital: [*]Total stockholder equity on the balance sheet [*]Amount of liquidation preference owed to shareholders upon liquidation [*]Core capital: stockholder equity minus cumulative prefs and AOCI [*]Tier 1 capital: core capital minus DTAs [*]CET1 capital: Tier 1 capital minus non-cumulative prefs When you say that only "fictional" capital is being built, that tells me you are using #2 as your definition, or perhaps something not on the list. All other entries on the list will go up with FnF's retained earnings because they are balance sheet calculations: the earnings go on there but the senior pref liquidation preference increases don't. The key is that core capital is defined under HERA, and FnF's post-release capital classifications are defined by HERA. Thus increasing core capital, which retained earnings now do, is important even if the senior pref liquidation preference increases along with it. This is real capital being built in the eyes of the law. The letter agreement might have been thin gruel, but it wasn't a complete nothingburger. The date at which the true NWS would have turned back on has been pushed from around now to 2044 or so. While not being nearly enough to accomplish recap and release, it's a significant step. Yes, I'm not using the balance sheet calculations, because they ignore that a real liability is being kept off balance sheet as the Sr Pfd balance increases. Now, you might argue that the next agreement (hopefully pushed by a settlement) will finally take care of this, but as of now, it hasn't done anything for us other than create a fictional balance sheet entry that can eventually be relied on to reach capital levels and theoretically allow for paydown of the very real liability of the Sr Pfd. All retained earnings "capital" built under the current agreement is bogus.