COBFInfinity

I don't know. There is a lot of uncertainty left here. Who remembers the General Growth bankruptcy? I bought some stock fairly late in the bankruptcy process, but by then the fog had cleared and it seemed pretty obvious that the equity was worth way more the market price. I think I made 300% in less than six months. I would argue the GSEs still have a lot more fog clouding their futures than GGP did when I bought it, so is it unreasonable for junior preferred to still have 200% upside? I bought into the GSEs because of the legal angle - it seemed so obvious that the NWS would be overturned. But I've been waiting for 6 years already and, as discussed here already, if we "win" in SCOTUS it will likely still mean a few more years in court. So without a PSPA amendment, I can't really say today's prices are wrong. And Mr. Market is obviously demanding action, not talk, out of Mnuchin. He's been talking now for 4 years and we've got little to show for it.

My view is simple whether you are using a yield curve model or anything else to try to forecast the economy - you probably need to throw out the 2020 data. My other view is that the economy and markets are pretty unpredictable, so you shouldn't rely on those models too much anyway. I am of the view that U.S. stocks are probably higher today than they would have been without COVID. I think that is fundamentally insane, yet here we are.

You could make the argument that we were heading into a recession regardless. PMIs had been sub-50 globally for some time. Manufacturing had already been in a multi-month contraction. Who is to say that had covid-19 never occurred, that we wouldn't have found ourselves in a recession by this summer anyways? There's always a catalyst. Covid-19 is no different. Something always happens that we can blame the recession on, but it's the environment that makes us vulnerable to that shock. An inverted yield curve, declining PMIs, manufacturing weakness, global trade thrown into disarray/uncertainty, make us vulnerable to whatever shock comes - whether that be covid, or s string of corporate defaults, or a currency shock, etc. The vulnerability makes that a recession versus a wall of worry that we climb over. Seems like a bogus argument for 2020. The economy could have been at max strength, but still would have been hammered due to COVID shutdowns. We can all play the guessing game of whether a U.S. recession would have rolled in by now anyway, but the idea that the economy was fragile and COVID was just the tipping point? That's implausible. Simple way to look at it is that a huge number of countries had a COVID recession - were they all going to have a recession anyway? Clearly not.

Yes, but is he going to resolve them or let the courts carry it out for years to come? Obviously, we know he didn't just decide today what he's planning to do, so why let the case go to SCOTUS? I think he wants to punt on dealing with the Senior Preferred balance. I hope I'm wrong.

"Mnuchin Says He’s ‘Likely’ to Back Changes to Fannie and Freddie" https://finance.yahoo.com/news/mnuchin-says-likely-back-changes-000854956.html But the quote on SCOTUS case: “If they rule in Treasury’s favor it simplifies things,” he said. “If they rule against, it’s still going to end up in litigation.” I get the sense that Mnuchin is willing to amend PSPA, but doesn't intend to settle cases OR write down the Senior Preferred. Of course this would completely counter his claim that he wants "to set them on the right direction" because the cloud of uncertainty will remain and no outside capital can be raised.

John Carney (no longer at WSJ, but matched their overall views throughout) is still on Twitter today saying that he thinks the NWS was legal. A lot of them bought into the ridiculous logic of Lamberth that the only thing that mattered in HERA was the use of the words may vs. shall, and they're sticking with it. Geez, every company should just start sticking vague words into their prospectuses and then screw investors later if it's that easy.

The problem with that idea is that Mr. Market will probably reduce your position for you before you get a chance. Interesting where we're at now. Maybe I should wait 24 hours to post this, but it seems pretty darn likely that SCOTUS argument will occur on the 9th. And my hunch was wrong - preferred prices are higher than they were in late October even without the pre-SCOTUS settlement we've been hoping for. Just shows again that predicting price movements doesn't work very well. Orthopa, however, is on the record saying he/she would heavily decrease exposure if SCOTUS is argued. Are you sticking with that view?

I added emphasis. The logic for a common stock dividend is that more investors will buy the stock, making it easier to raise capital. I don't know if that will be part of the plan early on or not, but if so the preferred go to par early, not late.

It's nothing new to anyone here, but I am still astonished at the many parties interested in the GSE conservatorship, but don't have the slightest concern for shareholder rights or are antagonistic to shareholder rights. I am so naive that I thought those rights would matter.

The Washington Federal case to overturn the conservatorship has always been viewed as a long shot, but these are some smoking guns right here:

The very low yielding (in some cases, 0%) preferreds have closed most of the price gap with those with 5-6% yields. It sure looks like some form of equal treatment is being considered more likely by the market. I've never owned those low yields, but if I did I sure would be trying to swap into some of the higher yields at this point just in case the dividend rates end up mattering.

Someone is hitting most of these bids. Someone else wants to get out. That's what makes a market, I guess.

Interesting action in $50 preferreds to start the morning. Someone has bid exactly $17.50 for exactly 4,285 shares each (comes to just under $75,000 each) on FREJO, FMCKK, FREJP, FMCCO, FMCKP, FREJN, FMCCH. I've been watching these tickers a long time and have never seen such coordination across issues. Someone wants to get in.

The only part of this bet I care about is that the loser also gets something valuable.

right. Ackerman is too much of a tool not to be used as a tool by C/Mn. the collins reply brief was due 11/23, filed 11/19. you almost never see an early filing. https://www.supremecourt.gov/DocketPDF/19/19-422/161278/20201119155421721_11-19-20%20Collins%20Merits%20Reply.pdf The article was certainly a trial ballon. This has been telegraphed for essentially years now so not sure why the MBS market would be suprised by this. I dont have access to an instrument to tell by pricing or otherwise if they were or will be "surpised" but I doubt that to be the case. Apparently Sherrod Brown has come out and said he thinks Mnuchin is the worst Treasury Secretary of all time so he wont lose any friends there by doing the PSPA. Calabria has said that the lawsuits go away with the 4 PSPA and with the timing here that very likely maybe the case. For optics there may not be a "settlement" as much as plaintiffs drop the case no? It would be in their best interest depending what's in the 4th PSPA to preserve Calabria for as long as possible and let his removal play out through the legal system. Someone please tell me if Im off on this but once there is a 4th PSPA within 30 days FHFA should request recap plan. FnF then have 45 days to respond and in turn FHFA has 60 days to approve. So we are looking out no further then 4.5 months from the PSPA amendment to know the final fate of the Jr Preferred. Hopefully sooner as one has to imagine JPM and MS have been sitting on plans for months and just tweaked it Wednesday night. Worst case by middle of Q2 2021 we should finally know our fate. there may very well be some kabuki theater with this process, no settlement (for optics) but T going to scotus and saying collins is moot because 4th A...and if it is to be moot, Ps need to get everything they are asking for...or maybe there is some backchanneling so that Ps will agree case is moot if 4th A does X, but there won't be a formal settlement agreement with Ps. once a 4thA is agreed to by fhfa and T, then yes fhfa can immediately ask for CRPs, which can be a part of a consent decree. If the SCOTUS case is not ended, one way or the other, and it is decided that the 3rd amendment needs to be overturned, can someone hostile to GSE recap come along and use the exact same legal arguments to overturn a 4th amendment?

Market seems it has given up on this trade. Its the only explanation I see to pfds trading significaly below 2019 highs. It will be a slow recognizion Simply put, the junior preferred isn't worth much unless the senior preferred is written down. We've been led to believe that will happen, but until it does the JPS probably won't go much higher. But if the senior preferred is written down, I think Mr. Market's recognition will be very rapid.

Current feelings: https://memepedia.ru/wp-content/uploads/2019/06/dont-give-me-hope-meme-3-768x409.jpg

Good find. But of course, history of delays implies it will still be next quarter!

They may have sources, but they interpret everything in the most anti-GSE way they can.

Gasparino saying the same thing. The curious thing is that there was below average volume and no real price action based on the resignation news today. So smarter money than me appears to have been unaffected by this. But as I said yesterday, the smart money already has the preferreds at 27% of par, so they already weren't believers in an imminent recap.

Yeah, he is reading a lot into it considering that no reason for the resignation was given.

Kind of sad that Coronavirus should only be discussed in Politics section.

Except it mentions "immigration, trade, health care, China and school choice", but not housing. Nonetheless, it's been clear for a couple weeks that the Trump admin is making whatever moves it wants now with zero concern about what anyone thinks about it. Senate Republicans are even willing to put the completely unqualified Judy Shelton on the Fed Board just to make Trump happy. So setting aside whether you like or dislike any of these other moves, it does imply that Mnuchin would be willing to finish off the NWS and let the GSEs recapitalize, but will Calabria be scared off by the talk that Biden's Adminstration will target him for removal if he makes any big changes in the next two months? It seems that Calabria has the decision to make - does he want to keep the job or does he want to stamp his legacy on the GSEs while he has the chance? P.S. While all this sounds good, my preferreds remain stuck at about 27% of par value.

Like many others here, I was in this trade before Trump even started his campaign in 2015, so clearly my naive assumption all along was that the courts would be on our side. But while there is a possibility that the courts could finally come through for us, as a preferred holder I would gladly accept a deal between Mnuchin and Calabria to write off the senior preferred and settle the lawsuits. If you hold the common stock, perhaps some would prefer the gamble that the lawsuits yield a bigger payday, but that's a risky play, if you ask me.

So your view is that everything Calabria has said and done has been a headfake? To what end? If he didn't want to end the conservatorships, he could be doing a lot less. And I guess I could imagine a scenario where Calabria is just wasting everyone's time within the FHFA making busywork capital rules, etc., but where your view doesn't seem to make sense is that JPMorgan and Morgan Stanley were hired as investment banks. That step did NOT need to happen if this is all just a big game and the investment bankers are certainly smart enough to have sniffed out if this was all a hoax. Also, the GSE CEOs seem to believe that Calabria has a real plan.