merkhet

I think regardless of whether you think that the situation is binary or not -- it's indisputable that losing all the cases concerning the NWS puts you in a significantly worse position than you're in now. Whether that situation is zero or not is up for some discussion, but we can probably all agree on the first part.

The main worry about the status quo, of course, is an administration that is hell bent on shutting down the GSEs.

Which is more speculation. :) In any case, my edit to the above post then becomes relevant. Let's play it through. What does a valid NWS world look like? Let's say that they try to excise the assets from Fannie & Freddie. How do you do that? Do you spin off the new common stock to the government preferred shareholders? That would seem to require another amendment because the government preferred shareholders have access to cash flow and not the residual ownership of the corporations. How do you even structure a spinoff that flows through to preferred shareholders? (These aren't just rhetorical. I can't think of an instance of seeing this, and I literally do not know.) And then that brings up a completely new question for litigation. Assume the NWS is valid. Excise the assets of the GSEs. Doesn't this bring up a new question of whether this is now a de facto liquidation that occurred without the benefit of various protections afforded to people in the various capital structures that happen during an actual receivership?

But that speculation is sort of embedded in asking the question of how Berkowtiz could put 16% of his fund into the GSEs? The content of the question itself is asking for speculation... I don't know. Maybe this sub-topic has run its course. In any case, I agree with everyone saying that people shouldn't just outsource their DD. I actually think a lot of people who don't really understand the legal elements of this case by definition are outsourcing their DD! But c'est la vie, and I'm happy to continue providing opinions of how I see the legal aspects of the case... just remember that, by definition, again, my opinions are likely incorporating personal biases...

You just have to deal with it. Do good work, find good value, and be ready for the macro schlonging that makes the macro guys look great for six months out of every three years. It's fine to mix in a little bit of your own "macro magic" when you feel strongly about something. But you'll find, just like I have, that it's a giant waste of time. Then again you guys are probably a lot smarter than I am and I don't mean that jokingly. You should just apply that intelligence to finding cheaper stocks the rest of us are too dumb to buy. +1

Value is a funny term though. Do you meant market value or intrinsic value? Because I could make a good argument for intrinsic value being higher than market value for a number of stocks. (Jeez, I hope I can -- otherwise, we're all in the wrong business...)

Then, I don't understand what you mean? Berkowitz did know something we didn't... as confirmed by Jon Prior @ Politico. I mean, he could be wrong. The tête-à-tête from last fall could be part of a delay strategy. Is that what you meant? I'm just confused.

I think the problem is that intrinsic value might be high in 1965 with hindsight, but the company at the outset still has to earn that intrinsic value over time.

That's actually not what I was saying. Or rather, it's an unjustified extension of what I was saying. You asked why Berkowtiz would increase his holdings. I proffered a reason that he has more access to information than we do, which is true & evidenced by the fact that none of us knew there was a back and forth in fall of last year. You assumed that I mean that to mean we should just trust him by buying because he did. Except I was just answering your question.

@hardincap is correct in the percentage. The report was 11/30 & the fact sheet is 12/31. I wonder if he added or if that's the same absolute shares w/ redemption payouts. I would be surprised to see people rush in to buy equities of the new companies w/ the NWS intact, but Zenaida makes a good point on Argentina. No warships for new Fannie shareholders to impound though... And then there are some issues with respect to how do you spin the companies and give the investors nothing. Think about the structure of how that would work. Who would you spin it out to? And if you IPO it, where does the money go?

He may have underestimated, but none-the-less he's still increasing his stake... he wasn't at 16% last time I checked - I think it was about 11% He's at 15.1% including common & preferred. Check the most recent report.

I think colinwalt has the gist of the reason why Berkowitz thinks that there is a way out if the shareholders lose all the NWS cases. (As unlikely as I think that is to occur.) Remember, also, Berkowitz likely has more information than we do behind the scenes. There was an (as yet) unsubstantiated rumor that the government was looking to settle during the summer of 2014. Up until February of this year, most of us didn't know that there was a bit of back and forth (albeit only a very little bit) between the plaintiffs and the government concerning what a settlement would look like.

Everyone check to make sure your safety's on...

https://en.m.wikipedia.org/wiki/Judicial_review_in_the_United_States#Laws_limiting_judicial_review

I guess people don't understand lifetime appointments. If people need a story, one story is that the markets are backward looking and extrapolating that the plaintiffs haven't won a single significant battle in the past (not counting discovery). As to whether that's the actual reason that the preferred shares are priced where they are? Impossible to know. But it sounds good and logical, so it's got that going for it. :)

Well, I agree with you. I mean, the point I'm trying to make is that if you adopt Dalio's views as being correct, you sort of have to adopt all of his views? And if you don't adopt all of his views, how do you decide which one is correct and which one is incorrect? For what it's worth, I suspect that his view on how the economic machine works re long debt cycles is probably accurate. But how does that inform how I pick stocks 99% of the time? ¯\_(ツ)_/¯

Fair enough. I'm firmly in the "ignore macro" camp, but I think maybe it doesn't always mean what the "consider macro" camp thinks it means. Allow me to provide an example. For instance, Picasso mentioned GM, so let's use that as an example. On the one hand, you can take a look at General Motors and say, "Hey, it makes $152 billion in revenues a year and has a 7% EBIT margin on the full year. If it stays that way in perpetuity w/ a little bit of improvement on the EBIT margin, then maybe it's worth 10x earnings." Now, that's one way to go about it and "ignore macro." On the other hand, you can take a look at the exact same numbers, and then you can go one step further and ask the question of "where are we in the auto cycle?" That's an important question when you're assuming that the revenues will stay at $152 billion a year, right? And perhaps if auto sales are going to drop then perhaps you 10x earnings won't be fair value for an auto company. (FWIW, I think we still have almost 9 million units of lost demand/replacement to make up in the U.S., but that's a totally separate discussion.) Now, I would still consider this "ignore macro," but in some sense, you are incorporating macro-type information through the revenue line. But I'm not necessarily trying to think through the implications of negative interest rates in Europe and the transmission mechanism through which that reaches and affects auto sales. Primarily because I don't know that (A) it matters and (B) it is knowable. In general, my sense is that without some form of contagion effect, we don't get (A). And then in trying to figure out whether you'll get a contagion effect, you run into the problem of (B).

My best understanding of how the market processes information is ¯\_(ツ)_/¯ Honestly, if I could correctly anticipate or interpret how the market processes information, I'd be trading futures on leverage and much, much richer.

If I could answer that I'd have a mansion and a turkey farm instead of a 1BR and a day job :) How are you handicapping the idea that: I mean, I suppose you don't need an exact percentage, but you would need a range, right? Like a rough range? Otherwise, how do you know if it's more probable than the next one?

Here's the problem with that statement. I could also say "Dalio isn't bearish because he doesn't see the immediate catalyst for what will drive equity returns up, but could very well realize the most likely path forward is for a large jump at some point in the future." There is no evidentiary basis in what Dalio has said to pick your statement or mine -- other than personal views on the matter. That's my main concern here. The creeping insertion of personal biases once we pick Option (2). Anyway, we may have beaten this horse well beyond dead at this point, and I appreciate that you were trying to integrate the two statements, but I'm just trying to illustrate that in integrating the two statements you might have inserted personal bias into it to make the disconfirming evidence less disconfirming.

Let me take a run at this in a slightly less facetious way. I think you basically have two options: (1) Take everything Ray Dalio says at face value, or (2) Look between the lines at what he's saying Option (1) has the benefit of being pretty easy. You just listen to him, and you believe what he says. The downside here is that there's no flexibility if you don't like what he says. Option (2) has the benefit of being a bit flexible, but the downside is that it allows for personal biases to come into play. Because then you're sort of un-moored from any anchor to what was actually said. The main problem I'm seeing here is that there is signifiant cognitive dissonance between the following two statements: Dalio is not bearish on the stock market Dalio sees 0% returns for cash, 2% returns for bonds, 4% returns for stocks and increased volatility So people are looking at it and saying that the second bullet point invalidates the first bullet point. Except then you're now in Option (2) picking and choosing between what you want to agree with -- which is fine, so long as everyone involved is clear that this is what is occurring. However, I don't see too many people trying to figure out how both statements could be true, and that's because the first bullet point is disconfirming evidence towards some people's views, and the second bullet point is confirming evidence towards some people's views, and it's easier to dismiss the disconfirming evidence than to try to find a way to integrate both statements.

Except he was pressed! He said he wasn't bearish on the stock market. The interviewer said "No?" in a particularly incredulous way, and he repeated "No, I'm not bearish on the stock market." I'm not sure how much more you can press him. Would you hold him down and slap him across the face until he finally told you his "real feelings"? This entire conversation between me and ni-co has started because I made a claim that people don't like pointing out disconfirming evidence! I feel like that statement is still true?

I agree! I have a friend who used to work at Bridgewater (employee #40 or something like that), and he said that one of the things he liked best about the place was the culture of thoughtful disagreement. Except Dalio actually says that he thinks that the politburo in China is both very capable and in an advantaged situation whereby they can exercise considerable control. And if you start at 15:12, you can read his body language as he's talking about it. He doesn't look like a person that seems particularly concerned about the short-term, but without asking him the question directly and getting a direct response, it's impossible to tell. However, he does go on to say: But again, look, we're likely looking at this information with our own biases, right? Dalio analogizes it to heart surgery -- it's going to weaken you in the short-term, but you're going to come out of it alright and you're going to be better than you were before. You might look at "weaken" and think "something short of crisis," and I might look at "weaken" and think slower growth but not recession. I don't think he's bullish about the stock market, but neither is he bearish. (Primarily because he stated as much!) It's a problem if people start to pick and choose amongst which things he's said that they choose to believe... it's sort of like when the Westboro Church decides they're going to follow some aspects of the Bible but not others. (And remember, I have biases too, so it's possible that I'm picking and choosing between the things he's said that I choose to believe!) In any case, my interpretation of his interview is that stock markets are going to have relative stagnation for a while with some increased volatility, and I think that the resulting choppy markets are good for value investors.

Looks like there were two things that happened today. The United States Court of Appeals for the District of Columbia Circuit accepted Perry's Supplemental Appendix. (A win for us.) The United States District Court for the Northern District of Iowa reinstated the stay for the administrative record unless Defendants somehow fail to file a motion to dismiss by March 18th. (A loss for us, sort of.) I'm mostly waiting for two things now: A decision on the motion to compel in Sweeney's court A scheduling for oral arguments on the motion to dismiss and the application for certification in Sleet's court

@sun if NWS invalidated, govt will try to argue some sort of "equitable" fix retroactively. i dont think that would be successful. that means that about $90B will get chopped off its FNMA preference since its excess dividends above 10% have amounted to that for FNMA alone. anything govt would try to do would be only prospective, and the holding of any case in which plaintiffs win will make it very hard for govt to try to sweep say 90% of net worth in future, as merkhet indicates. so my view is that after any loss and failure of appeal, winding down GSEs will be not practicable (not that it ever was) That's largely how I see it. If the NWS is invalidated, I expect the government to take the Churchill position of the United States doing the right thing once it's exhausted all other possibilities. Without the company functioning as a piggy bank, there will be no reason to keep it locked up.